Document:

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                                                                     EXHIBIT 4.1

                              MOLDFLOW CORPORATION

                                       AND

                          EQUISERVE TRUST COMPANY, N.A.

                                 AS RIGHTS AGENT

                          SHAREHOLDER RIGHTS AGREEMENT

                          DATED AS OF JANUARY 29, 2003

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                                TABLE OF CONTENTS

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Section                                                                                         Page
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Section 1.  Certain Definitions....................................................................1

Section 2.  Appointment of Rights Agent............................................................7

Section 3.  Issue of Right Certificates............................................................7

Section 4.  Form of Right Certificates.............................................................9

Section 5.  Countersignature and Registration.....................................................10

Section 6.  Transfer, Split Up, Combination and Exchange of Right Certificates;
                Mutilated, Destroyed, Lost or Stolen Right Certificates...........................11

Section 7.  Exercise of Rights; Exercise Price; Expiration Date of Rights.........................11

Section 8.  Cancellation and Destruction of Right Certificates....................................13

Section 9.  Reservation and Availability of Preferred Stock.......................................14

Section 10. Preferred Stock Record Date...........................................................15

Section 11. Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights...........15

Section 12. Certificate of Adjusted Exercise Price or Number of Shares............................23

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..................23

Section 14. Fractional Rights and Fractional Shares...............................................26

Section 15. Rights of Action......................................................................26

Section 16. Agreement of Right Holders............................................................27

Section 17. Right Certificate Holder Not Deemed a Shareholder.....................................27

Section 18. Concerning the Rights Agent...........................................................28

Section 19. Merger or Consolidation or Change of Name of Rights Agent.............................28

Section 20. Duties of Rights Agent................................................................29

Section 21. Change of Rights Agent................................................................31
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Section 22. Issuance of New Right Certificates....................................................32

Section 23. Redemption............................................................................32

Section 24. Exchange..............................................................................33

Section 25. Notice of Certain Events..............................................................35

Section 26. Notices...............................................................................36

Section 27. Supplements and Amendments............................................................36

Section 28. Successors............................................................................37

Section 29. Determinations and Actions by the Board of Directors..................................37

Section 30. Benefits of this Agreement............................................................37

Section 31. Severability..........................................................................38

Section 32. Governing Law.........................................................................38

Section 33. Counterparts..........................................................................38

Section 34. Descriptive Headings..................................................................38

Section 35. Force Majeure.........................................................................38
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Exhibit A --  Certificate of Designations of
              Series a Junior Participating
              Cumulative Preferred Stock

Exhibit B --  Form of Right Certificate

                                      -ii-
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                          SHAREHOLDER RIGHTS AGREEMENT

     Agreement, dated as of January 29, 2003, between Moldflow Corporation, a
Delaware corporation (the "Company"), and EquiServe Trust Company, a federally
chartered trust company (the "Rights Agent").

                               W I T N E S S E T H

     WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company; and

     WHEREAS, on January 29, 2003, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each share of Common Stock, par value $0.01 per share,
of the Company (the "Common Stock") outstanding as of January 30, 2003 (the
"Record Date"), and authorized the issuance of one Right for each share of
Common Stock of the Company issued (whether or not originally issued or sold
from the Company's treasury, except in the case of treasury shares having
associated Rights) between the Record Date and the earlier of the Distribution
Date or the Expiration Date (as such terms are hereinafter defined), each Right
initially representing the right to purchase one ten-thousandth of a share of
Series A Junior Participating Cumulative Preferred Stock of the Company having
the rights, powers and preferences set forth on EXHIBIT A hereto, upon the terms
and subject to the conditions hereinafter set forth (the "Rights"); and

     WHEREAS, the Company desires to appoint the Rights Agent to act as rights
agent hereunder, in accordance with the terms and conditions hereof.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

     Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

          (a)     "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of 15% or more of the shares of Common Stock of the Company then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit plan or
compensation arrangement of the Company or any Subsidiary of the Company or (iv)
any Person holding shares of Common Stock of the Company organized, appointed or
established by the Company or any Subsidiary of the Company for or pursuant to
the terms of any such employee benefit plan or compensation arrangement (the
Persons described in clauses (i) through (iv) above are

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referred to herein as "Exempt Persons"); PROVIDED, HOWEVER, that the term
"Acquiring Person" shall not include any Grandfathered Person, unless such
Grandfathered Person becomes the Beneficial Owner of a percentage of the shares
of Common Stock of the Company then outstanding equal to or exceeding such
Grandfathered Person's Grandfathered Percentage.

     Notwithstanding the foregoing, no Person shall become an "Acquiring Person"
as the result of an acquisition by the Company of Common Stock of the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares Beneficially Owned by such Person to 15% (or in the case of a
Grandfathered Person, the Grandfathered Percentage applicable to such
Grandfathered Person) or more of the shares of Common Stock of the Company then
outstanding; PROVIDED, HOWEVER, that if a Person shall become the Beneficial
Owner of 15% (or in the case of a Grandfathered Person, the Grandfathered
Percentage applicable to such Grandfathered Person) or more of the shares of
Common Stock of the Company then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional shares (other than pursuant to a stock split,
stock dividend or similar transaction) of Common Stock of the Company and
immediately thereafter be the Beneficial Owner of 15% (or in the case of a
Grandfathered Person, the Grandfathered Percentage applicable to such
Grandfathered Person) or more of the shares of Common Stock of the Company then
outstanding, then such Person shall be deemed to be an "Acquiring Person."

     In addition, notwithstanding the foregoing, and notwithstanding anything to
the contrary provided in the Agreement including without limitation in Sections
1(gg), 3(a) or 27, a Person shall not be an "Acquiring Person" if the Board of
Directors of the Company determines at any time that a Person who would
otherwise be an "Acquiring Person," has become such without intending to become
an "Acquiring Person," and such Person divests as promptly as practicable (or
within such period of time as the Board of Directors of the Company determines
is reasonable) a sufficient number of shares of Common Stock of the Company so
that such Person would no longer be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this Section 1(a).

          (b)     "ADJUSTMENT SHARES" shall have the meaning set forth in
Section 11(a)(ii) hereof.

          (c)     "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations (the
"Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement; PROVIDED, HOWEVER, that no
Person who is a director or officer of the Company shall be deemed an Affiliate
or an Associate of any other director or officer of the Company solely as a
result of his or her position as director or officer of the Company.

          (d)     A Person shall be deemed the "BENEFICIAL OWNER" of, and shall
be deemed to "BENEFICIALLY OWN" and have "BENEFICIAL OWNERSHIP" of, any
securities:

                  (i)    which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, Beneficially Owns (as determined
     pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on
     the date of this Agreement);

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                  (ii)   which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, has:

                         (A)  the right to acquire (whether or not such right is
          exercisable immediately or only after the passage of time or upon the
          satisfaction of any conditions or both) pursuant to any agreement,
          arrangement or understanding (whether or not in writing) (other than
          customary agreements with and between underwriters and selling group
          members with respect to a bona fide public offering of securities) or
          upon the exercise of conversion rights, exchange rights, rights (other
          than the Rights), warrants or options, or otherwise; PROVIDED,
          HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of,
          or to "Beneficially Own" or have "Beneficial Ownership" of, (1)
          securities tendered pursuant to a tender or exchange offer made by or
          on behalf of such Person or any of such Person's Affiliates or
          Associates until such tendered securities are accepted for purchase or
          exchange; (2) securities issuable upon exercise of these Rights at any
          time prior to the occurrence of a Triggering Event; or (3) securities
          issuable upon exercise of Rights from and after the occurrence of a
          Triggering Event, which Rights were acquired by such Person or any of
          such Person's Affiliates or Associates prior to the Distribution Date
          or pursuant to Sections 3(a), 11(i) or 22 hereof; or

                         (B)  the right to vote pursuant to any agreement,
          arrangement or understanding (whether or not in writing); PROVIDED,
          HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of,
          or to "Beneficially Own" or have "Beneficial Ownership" of, any
          security under this clause (B) if the agreement, arrangement or
          understanding to vote such security (1) arises solely from a revocable
          proxy given in response to a public proxy or consent solicitation made
          pursuant to, and in accordance with, the Rules of the Exchange Act and
          (2) is not also then reportable by such person on Schedule 13D under
          the Exchange Act (or any comparable or successor report); or

                         (C)  the right to dispose of pursuant to any agreement,
          arrangement or understanding (whether or not in writing) (other than
          customary arrangements with and between underwriters and selling group
          members with respect to a bona fide public offering of securities); or

                  (iii)  which are Beneficially Owned, directly or indirectly,
     by any other Person (or any Affiliate or Associate thereof) with which such
     Person or any of such Person's Affiliates or Associates has any agreement,
     arrangement or understanding (whether or not in writing) (other than
     customary agreements with and between underwriters and selling group
     members with respect to a bona fide public offering of securities) for the
     purpose of acquiring, holding, voting (except pursuant to a revocable proxy
     as described in clause (B) of Section 1(d)(ii) hereof) or disposing of any
     securities of the Company;

PROVIDED, HOWEVER, that (1) no Person engaged in business as an underwriter of
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation

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as an underwriter in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of such acquisition, and (2) no
Person who is a director or an officer of the Company shall be deemed, as a
result of his or her position as director or officer of the Company, the
Beneficial Owner of any securities of the Company that are Beneficially Owned by
any other director or officer of the Company.

     For all purposes of this Agreement, the phrase "then outstanding," when
used with reference to the percentage of the then outstanding securities
Beneficially Owned by a Person, shall mean the number of securities then issued
and outstanding together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to Beneficially Own
hereunder.

          (e)     "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.

          (f)     "CERTIFICATE OF INCORPORATION" when used in reference to the
Company shall mean the Third Amended and Restated Certificate of Incorporation,
as may be amended from time to time, of the Company.

          (g)     "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
New York, New York time, on such date; PROVIDED, HOWEVER, that if such date is
not a Business Day it shall mean 5:00 p.m., New York, New York time, on the next
succeeding Business Day.

          (h)     "COMMON STOCK" when used in reference to the Company shall
mean the common stock, par value $0.01 per share, of the Company or any other
shares of capital stock of the Company into which such stock shall be
reclassified or changed. "Common Stock" when used with reference to any Person
other than the Company organized in corporate form shall mean (i) the capital
stock or other equity interest of such Person with the greatest voting power,
(ii) the equity securities or other equity interest having power to control or
direct the management of such Person or (iii) if such Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person and which have issued any such outstanding capital stock,
equity securities or equity interest. "Common Stock" when used with reference to
any Person not organized in corporate form shall mean units of beneficial
interest which (x) shall represent the right to participate generally in the
profits and losses of such Person (including without limitation any flow-through
tax benefits resulting from an ownership interest in such Person) and (y) shall
be entitled to exercise the greatest voting power of such Person or, in the case
of a limited partnership, shall have the power to remove or otherwise replace
the general partner or partners.

          (i)     "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.

          (j)     "DEPOSITARY AGENT" shall have the meaning set forth in Section
7(c) hereof.

          (k)     "DISTRIBUTION DATE" shall have the meaning defined in Section
3(a) hereof.

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          (l)     "EXEMPT PERSON" shall have the meaning set forth in the
definition of "Acquiring Person."

          (m)     "EXERCISE PRICE" shall have the meaning defined in Section
4(a) hereof.

          (n)     "EXPIRATION DATE" and "FINAL EXPIRATION DATE" shall have the
meanings set forth in Section 7(a) hereof.

          (o)     "FAIR MARKET VALUE" of any securities or other property shall
be as determined in accordance with Section 11(d) hereof.

          (p)     "GRANDFATHERED PERCENTAGE" shall mean, with respect to any
Grandfathered Person, the percentage of the outstanding shares of Common Stock
of the Company that such Grandfathered Person, together with all Affiliates and
Associates of such Grandfathered Person, Beneficially Owns as of the
Grandfathered Time, plus an additional 1/2%; provided, however, that, in the
event any Grandfathered Person shall sell, transfer, or otherwise dispose of any
outstanding shares of Common Stock of the Company after the Grandfathered Time,
the Grandfathered Percentage shall, subsequent to such sale, transfer or
disposition, mean, with respect to such Grandfathered Person, the lesser of (i)
the Grandfathered Percentage as in effect immediately prior to such sale,
transfer or disposition or (ii) the percentage of outstanding shares of Common
Stock of the Company that such Grandfathered Person Beneficially Owns
immediately following such sale, transfer or disposition, plus an additional
1/2%.

          (q)     "GRANDFATHERED PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, is, as of the
Grandfathered Time, the Beneficial Owner of 15% or more of the shares of Common
Stock of the Company then outstanding. Notwithstanding anything to the contrary
provided in this Agreement, any Grandfathered Person who after the Grandfathered
Time becomes the Beneficial Owner of less than 15% of the shares of Common Stock
of the Company then outstanding shall cease to be a Grandfathered Person and
shall be subject to all of the provisions of this Agreement in the same manner
as any Person who is not and was not a Grandfathered Person.

          (r)     "GRANDFATHERED TIME" shall mean 9:00 a.m., Boston,
Massachusetts time, on January 30, 2003.

          (s)     "GROUP" shall have the meaning set forth in clause (b) of the
definition of "Person."

          (t)     "PERSON" shall mean (a) an individual, a corporation, a
partnership, a limited liability company, an association, a joint stock company,
a trust, a business trust, a government or political subdivision, any
unincorporated organization, or any other association or entity including any
successor (by merger or otherwise) thereof or thereto, and (b) a "group" as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.

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          (u)     "PREFERRED STOCK" shall mean shares of Series A Junior
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company having the rights and preferences set forth in the form of Certificate
of Designations attached hereto as EXHIBIT A.

          (v)     "PREFERRED STOCK EQUIVALENTS" shall have the meaning set forth
in Section 11(b) hereof.

          (w)     "PRINCIPAL PARTY" shall have the meaning defined in Section
13(b) hereof.

          (x)     "REDEMPTION PRICE" shall have the meaning defined in Section
23 hereof.

          (y)     "REGISTERED COMMON STOCK" shall have the meaning set forth in
Section 13(b) hereof.

          (z)     "RIGHT CERTIFICATE" shall have the meaning set forth in
Section 3(a) hereof.

          (aa)    "SECTION 11(a)(ii) EVENT" shall have the meaning set forth in
Section 11(a)(ii) hereof.

          (bb)    "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.

          (cc)    "SECTION 13 EVENT" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.

          (dd)    "SECTION 24(a)(i) EXCHANGE RATIO" shall have the meaning set
forth in Section 24(a)(i) hereof.

          (ee)    "SECTION 24(a)(ii) EXCHANGE RATIO" shall have the meaning set
forth in Section 24(a)(ii) hereof.

          (ff)    "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.

          (gg)    "STOCK ACQUISITION DATE" shall mean the date of the first
public announcement (which for purposes of this definition shall include,
without limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Securities and Exchange
Commission or any other governmental agency) by the Company, acting pursuant to
a resolution adopted by the Board of Directors of the Company, or an Acquiring
Person, subject in each case to the last paragraph of Section 1(a), that an
Acquiring Person has become such.

          (hh)    "SUBSIDIARY" shall mean, with reference to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions of such corporation or other entity are at the time directly or
indirectly Beneficially Owned or otherwise controlled by such Person either
alone or together with one or more Affiliates of such Person.

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          (ii)    "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.

          (jj)    "TRIGGERING EVENT" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.

     Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date (as
hereinafter defined in Section 3(a)) also be the holders of the Common Stock of
the Company) in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable. In the event the
Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
The Company shall give ten (10) days' prior written notice to the Rights Agent
of the appointment of one or more Co-Rights Agents and the respective duties of
the Rights Agent and any such Co-Rights Agents. The Rights Agent shall have no
duty to supervise, and shall in no event be liable for, the acts or omissions of
any such Co-Rights Agent.

     Section 3. ISSUE OF RIGHT CERTIFICATES.

          (a)     From the date hereof until the earlier of (i) the Close of
Business on the tenth calendar day after the Stock Acquisition Date or (ii) the
Close of Business on the tenth Business Day (or such later calendar day, if any,
as the Board of Directors of the Company may determine in its sole discretion)
after the date a tender or exchange offer by any Person, other than an Exempt
Person, is first published or sent or given within the meaning of Rule 14d-4(a)
of the Exchange Act, or any successor rule, if, upon consummation thereof, such
Person could become the Beneficial Owner of 15% (or in the case of a
Grandfathered Person, the Grandfathered Percentage applicable to such
Grandfathered Person) or more of the shares of Common Stock of the Company then
outstanding (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights) (the earliest of such dates being
herein referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for the
Common Stock of the Company registered in the names of the holders of the Common
Stock of the Company (which certificates for Common Stock of the Company shall
be deemed also to be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock of the Company. As soon as practicable
after the Distribution Date, the Rights Agent will, at the Company's expense
send, by first-class, insured, postage prepaid mail, to each record holder of
the Common Stock of the Company as of the Close of Business on the Distribution
Date, at the address of such holder shown on the records of the Company, one or
more certificates, in substantially the form of EXHIBIT B hereto (the "Right
Certificates"), evidencing one Right for each share of Common Stock of the
Company so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock of the Company has
been made pursuant to Section 11(o) hereof, the Company may make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of

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any fractional Rights. As of and after the Close of Business on the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.

          (b)     With respect to certificates for the Common Stock of the
Company issued prior to the Close of Business on the Record Date, the Rights
will be evidenced by such certificates for the Common Stock of the Company on or
until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), and the registered holders of the Common Stock of
the Company also shall be the registered holders of the associated Rights. Until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), the transfer of any of the certificates for the Common Stock of the
Company outstanding prior to the date of this Agreement shall also constitute
the transfer of the Rights associated with the Common Stock of the Company
represented by such certificate.

          (c)     Certificates for the Common Stock of the Company issued after
the Record Date, but prior to the earlier of the Distribution Date or the
redemption, expiration or termination of the Rights, shall be deemed also to be
certificates for Rights, and shall bear a legend, substantially in the form set
forth below:

          This certificate also evidences and entitles the holder
          hereof to certain Rights as set forth in a Shareholder
          Rights Agreement between Moldflow Corporation and EquiServe
          Trust Company (or any successor thereto), as Rights Agent,
          dated as of January 29, 2003, as amended, restated, renewed,
          supplemented or extended from time to time (the "Rights
          Agreement"), the terms of which are hereby incorporated
          herein by reference and a copy of which is on file at the
          principal offices of Moldflow Corporation and the stock
          transfer administration office of the Rights Agent. Under
          certain circumstances, as set forth in the Rights Agreement,
          such Rights will be evidenced by separate certificates and
          will no longer be evidenced by this certificate. Moldflow
          Corporation may redeem the Rights at a redemption price of
          $0.01 per Right, subject to adjustment, under the terms of
          the Rights Agreement. Moldflow Corporation will mail to the
          holder of this certificate a copy of the Rights Agreement,
          as in effect on the date of mailing, without charge promptly
          after receipt of a written request therefor. Under certain
          circumstances, Rights issued to or held by Acquiring Persons
          or any Affiliates or Associates thereof (as defined in the
          Rights Agreement), and any subsequent holder of such Rights,
          may become null and void. The Rights shall not be
          exercisable, and shall be void so long as held, by a holder
          in any jurisdiction where the requisite qualification, if
          any, to the issuance to such holder, or the exercise by such
          holder, of the Rights in such jurisdiction shall not have
          been obtained or be obtainable.

     With respect to such certificates containing the foregoing legend, the
Rights associated with the Common Stock of the Company represented by such
certificates shall be evidenced by such certificates alone until the
Distribution Date (or the earlier redemption, expiration or

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termination of the Rights), and the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with the Common Stock of
the Company represented by such certificates. In the event that the Company
purchases or acquires any shares of Common Stock of the Company after the Record
Date but prior to the Distribution Date, any Rights associated with such Common
Stock of the Company shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the shares of
Common Stock of the Company which are no longer outstanding. The failure to
print the foregoing legend on any such certificate representing Common Stock of
the Company or any defect therein shall not affect in any manner whatsoever the
application or interpretation of the provisions of Section 7(e) hereof.

     Section 4. FORM OF RIGHT CERTIFICATES.

          (a)     The Right Certificates (and the forms of election to purchase
shares and of assignment and certificate to be printed on the reverse thereof)
shall each be substantially in the form of EXHIBIT B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to customary usage. The Right Certificates shall be in a
machine printable format and in a form reasonably satisfactory to the Rights
Agent. Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates, whenever distributed, shall be dated as of the Record Date, shall
show the date of countersignature, and on their face shall entitle the holders
thereof to purchase such number of one ten-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (the
"Exercise Price"), but the number of such shares and the Exercise Price shall be
subject to adjustment as provided herein.

          (b)     Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights Beneficially Owned by (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights, the shares of Common Stock of the Company
associated with such Rights or the Company or (B) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e) hereof, and any Right Certificate issued pursuant to Section 6, Section 11
or Section 22 upon transfer, exchange, replacement or adjustment of any other
Right Certificate referred to in this sentence, shall have deleted therefrom the
second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:

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          The Rights represented by this Right Certificate are or were
          Beneficially Owned by a Person who was or became an
          Acquiring Person or an Affiliate or an Associate of an
          Acquiring Person (as such terms are defined in the Rights
          Agreement). This Right Certificate and the Rights
          represented hereby may become null and void under certain
          circumstances as specified in Section 7(e) of the Rights
          Agreement.

     The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of the
Rights which should be so legended. The failure to print the foregoing legend on
any such Right Certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.

     Section 5. COUNTERSIGNATURE AND REGISTRATION.

          (a)     The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board of Directors, or its President or any Vice
President and by its Treasurer or any Assistant Treasurer, or by its Secretary
or any Assistant Secretary, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested to by the Secretary or any Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned, and such countersignature upon
any Right Certificate shall be conclusive evidence, and the only evidence, that
such Right Certificate has been duly countersigned as required hereunder. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by an authorized
signatory of the Rights Agent, and issued and delivered by the Company with the
same force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificates may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.

          (b)     Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.

                                       10
<Page>

     Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.

          (a)     Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one ten-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, Common Stock of the Company or any combination thereof) as the Right
Certificate or Certificates surrendered then entitled such holder to purchase
and at the same Exercise Price. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Certificates to be transferred, split up, combined or exchanged, with the
form of assignment and certificate duly executed, at the office or offices of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Certificates, as the case may be, as so
requested. The Company may require payment by the registered holder of a Right
Certificate, of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.

          (b)     Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.

     Section 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF RIGHTS.

          (a)     Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one ten-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercised, at or prior to the earlier of (i) the Close of Business on the tenth
anniversary of the Record Date (the "Final Expiration Date"), (ii)

                                       11
<Page>

the time at which the Rights are redeemed as provided in Section 23 hereof or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof (the earlier of (i), (ii) or (iii) being herein referred to as the
"Expiration Date"). Except as set forth in Section 7(e) hereof and
notwithstanding any other provision of this Agreement, any Person who prior to
the Distribution Date becomes a record holder of shares of Common Stock of the
Company may exercise all of the rights of a registered holder of a Right
Certificate with respect to the Rights associated with such shares of Common
Stock of the Company in accordance with the provisions of this Agreement, as of
the date such Person becomes a record holder of shares of Common Stock of the
Company.

          (b)     The Exercise Price for each one ten-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be Fifty-One
United States Dollars (U.S. $51.00), shall be subject to adjustment from time to
time as provided in Section 11 and Section 13 hereof and shall be payable in
lawful money of the United States of America in accordance with Section 7(c)
below.

          (c)     As promptly as practicable following the Distribution Date,
the Company shall deposit with a corporation, trust, bank or similar institution
in good standing organized under the laws of the United States or any State of
the United States, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by a
federal or state authority (such institution is hereinafter referred to as the
"Depositary Agent"), certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the Rights and the Company shall cause
such Depositary Agent to enter into an agreement pursuant to which the
Depositary Agent shall issue receipts representing interests in the shares of
Preferred Stock so deposited. Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) by certified check or bank
draft payable to the order of the Company or by money order, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) requisition from
the Depositary Agent (or make available, if the Rights Agent is the Depositary
Agent) depositary receipts or certificates for the number of one ten-thousandths
of a share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes the Depositary Agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash or other property are available for distribution by the Rights
Agent, if and when appropriate. The payment of the Exercise Price may be made by
certified or bank check payable to the order of the Company, or by money order
or wire transfer of immediately available funds to the account of the Company
(provided that notice of such wire transfer shall be given by the holder of the
related Right to the Rights Agent).

                                       12
<Page>

          (d)     In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.

          (e)     Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event or Section 13
Event, any Rights Beneficially Owned by (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any Associate or Affiliate of an Acquiring Person) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, the shares of Common Stock of the Company associated with such Rights or
the Company, or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall be null and
void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any Affiliates or Associates of an Acquiring
Person or any transferee of any of them hereunder.

          (f)     Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
shall have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.

     Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company.

                                       13
<Page>

     Section 9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK.

          (a)     The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding and exercisable Rights. Upon the
occurrence of any events resulting in an increase in the aggregate number of
shares of Preferred Stock issuable upon exercise of all outstanding Rights in
excess of the number then reserved, the Company shall make appropriate increases
in the number of shares so reserved.

          (b)     The Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares of Preferred Stock
issued or reserved for issuance to be listed, upon official notice of issuance,
upon the principal national securities exchange, if any, upon which the Common
Stock of the Company is listed or, if the principal market for the Common Stock
of the Company is not on any national securities exchange, to be eligible for
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any successor thereto or other comparable quotation system.

          (c)     The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus that at
all times meets the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for such securities or
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, and which will ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date determined in accordance with the
provisions of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect, in each case with prompt written notice to the Rights Agent.
Notwithstanding any such provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.

          (d)     The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock
delivered upon the exercise of the Rights shall, at the time of delivery of the
certificates or depositary receipts for such shares (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.

                                       14
<Page>

          (e)     The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any certificates for shares of Preferred Stock upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Right
Certificates to a person other than, or in respect of the issuance or delivery
of securities in a name other than that of, the registered holder of the Right
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for securities in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.

     Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for Preferred Stock (including any fraction of a share of Preferred
Stock) is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the shares of Preferred Stock represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER,
that if the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
transfer books of the Company are open; and further PROVIDED, HOWEVER, that if
delivery of shares of Preferred Stock is delayed pursuant to Section 9(c), such
Person shall be deemed to have become the record holder of such shares of
Preferred Stock only when such shares first become deliverable. Prior to the
exercise of the Right evidenced thereby, the holder of a Right Certificate shall
not be entitled to any rights of a shareholder of the Company with respect to
shares for which the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

     Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Exercise Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

          (a)     (i)    In the event the Company shall at any time after the
     date of this Agreement (A) declare a dividend on the Preferred Stock
     payable in shares of Preferred Stock, (B) subdivide the outstanding
     Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller
     number of shares or (D) issue any shares of its capital stock in a
     reclassification of the Preferred Stock (including any such
     reclassification in connection with a consolidation or merger in which the
     Company is the continuing or surviving corporation), except as otherwise
     provided in this Section 11(a) and Section 7(e) hereof, the Exercise Price
     in effect at the time of the record date for such dividend or of the
     effective date of such subdivision, combination or reclassification, and
     the number and kind of shares of capital stock issuable on such date, shall
     be proportionately adjusted so that the holder of any Right exercised after
     such time shall be entitled to receive the aggregate number and kind of
     shares of capital stock which, if such Right had been

                                       15
<Page>

     exercised immediately prior to such date and at a time when the Preferred
     Stock transfer books of the Company were open, such holder would have owned
     upon such exercise and been entitled to receive by virtue of such dividend,
     subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no
     event shall the consideration to be paid upon the exercise of a Right be
     less than the aggregate par value of the shares of capital stock of the
     Company issuable upon exercise of a Right. If an event occurs which would
     require an adjustment under both Section 11(a)(i) and Section 11(a)(ii)
     hereof, the adjustment provided for in this Section 11(a)(i) shall be in
     addition to, and shall be made prior to, any adjustment required pursuant
     to Section 11(a)(ii) hereof.

                  (ii)   Subject to the provisions of Section 24 hereof, in the
     event any Person, alone or together with its Affiliates and Associates,
     shall become an Acquiring Person, then, promptly following any such
     occurrence (a "Section 11(a)(ii) Event"), proper provision shall be made so
     that each holder of a Right, except as provided in Section 7(e) hereof,
     shall thereafter have a right to receive, upon exercise thereof at the then
     current Exercise Price in accordance with the terms of this Agreement, such
     number of shares of Preferred Stock of the Company as shall equal the
     result obtained by (x) multiplying the then current Exercise Price by the
     then number of one ten-thousandths of a share of Preferred Stock for which
     a Right was exercisable immediately prior to the first occurrence of a
     Section 11(a)(ii) Event, whether or not such Right was then exercisable,
     and dividing that product by (y) 50% of the Fair Market Value per one
     ten-thousandth of a share of the Preferred Stock (determined pursuant to
     Section 11(d)) on the date of the occurrence of a Section 11(a)(ii) Event
     (such number of shares being referred to as the "Adjustment Shares").

                  (iii)  In lieu of issuing any shares of Preferred Stock in
     accordance with Section 11(a)(ii) hereof, the Company, acting by or
     pursuant to a resolution of the Board of Directors of the Company, may, and
     in the event that the number of shares of Preferred Stock which are
     authorized by the Company's Certificate of Incorporation but not
     outstanding or reserved for issuance for purposes other than upon exercise
     of the Rights is not sufficient to permit the exercise in full of the
     Rights in accordance with the foregoing subparagraph (ii) of this Section
     11(a), the Company, acting by or pursuant to a resolution of the Board of
     Directors of the Company, shall: (A) determine the excess of (X) the Fair
     Market Value of the Adjustment Shares issuable upon the exercise of a Right
     (the "Current Value") over (Y) the Exercise Price attributable to each
     Right (such excess being referred to as the "Spread") and (B) with respect
     to all or a portion of each Right (subject to Section 7(e) hereof), make
     adequate provision to substitute for the Adjustment Shares, upon payment of
     the applicable Exercise Price, (1) Common Stock of the Company, (2) cash,
     (3) a reduction in the Exercise Price, (4) Preferred Stock Equivalents
     which the Board of Directors of the Company has deemed to have the same
     value as shares of Common Stock of the Company, (5) debt securities of the
     Company, (6) other assets or securities of the Company or (7) any
     combination of the foregoing which, when added to any shares of Preferred
     Stock issued upon such exercise, has an aggregate value equal to the
     Current Value, where such aggregate value has been determined by the Board
     of Directors of the Company based upon the advice of a nationally
     recognized investment banking firm selected by the Board of Directors of
     the Company; PROVIDED, HOWEVER, that if the Company shall not have made
     adequate provision to deliver value

                                       16
<Page>

     pursuant to clause (B) above within thirty (30) days following the later of
     (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on
     which the Company's right of redemption pursuant to Section 23(a) expires
     (the later of (x) and (y) being referred to herein as the "Section
     11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
     upon the surrender for exercise of a Right and without requiring payment of
     the Exercise Price, shares of Preferred Stock (to the extent available) and
     then, if necessary, cash, which shares and/or cash have an aggregate value
     equal to the Spread. If the Board of Directors of the Company shall
     determine in good faith that it is likely that sufficient additional shares
     of Preferred Stock could be authorized for issuance upon exercise in full
     of the Rights, the 30-day period set forth above may be extended to the
     extent necessary, but not more than ninety (90) days after the Section
     11(a)(ii) Trigger Date, in order that the Company may seek shareholder
     approval for the authorization of such additional shares (such period, as
     it may be extended, being referred to herein as the "Substitution Period").
     To the extent that the Company determines that some action need be taken
     pursuant to the first and/or second sentences of this Section 11(a)(iii),
     the Company (x) shall provide, subject to Section 7(e) hereof, that such
     action shall apply uniformly to all outstanding Rights and (y) may suspend
     the exercisability of the Rights until the expiration of the Substitution
     Period in order to seek any authorization of additional shares and/or to
     decide the appropriate form of distribution to be made pursuant to such
     first sentence and to determine the value thereof. In the event of any such
     suspension, the Company shall issue a public announcement stating that the
     exercisability of the Rights has been temporarily suspended and a public
     announcement at such time as the suspension is no longer in effect. For
     purposes of this Section 11(a)(iii), the value of the Preferred Stock shall
     be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
     per share of the Preferred Stock on the Section 11(a)(ii) Trigger Date and
     the value of any Preferred Stock Equivalent shall be deemed to have the
     same value as the Preferred Stock on such date.

          (b)     If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Preferred Stock (or securities having the
same or more favorable rights, privileges and preferences as the shares of
Preferred Stock ("Preferred Stock Equivalents")) or securities convertible into
Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred
Stock or per share of Preferred Stock Equivalents (or having a conversion price
per share, if a security convertible into Preferred Stock or Preferred Stock
Equivalents) less than the Fair Market Value (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record date, the Exercise
Price to be in effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or Preferred Stock Equivalents to be offered (and the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Fair Market Value and the denominator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of additional shares of Preferred Stock and Preferred
Stock Equivalents to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); PROVIDED,
HOWEVER, that in no event shall the consideration

                                       17
<Page>

to be paid upon the exercise of a Right be less than the aggregate par value of
the shares of stock of the Company issuable upon exercise of a Right. In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be the
Fair Market Value thereof determined in accordance with Section 11(d) hereof.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Exercise Price
shall be adjusted to be the Exercise Price which would then be in effect if such
record date had not been fixed.

          (c)     If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), of evidences of indebtedness, cash (other
than a regular periodic cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
convertible securities, subscription rights or warrants (excluding those
referred to in Section 11(b)), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one ten-thousandth of a share of Preferred Stock on such record date, less
the Fair Market Value (as determined pursuant to Section 11(d) hereof) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such convertible securities, subscription rights or warrants applicable to
one ten-thousandth of a share of Preferred Stock and the denominator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one ten-thousandth of a share of Preferred Stock; PROVIDED, HOWEVER, that in
no event shall the consideration to be paid upon the exercise of a Right be less
than the aggregate par value of the shares of stock of the Company issuable upon
exercise of a Right. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
be in effect if such record date had not been fixed.

          (d)     For the purpose of this Agreement, the "Fair Market Value" of
any share of Preferred Stock, Common Stock or any other stock or any Right or
other security or any other property shall be determined as provided in this
Section 11(d).

                  (i)    In the case of a publicly-traded stock or other
     security, the Fair Market Value on any date shall be deemed to be the
     average of the daily closing prices per share of such stock or per unit of
     such other security for the 30 consecutive Trading Days (as such term is
     hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER,
     that in the event that the Fair Market Value per share of any share of
     stock is determined during a period following the announcement by the
     issuer of such stock of (x) a dividend or distribution on such stock
     payable in shares of such stock or securities convertible into shares of
     such stock or (y) any subdivision, combination or reclassification of such
     stock, and prior to the expiration of the 30 Trading Day period after the
     ex-dividend date for such dividend or distribution, or the record date for
     such subdivision, combination or reclassification, then, and in each such
     case, the Fair Market

                                       18
<Page>

     Value shall be properly adjusted to take into account ex-dividend trading.
     The closing price for each day shall be the last sale price, regular way,
     or, in case no such sale takes place on such day, the average of the
     closing bid and asked prices, regular way, in either case as reported in
     the principal consolidated transaction reporting system with respect to
     securities listed or admitted to trading on the New York Stock Exchange or,
     if the securities are not listed or admitted to trading on the New York
     Stock Exchange, as reported in the principal consolidated transaction
     reporting system with respect to securities listed on the principal
     national securities exchange on which such security is listed or admitted
     to trading; or, if not listed or admitted to trading on any national
     securities exchange, the last quoted price (or, if not so quoted, the
     average of the last quoted high bid and low asked prices) in the
     over-the-counter market, as reported by NASDAQ or such other system then in
     use; or, if on any such date no bids for such security are quoted by any
     such organization, the average of the closing bid and asked prices as
     furnished by a professional market maker making a market in such security
     selected by the Board of Directors of the Company. If on any such date no
     market maker is making a market in such security, the Fair Market Value of
     such security on such date shall be determined reasonably and with utmost
     good faith to the holders of the Rights by the Board of Directors of the
     Company, PROVIDED, HOWEVER, that if at the time of such determination there
     is an Acquiring Person, the Fair Market Value of such security on such date
     shall be determined by a nationally recognized investment banking firm
     selected by the Board of Directors of the Company, which determination
     shall be described in a statement filed with the Rights Agent and shall be
     binding on the Rights Agent and the holders of the Rights. The term
     "Trading Day" shall mean a day on which the principal national securities
     exchange on which such security is listed or admitted to trading is open
     for the transaction of business or, if such security is not listed or
     admitted to trading on any national securities exchange, a Business Day.

                  (ii)   If a security is not publicly held or not so listed or
     traded, "Fair Market Value" shall mean the fair value per share of stock or
     per other unit of such security, determined reasonably and with utmost good
     faith to the holders of the Rights by the Board of Directors of the
     Company; PROVIDED, HOWEVER, that if at the time of such determination there
     is an Acquiring Person, the Fair Market Value of such security on such date
     shall be determined by a nationally recognized investment banking firm
     selected by the Board of Directors of the Company, which determination
     shall be described in a statement filed with the Rights Agent and shall be
     binding on the Rights Agent and the holders of the Rights; PROVIDED,
     HOWEVER, that for the purposes of making any adjustment provided for by
     Section 11(a)(ii) hereof, the Fair Market Value of a share of Preferred
     Stock shall not be less than the product of the then Fair Market Value of a
     share of Common Stock multiplied by the higher of the then Dividend
     Multiple or Vote Multiple (as both of such terms are defined in the
     Certificate of Designations attached as Exhibit A hereto) applicable to the
     Preferred Stock and shall not exceed 105% of the product of the then Fair
     Market Value of a share of Common Stock multiplied by the higher of the
     then Dividend Multiple or Vote Multiple applicable to the Preferred Stock.

                  (iii)  In the case of property other than securities, the Fair
     Market Value thereof shall be determined reasonably and with utmost good
     faith to the holders of Rights by the Board of Directors of the Company;
     PROVIDED, HOWEVER, that if at the time

                                       19
<Page>

     of such determination there is an Acquiring Person, the Fair Market Value
     of such property on such date shall be determined by a nationally
     recognized investment banking firm selected by the Board of Directors of
     the Company, which determination shall be described in a statement filed
     with the Rights Agent and shall be binding upon the Rights Agent and the
     holders of the Rights.

          (e)     Anything herein to the contrary notwithstanding, no adjustment
in the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one-millionth of a share of Common Stock of the Company
or hundred-millionth of a share of Preferred Stock, as the case may be, or to
such other figure as the Board of Directors of the Company may deem appropriate.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Expiration Date.

          (f)     If as a result of any provision of Section 11(a) or Section
13(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Section 11(a), (b), (c), (d), (e), (g) through (k)
and (m), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 hereof
with respect to the Preferred Stock shall apply on like terms to any such other
shares.

          (g)     All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one ten-thousandths of a
share of Preferred Stock (or other securities or amount of cash or combination
thereof) purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.

          (h)     Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of one
ten-thousandths of a share of Preferred Stock (calculated to the nearest
hundred-millionth) as the Board of Directors of the Company determines is
appropriate to preserve the economic value of the Rights, including, by way of
example, that number obtained by (i) multiplying (x) the number of one
ten-thousandths of a share of Preferred Stock for which a Right may be
exercisable immediately prior to this adjustment by (y) the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price.

          (i)     The Company may elect on or after the date of any adjustment
of the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of

                                       20
<Page>

shares of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one ten-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one-millionth) obtained
by dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Exercise Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Exercise Price) and shall be registered in the names
of the holders of record of Right Certificates on the record date specified in
the public announcement.

          (j)     Irrespective of any adjustment or change in the Exercise Price
or the number of one ten-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder
without prejudice to any adjustment or change.

          (k)     Before taking any action that would cause an adjustment
reducing the Exercise Price below the then stated value, if any, of the number
of one ten-thousandths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Preferred Stock at such
adjusted Exercise Price.

          (l)     In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of one ten-thousandths of a share of Preferred Stock or other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one ten-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

                                       21
<Page>

          (m)     Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the Company
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Stock, issuance wholly for cash of any shares of Preferred
Stock at less than the Fair Market Value, issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, stock dividends or issuance of
rights, options or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Preferred Stock, shall not be
taxable to such shareholders.

          (n)     The Company covenants and agrees that it shall not, at any
time after the Distribution Date and so long as the Rights have not been
redeemed pursuant to Section 23 hereof or exchanged pursuant to Section 24
hereof, (i) consolidate with (other than a Subsidiary of the Company in a
transaction that complies with the proviso at the end of this sentence), (ii)
merge with or into, or (iii) sell or transfer (or permit any Subsidiary to sell
or transfer), in one transaction or a series of related transactions, assets or
earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries taken as a whole, to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with the proviso at the end of this
sentence) if (x) at the time of or immediately after such consolidation, merger
or sale there are any rights, warrants or other instruments outstanding or
agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale the shareholders of a Person who constitutes, or would constitute, the
"Principal Party" for the purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates; PROVIDED, HOWEVER, that this Section 11(n) shall not affect the
ability of any Subsidiary of the Company to consolidate with, or merge with or
into, or sell or transfer assets or earning power to, any other Subsidiary of
the Company. The Company further covenants and agrees that after the
Distribution Date it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.

          (o)     Notwithstanding anything in this Agreement to the contrary, in
the event the Company shall at any time after the date of this Agreement and
prior to the Distribution Date (i) declare or pay any dividend on the
outstanding Common Stock of the Company payable in shares of Common Stock of the
Company or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock of the Company (by reclassification or
otherwise than by payment of dividends in shares of Common Stock of the Company)
into a greater or lesser number of shares of Common Stock of the Company, then
in any such case (A) the number of one ten-thousandths of a share of Preferred
Stock purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one ten-thousandths of a share of
Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock of the Company
outstanding immediately prior to such event and the denominator of which is the
number of shares of Common Stock of the Company outstanding immediately after
such event, and

                                       22
<Page>

(B) each share of Common Stock of the Company outstanding immediately after such
event shall have issued with respect to it that number of Rights which each
share of Common Stock of the Company outstanding immediately prior to such event
had issued with respect to it. The adjustments provided for in this Section
11(o) shall be made successively whenever such a dividend is declared or paid or
such a subdivision, combination or consolidation is effected.

          (p)     The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event which has occurred or may thereafter occur,
as set forth in Section 13 hereof. Upon exercise of a Right Certificate under
Section 11(a)(ii), the Rights Agent shall return such Right Certificate duly
marked to indicate that such exercise has occurred.

     Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock of the Company a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock of the Company) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.

     Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.

          (a)     In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which is not prohibited by Section 11(n) hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation or
merger, (y) any Person (other than a Subsidiary of the Company in a transaction
which is not prohibited by the proviso at the end of the first sentence of
Section 11(n) hereof) shall consolidate with the Company, or merge with and into
the Company and the Company shall be the continuing or surviving corporation of
such merger and, in connection with such merger, all or part of the shares of
Common Stock of the Company shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (z) the
Company shall sell, mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, mortgage or otherwise transfer), in one transaction or
a series of related transactions, assets or earning power aggregating 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to any other Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions, each of which is not
prohibited by the proviso at the end of the first sentence of Section 11(n)
hereof), then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
have the right to receive, upon the exercise thereof at the then current
Exercise Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable shares of freely
tradable Common Stock of the Principal

                                       23
<Page>

Party (as hereinafter defined in Section 13(b)), free and clear of rights of
call or first refusal, liens, encumbrances, transfer restrictions or other
adverse claims, as shall be equal to the result obtained by (1) multiplying the
then current Exercise Price by the number of one ten-thousandths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event, and dividing that product by (2) 50% of the
Fair Market Value (determined pursuant to Section 11(d) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale, mortgage or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13(a) and the
making of payments in cash and/or other securities in accordance with Section
11(a)(iii) hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights.

          (b)     "Principal Party" shall mean

                  (i)    in the case of any transaction described in clause (x)
     or (y) of the first sentence of Section 13(a), the Person that is the
     issuer of any securities into which shares of Common Stock of the Company
     are converted in such merger or consolidation, or, if there is more than
     one such issuer, the issuer of Common Stock that has the highest aggregate
     Fair Market Value (determined pursuant to Section 11(d)), and if no
     securities are so issued, the Person that is the other party to the merger
     or consolidation, or, if there is more than one such Person, the Person the
     Common Stock of which has the highest aggregate Fair Market Value
     (determined pursuant to Section 11(d)); and

                  (ii)   in the case of any transaction described in clause (z)
     of the first sentence of Section 13(a), the Person that is the party
     receiving the greatest portion of the assets or earning power transferred
     pursuant to such transaction or transactions, or, if each Person that is a
     party to such transaction or transactions receives the same portion of the
     assets or earning power transferred pursuant to such transaction or
     transactions or if the Person receiving the largest portion of the assets
     or earning power cannot be determined, whichever Person the Common Stock of
     which has the highest aggregate Fair Market Value (determined pursuant to
     Section 11(d));

PROVIDED, HOWEVER, that in any such case described in clauses (i) or (ii) of
Section 13(b) hereof, (1) if the Common Stock of such Person is not at such time
and has not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act ("Registered Common Stock") or such Person
is not a corporation, and such Person is a direct or indirect Subsidiary or
Affiliate of another Person who has Registered Common Stock outstanding,
"Principal Party" shall refer to such other Person; (2) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a corporation,
and such Person is a direct or indirect Subsidiary of another Person but is not
a direct or indirect Subsidiary of another Person

                                       24
<Page>

which has Registered Common Stock outstanding, "Principal Party" shall refer to
the ultimate parent entity of such first-mentioned Person; (3) if the Common
Stock of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest aggregate Fair
Market Value (determined pursuant to Section 11(d)); and (4) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest shareholders' equity or, if no such
ultimate parent entity is a corporation, "Principal Party" shall refer to
whichever ultimate parent entity is the entity having the greatest net assets.

          (c)     The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto (x) the Principal Party shall have
a sufficient number of authorized shares of its Common Stock, which have not
been issued or reserved for issuance, to permit the exercise in full of the
Rights in accordance with this Section 13, and (y) the Company and each
Principal Party and each other Person who may become a Principal Party as a
result of such consolidation, merger, sale or transfer shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in Section 13(a) and (b) and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or transfer of
assets mentioned in Section 13(a), the Principal Party at its own expense will:

                  (i)    prepare and file a registration statement under the
     Securities Act with respect to the Rights and the securities purchasable
     upon exercise of the Rights on an appropriate form, cause such registration
     statement to become effective as soon as practicable after such filing and
     cause such registration statement to remain effective (with a prospectus
     that at all times meets the requirements of the Securities Act) until the
     Expiration Date;

                  (ii)   qualify or register the Rights and the securities
     purchasable upon exercise of the Rights under the blue sky laws of such
     jurisdictions as may be necessary or appropriate;

                  (iii)  list (or continue the listing of) the Rights and the
     securities purchasable upon exercise of the Rights on a national securities
     exchange or to meet the eligibility requirements for quotation on NASDAQ;
     and

                  (iv)   deliver to holders of the Rights historical financial
     statements for the Principal Party and each of its Affiliates which comply
     in all respects with the requirements for registration on Form 10 under the
     Exchange Act.

          (d)     In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its certificate of incorporation or By-laws or other
instrument governing its affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to

                                       25
<Page>

this Section 13), in connection with, or as a consequence of, the consummation
of a transaction referred to in this Section 13, shares of Common Stock of such
Principal Party at less than the then current Fair Market Value (determined
pursuant to Section 11(d)) or securities exercisable for, or convertible into,
Common Stock of such Principal Party at less than such Fair Market Value, or
(ii) providing for any special payment, tax or similar provisions in connection
with the issuance of the Common Stock of such Principal Party pursuant to the
provisions of this Section 13, then, in such event, the Company shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.

     The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.

     Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

          (a)     The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(o)
hereof, or to distribute Right Certificates which evidence fractional Rights. If
the Company elects not to issue such fractional Rights, the Company shall pay,
in lieu of such fractional Rights, to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the Fair Market Value
of a whole Right, as determined pursuant to Section 11(d) hereof.

          (b)     The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one ten-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one ten-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one ten-thousandth of a share of Preferred
Stock. For purposes of this Section 14(b), the Fair Market Value of one
ten-thousandth of a share of Preferred Stock shall be determined pursuant to
Section 11(d) hereof for the Trading Day immediately prior to the date of such
exercise.

          (c)     The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.

     Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (or, prior to the Distribution Date, the registered
holders of the Common Stock of the Company); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Stock of
the Company),

                                       26
<Page>

without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Stock of the
Company), may, in such registered holder's own behalf and for such registered
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his right to exercise the Right evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement. Holders of Rights shall be entitled to recover the reasonable costs
and expenses, including attorneys' fees, incurred by them in any action to
enforce the provisions of this Agreement.

     Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

          (a)     prior to the Distribution Date, each Right will be
transferable only simultaneously and together with the transfer of shares of
Common Stock of the Company;

          (b)     after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;

          (c)     subject to Sections 6(a) and 7(f), the Company and the Rights
Agent may deem and treat the person in whose name a Right Certificate (or, prior
to the Distribution Date, the associated certificate representing Common Stock
of the Company) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated certificate representing Common Stock of
the Company made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and, subject to the last sentence of Section 7(e), neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and

          (d)     notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; PROVIDED, HOWEVER, that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.

     Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Preferred Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything

                                       27
<Page>

contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.

     Section 18. CONCERNING THE RIGHTS AGENT.

          (a)     The Company agrees to pay to the Rights Agent such
compensation as shall be agreed to in writing between the Company and the Rights
Agent for all services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly. The provisions of this Section 18(a) shall survive the expiration
of the Rights and the termination of this Agreement.

          (b)     The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate representing Common Stock of the Company, Preferred
Stock, or other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it in good faith
and without gross negligence to be genuine and to be signed and executed by the
proper Person or Persons.

          (c)     The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.

     Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

          (a)     Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent

                                       28
<Page>

may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

          (b)     In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

     Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations expressly imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:

          (a)     The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.

          (b)     Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, a Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Rights Agent. Any such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.

          (c)     The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.

          (d)     The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

          (e)     The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof

                                       29
<Page>

by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 7(e) hereof) or any adjustment required under the provisions
of Sections 11, 13 or 23(c) hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate describing any
such adjustment furnished in accordance with Section 12 hereof), nor shall it be
responsible for any determination by the Board of Directors of the Company of
the Fair Market Value of the Rights or Preferred Stock pursuant to the
provisions of Section 14 hereof; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Common Stock of the Company or Preferred Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether or not any
shares of Common Stock of the Company or Preferred Stock will, when so issued,
be validly authorized and issued, fully paid and nonassessable.

          (f)     The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.

          (g)     The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board of Directors, any Vice
Chairman of the Board of Directors, the President, a Vice President, the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.

          (h)     The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.

                                       30
<Page>

          (i)     The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.

          (j)     No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.

          (k)     If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company by first class
mail; PROVIDED, HOWEVER, that in the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to resign automatically on the effective date of such
termination. The Company may remove the Rights Agent or any successor Rights
Agent (with or without cause), effective immediately or on a specified date, by
written notice given to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Stock of the Company and
Preferred Stock, and by giving notice to the holders of the Right Certificates
by any means reasonably determined by the Company to inform such holders of such
removal (including without limitation, by including such information in one or
more of the Company's reports to shareholders or reports or filings with the
Securities and Exchange Commission). If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the
Commonwealth of Massachusetts or the State of New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the Commonwealth of Massachusetts or the State of New
York), in good standing, which is authorized under such laws to exercise stock
transfer or corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $10,000,000 or (b) an
Affiliate of a Person described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any

                                       31
<Page>

property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Stock of the Company and the Preferred Stock, and give notice to the holders of
the Right Certificates by any means reasonably determined by the Company to
inform such holders of such appointment (including without limitation, by
including such information in one or more of the Company's reports to
shareholders or reports or filings with the Securities and Exchange Commission).
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

     Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by the Board of Directors of the Company to reflect any
adjustment or change in the Exercise Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock of
the Company following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock of the Company so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED, HOWEVER,
that (i) no such Right Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Right Certificate would be issued, and (ii) no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustments
shall otherwise have been made in lieu of the issuance thereof.

     Section 23. REDEMPTION.

          (a)     The Board of Directors of the Company may, at its option,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.01 per Right, appropriately adjusted to reflect any dividend
declared or paid on the Common Stock of the Company in shares of Common Stock of
the Company or any subdivision or combination of the outstanding shares of
Common Stock of the Company or similar event occurring after the date of this
Agreement (such redemption price, as adjusted from time to time, being
hereinafter referred to as the "Redemption Price"). The Rights may be redeemed
only until the earlier to occur of (i) the time at which any Person becomes an
Acquiring Person or (ii) the Final Expiration Date.

          (b)     Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights in accordance with Section 23
hereof, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors of the Company ordering the

                                       32
<Page>

redemption of the Rights in accordance with Section 23 hereof, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to the Rights Agent and to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock of the Company. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that specifically set forth in
this Section 23 or Section 24 hereof or in connection with the purchase of
shares of Common Stock of the Company prior to the Distribution Date.

          (c)     The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock of the Company (based on the Fair Market Value of
the Common Stock of the Company as of the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors of the Company.

     Section 24. EXCHANGE.

          (a)     (i)    The Board of Directors of the Company may, at its
     option, at any time on or after the occurrence of a Section 11(a)(ii)
     Event, exchange all or part of the then outstanding and exercisable Rights
     (which shall not include Rights that have become void pursuant to the
     provisions of Section 7(e) hereof) for shares of Common Stock of the
     Company at an exchange ratio of one share of Common Stock of the Company
     per Right, appropriately adjusted to reflect any stock split, stock
     dividend or similar transaction occurring after the date hereof (such
     exchange ratio being hereinafter referred to as the "Section 24(a)(i)
     Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of
     the Company shall not be empowered to effect such exchange at any time
     after any Person (other than an Exempt Person), together with all
     Affiliates and Associates of such Person, becomes the Beneficial Owner of
     50% or more of the Common Stock of the Company.

                  (ii)   Notwithstanding the foregoing, the Board of Directors
     of the Company may, at its option, at any time on or after the occurrence
     of a Section 11(a)(ii) Event, exchange all or part of the then outstanding
     and exercisable Rights (which shall not include Rights that have become
     null and void pursuant to the provisions of Section 7(e) hereof) for shares
     of Common Stock of the Company at an exchange ratio specified in the
     following sentence, as appropriately adjusted to reflect any stock split,
     stock dividend or similar transaction occurring after the date of this
     Agreement. Subject to the adjustment described in the foregoing sentence,
     each Right may be exchanged for that number of shares of Common Stock of
     the Company obtained by dividing the Spread (as defined in Section
     11(a)(iii)) by the then Fair Market Value per one ten-thousandth of a share
     of Preferred Stock on the earlier of (x) the date on which any person
     becomes an Acquiring Person or (y) the date on which a tender or exchange
     offer by any Person

                                       33
<Page>

     (other than an Exempt Person) is first published or sent or given within
     the meaning of Rule 14d-4(a) of the Exchange Act or any successor rule, if
     upon consummation thereof such Person could become an Acquiring Person
     (such exchange ratio being referred to herein as the "Section 24(a)(ii)
     Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of
     the Company shall not be empowered to effect such exchange at any time
     after any Person (other than an Exempt Person), together with all
     Affiliates and Associates of such Person, becomes the Beneficial Owner of
     50% or more of the Common Stock of the Company.

          (b)     Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock of the
Company equal to the number of such Rights held by such holder multiplied by the
Section 24(a)(i) Exchange Ratio or the Section 24(a)(ii) Exchange Ratio, as
applicable. The Company shall promptly give notice of any such exchange in
accordance with Section 26 hereof and shall promptly mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent; PROVIDED, HOWEVER, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock of the Company for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become null and void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.

          (c)     In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Stock (or Preferred Stock Equivalent, as
such term is defined in Section 11(b) hereof) for Common Stock of the Company
exchangeable for Rights, at the initial rate of one ten-thousandth of a share of
Preferred Stock (or Preferred Stock Equivalent) for each share of Common Stock
of the Company, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock of the Company shall have the same voting rights as one share of Common
Stock of the Company.

          (d)     In the event that there shall not be sufficient shares of
Common Stock of the Company or Preferred Stock (or Preferred Stock Equivalents)
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock of the Company or Preferred Stock (or Preferred Stock Equivalent)
for issuance upon exchange of the Rights.

          (e)     The Company shall not be required to issue fractions of Common
Stock of the Company or to distribute certificates which evidence fractional
shares of Common Stock of the Company. If the Company elects not to issue such
fractional shares of Common Stock of the Company, the Company shall pay, in lieu
of such fractional shares of Common Stock of the

                                       34
<Page>

Company, to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock of the Company would otherwise be
issuable, an amount in cash equal to the same fraction of the Fair Market Value
of a whole share of Common Stock of the Company. For the purposes of this
paragraph (e), the Fair Market Value of a whole share of Common Stock of the
Company shall be the closing price of a share of Common Stock of the Company (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.

     Section 25. NOTICE OF CERTAIN EVENTS.

          (a)     In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with, or to effect any sale, mortgage or other transfer (or to
permit one or more of its Subsidiaries to effect any sale, mortgage or other
transfer), in one transaction or a series of related transactions, of 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to, any other Person (other than a Subsidiary of the Company in one
or more transactions each of which is not prohibited by the proviso at the end
of the first sentence of Section 11(n) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Stock of the Company payable in Common Stock of the
Company or to effect a subdivision, combination or consolidation of the Common
Stock of the Company (by reclassification or otherwise than by payment of
dividends in Common Stock of the Company) then in each such case, the Company
shall give to each holder of a Right Certificate and to the Rights Agent, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Common
Stock of the Company and/or Preferred Stock, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or Preferred Stock, whichever shall be the earlier; PROVIDED,
HOWEVER, no such notice shall be required pursuant to this Section 25 as a
result of any Subsidiary of the Company effecting a consolidation or merger with
or into, or effecting a sale or other transfer of assets or earnings power to,
any other Subsidiary of the Company in a manner not inconsistent with the
provisions of this Agreement.

          (b)     In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the

                                       35
<Page>

occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.

     Section 26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, by facsimile transmission or by nationally-recognized
overnight courier addressed (until another address is filed in writing with the
Rights Agent) as follows:

          Moldflow Corporation
          430 Boston Post Road
          Wayland, MA 01778
          Fax: (508) 358-5840
          Attention: Secretary

     Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, by facsimile transmission or by
nationally-recognized overnight courier addressed (until another address is
filed in writing with the Company) as follows:

          EquiServe Trust Company
          150 Royall Street
          Canton, MA 02021
          Fax: (781) 575-2550
          Attention: Client Administration

     Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing shares of
Common Stock of the Company) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

     Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the occurrence of a
Section 11(a)(ii) Event, the Company and the Rights Agent shall, if the Board of
Directors of the Company so directs, supplement or amend any provision of this
Agreement as the Board of Directors of the Company may deem necessary or
desirable without the approval of any holders of certificates representing
shares of Common Stock of the Company. From and after the occurrence of a
Section 11(a)(ii) Event, the Company and the Rights Agent shall, if the Board of
Directors of the Company so directs, supplement or amend this Agreement without
the approval of any holder of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, or (iv) to change or supplement
the provisions hereof in any manner which the Board of Directors of the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or any Affiliate or Associate of an Acquiring Person); PROVIDED, HOWEVER, that
from and after the occurrence of a Section 11(a)(ii) Event this Agreement may
not

                                       36
<Page>

be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and the benefits to, the holders of Rights (other than an Acquiring
Person or any Affiliate or Associate of an Acquiring Person). Without limiting
the foregoing, the Company may at any time prior to the occurrence of a Section
11(a)(ii) Event amend this Agreement to lower the threshold set forth in Section
1(a) to not less than the greater of (i) the sum of .001% and the largest
percentage of the outstanding Common Stock of the Company then known by the
Company to be Beneficially Owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Stock of the Company for
or pursuant to the terms of any such plan) and (ii) 10%. Upon the delivery of
such certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment. Prior
to the occurrence of a Section 11(a)(ii) Event, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock of the Company. Notwithstanding any other provision hereof, the Rights
Agent's consent must be obtained regarding any amendment or supplement pursuant
to this Section 27 which alters the Rights Agent's rights or duties.

     Section 28. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including without limitation,
the right and power to (i) interpret the provisions of this Agreement and (ii)
make all determinations and computations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any member of the Board of Directors to any liability to the
holders of the Rights or to any other person.

     Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock of the Company) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock of the Company).

                                       37
<Page>

     Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from the Agreement would adversely affect the purpose or effect
of the Agreement, the right of redemption set forth in Section 23 hereof shall
be reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board of Directors.

     Section 32. GOVERNING LAW. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and to be performed entirely within such State. The courts of the State
of Delaware and of the United States of America located in the State of Delaware
(the "Delaware Courts") shall have exclusive jurisdiction over any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby, and any Person commencing or otherwise involved in any such litigation
shall waive any objection to the laying of venue of such litigation in the
Delaware Courts and shall not plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.

     Section 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

     Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

     Section 35. FORCE MAJEURE. Notwithstanding anything to the contrary
contained herein, neither the Company nor the Rights Agent shall be liable for
any delay or failure in performance resulting directly from any act or event
beyond its reasonable control and without the fault or gross negligence of the
delayed or non-performing party that causes a sudden, substantial or widespread
disruption in business activities, including, without limitation, fire, flood,
natural disaster or act of God, strike or other industrial disturbance, war
(declared or undeclared), embargo, blockade, legal restriction, riot,
insurrection, act of terrorism, disruption in transportation, communications,
electric power or other utilities, or other vital infrastructure or any means of
disrupting or damaging internet or other computer networks or facilities (each,
a "FORCE MAJEURE CONDITION"); PROVIDED, that such delayed or non-performing
party shall use reasonable commercial efforts to resume performance as soon as
practicable. If any Force Majeure Condition occurs, the party delayed or unable
to perform shall give immediate written notice to the other party, stating the
nature of the Force Majeure Condition and any action being taken to avoid or
minimize its effect.

                                       38
<Page>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an instrument under seal and attested, all as of the day and
year first above written.

ATTEST:                                  Moldflow Corporation

By: /s/ Lori M. Henderson                By: /s/ A. Roland Thomas
    ---------------------                    --------------------
                                         Name: A. Roland Thomas
                                         Title: President and CEO

ATTEST:                                  EquiServe Trust Company, N.A.,
                                         as Rights Agent

By: /s/ Paula Gill                       By: /s/ Margaret Prentice
    ---------------                          ---------------------
                                         Name: Margaret Prentice
                                         Title: Director

<Page>

                                    EXHIBIT A

                         VOTE OF DIRECTORS ESTABLISHING
                    SERIES A JUNIOR PARTICIPATING CUMULATIVE
                                 PREFERRED STOCK
                                       OF
                              MOLDFLOW CORPORATION

     Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:

     VOTED, that pursuant to authority conferred upon and vested in the Board of
Directors by the Third Amended and Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), of Moldflow Corporation (the
"Corporation"), the Board of Directors hereby establishes and designates a
series of Preferred Stock of the Corporation, and hereby fixes and determines
the relative rights and preferences of the shares of such series, in addition to
those set forth in the Certificate of Incorporation, as follows:

     Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares initially constituting
such series shall be 50,000; provided, however, that if more than a total of
50,000 shares of Series A Preferred Stock shall be issuable upon the exercise of
Rights (the "Rights") issued pursuant to the Shareholder Rights Agreement dated
as of January 29, 2003, between the Corporation and EquiServe Trust Company,
N.A., as Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, may direct by resolution or resolutions that a certificate be
properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 103 thereof, providing for the total number of shares of
Series A Preferred Stock authorized to be issued to be increased (to the extent
that the Certificate of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
such Rights.

     Section 2. DIVIDENDS AND DISTRIBUTIONS.

     (A)  (i)     Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of common stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 10,000 times the aggregate per share amount of
all cash dividends, and 10,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions

                                        2
<Page>

other than a dividend payable in shares of common stock or a subdivision of the
outstanding shares of common stock (by reclassification or otherwise), declared
on the common stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock.
The multiple of cash and non-cash dividends declared on the common stock to
which holders of the Series A Preferred Stock are entitled, which shall be
10,000 initially but which shall be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple." In the event
the Corporation shall at any time after January 29, 2003 (the "Rights
Declaration Date") (i) declare or pay any dividend on common stock payable in
shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends which holders of shares of Series A Preferred Stock shall be entitled
to receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of common stock outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were outstanding immediately
prior to such event.

          (ii)    Notwithstanding anything else contained in this paragraph (A),
the Corporation shall, out of funds legally available for that purpose, declare
a dividend or distribution on the Series A Preferred Stock as provided in this
paragraph (A) immediately after it declares a dividend or distribution on the
common stock (other than a dividend payable in shares of common stock); provided
that, in the event no dividend or distribution shall have been declared on the
common stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

     (B)  Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix in
accordance with applicable law a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.

                                        3
<Page>

     Section 3. VOTING RIGHTS. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:

     (A)  Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 10,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series A Preferred Stock is
entitled to cast, which shall initially be 10,000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on common stock payable in
shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series A Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of which is the
number of shares of common stock that were outstanding immediately prior to such
event.

     (B)  Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this Corporation having general
voting rights, shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.

     (C)  Except as otherwise required by applicable law or as set forth herein,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of common stock as set forth herein) for taking any corporate
action.

     Section 4. CERTAIN RESTRICTIONS.

     (A)  Whenever dividends or distributions payable on the Series A Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

          (i)     declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;

          (ii)    declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;

          (iii)   except as permitted in subsection 4(A)(iv) below, redeem,
purchase or otherwise acquire for consideration shares of any stock ranking on a
parity (either as to dividends

                                        4
<Page>

or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or

          (iv)    purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

     (B)  The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subsection (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.

     Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.

     Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $10,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 10,000 times the aggregate amount to be
distributed per share to holders of common stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare or pay any dividend on
common stock payable in shares of common stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of common stock (by
reclassification or otherwise than by payment of a dividend in shares of common
stock) into a greater or lesser number of shares of common stock, then in each
such case the aggregate amount per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (x)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the

                                        5
<Page>

denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.

     Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.

     Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of common stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 10,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of common stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series A
Preferred Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on common stock payable in
shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
common stock outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were outstanding immediately
prior to such event.

     Section 8. REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable; provided, however, that the foregoing shall not limit the ability of
the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.

     Section 9. RANKING. Unless otherwise expressly provided in the Certificate
of Incorporation or a Certificate of Designations relating to any other series
of preferred stock of the Corporation, the Series A Preferred Stock shall rank
junior to every other series of the Corporation's preferred stock previously or
hereafter authorized, as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and shall rank senior to the
common stock.

     Section 10. AMENDMENT. The Certificate of Incorporation and this
Certificate of Designations shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.

     Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
whole shares or in any fraction of a share that is one ten-thousandth
(1/10,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional

                                        6
<Page>

shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred Stock. In lieu of fractional shares, the Corporation may elect to make
a cash payment as provided in the Rights Agreement for fractions of a share
other than one ten-thousandth (1/10,000th) of a share or any integral multiple
thereof.

                                        7
<Page>

                                    EXHIBIT B

[Form of Right Certificate]

Certificate No. R-______ Rights

     NOT EXERCISABLE AFTER JANUARY 30, 2013 OR EARLIER IF NOTICE OF REDEMPTION
IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF MOLDFLOW
CORPORATION, AT $0.01 PER RIGHT, ON THE TERMS SET FORTH IN THE SHAREHOLDER
RIGHTS AGREEMENT BETWEEN MOLDFLOW CORPORATION AND EQUISERVE TRUST COPMANY, N.A.,
AS RIGHTS AGENT, DATED AS OF JANUARY 29, 2003 (THE "RIGHTS AGREEMENT"). UNDER
CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

Right Certificate

                              MOLDFLOW CORPORATION

     This certifies that ________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Agreement dated as of January 29, 2003 (the "Rights
Agreement") between Moldflow Corporation (the "Company") and EquiServe Trust
Company, N.A., as Rights Agent (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to the close of business on January 30, 2013 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one ten-thousandth of a fully paid, non-assessable
share of the Series A Junior Participating Cumulative Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of _____ per one
ten-thousandth of a share (the "Exercise Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase and
the related Certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of $_______, based on the Preferred Stock as
constituted at such date.

     Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person or Associate or Affiliate thereof, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a Person who, after such transfer, became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person, such Rights shall become null
and void and no holder hereof shall have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.

                                        8
<Page>

     As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.

     Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) specified in the Rights Agreement.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a redemption price of $0.01 per Right (payable in cash, Common Stock
or other consideration deemed appropriate by the Board of Directors).

     The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one ten-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

     No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for

                                        9
<Page>

the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

     This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.

     WITNESS the facsimile signature of the proper officers of the Company as a
document under corporate seal.

Attested:                                MOLDFLOW CORPORATION

By:                                      By:
   ---------------------------               ---------------------------
[Secretary or Assistant Secretary]       Name:
                                         Title: [Chairman, Vice Chairman,
                                                    President or Vice President]
Countersigned:

EQUISERVE TRUST COMPANY, N.A.

By:
   ---------------------------
   Name:
   Title:

                                       10
<Page>

                   [FORM OF REVERSE SIDE OF RIGHT CERTIFICATE]

                               FORM OF ASSIGNMENT
                (TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
               HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE.)

     FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ____________________________________ (Please print name and
address of transferee) ____________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.

     Dated: _________, __
                                         -----------------------------

                                         --------------------------------
                                         Signature

     Signature Guaranteed:
                           -----------------------------------

                                   CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ______ are ______ are
not being transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.

     Dated: _________, __
                                         -----------------------------

                                         --------------------------------
                                         Signature

<Page>

                                     NOTICE

     The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.

<Page>

                          FORM OF ELECTION TO PURCHASE

                      (TO BE EXECUTED IF HOLDER DESIRES TO
                        EXERCISE THE RIGHT CERTIFICATE.)

To MOLDFLOW CORPORATION:

     The undersigned hereby irrevocably elects to exercise _______ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:

          Please insert social security or other identifying taxpayer number:
          ____________________

          ______________________________________________________________________
          _______________

          ______________________________________________________________________
          _______________
(Please print name and address)

     If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:

          Please insert social security or other identifying taxpayer number:
          ____________________

          ______________________________________________________________________
          _______________

          ______________________________________________________________________
          _______________
          (Please print name and address)

     Dated: _________, __
                                         --------------------------------

                                         --------------------------------
                                         Signature

Signature Guaranteed:
                      -----------------------------------

<Page>

                                   CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.

     Dated: _________, __
                                         -----------------------------

                                         -----------------------------
                                         Signature

<Page>

                                     NOTICE

     The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.SENIOR SECURED

CREDIT AGREEMENT,

dated as of August

2, 2002,

between

THE TITAN

CORPORATION

as the Lender,

and

SUREBEAM

CORPORATION

as the Borrower

 

 

SENIOR SECURED

CREDIT AGREEMENT

THIS SENIOR SECURED

CREDIT AGREEMENT, dated as of August 2, 2002, is between SUREBEAM CORPORATION,

a Delaware corporation (the “Borrower”), and THE TITAN CORPORATION, a Delaware

corporation (the “Lender”).

W  I  T  N  E  S

S  E  T  H:

WHEREAS, the Lender

intends to distribute the Borrower’s common stock owned by Lender to the

Lender’s stockholders in a tax-free spin-off (the “Spin-off”); and

WHEREAS, the Borrower has

requested that the Lender make available to the Borrower a senior secured

credit facility in the amount of Fifty Million Dollars ($50,000,000); and

WHEREAS, the Lender is

willing to make such senior secured credit facility available upon and subject

to the terms and conditions contained herein.

NOW, THEREFORE, the

parties hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1             Defined Terms.  The following capitalized terms (whether or

not underscored) when used in this Agreement, including its preamble and

recitals, shall, except where the context otherwise requires, have the

following meanings (such meanings to be equally applicable to the singular and

plural forms thereof):

“Affiliate” of any

Person means any other Person which, directly or indirectly, controls, is

controlled by or is under common control with such Person.  “Control” of a Person means the power,

directly or indirectly,

(a)           to vote 10% or more of the securities

(on a fully diluted basis) having ordinary voting power for the election of

directors, managing members or general partners (as applicable); or

(b)           to direct or cause the direction of

the management and policies of such Person (whether by contract or otherwise).

“Agreement” means

this Senior Secured Credit Agreement, as it may be amended, restated,

supplemented, or otherwise modified from time to time.

“Allowed Quarterly

Maximum” is defined in Section 2.1(b).

“Annual Operating Plan”

means the 2002-2003 annual operating plan prepared by the Borrower and

previously delivered to the Lender, a copy of which is attached hereto as Exhibit A.

 

1

 

“Asset Sale” means

any sale, lease, sale and leaseback, assignment, conveyance, transfer or other

disposition by the Borrower or any of its Subsidiaries of any of its property

or assets, including the Capital Stock of any Subsidiary.

“Authorized Officer”

means, relative to any Obligor, those of its officers, general partners or

managing members (as applicable) whose signatures and incumbency shall have

been certified to the Lender in the certificate of incumbency most recently

delivered by such Obligor.

“Borrower” is

defined in the preamble.

“Borrower Pledge

Agreement” means the Pledge Agreement executed and delivered by the

Borrower pursuant to Article V substantially in the form of Exhibit B

hereto, as amended, restated, supplemented or otherwise modified from time to

time.

“Borrower Security

Agreement” means the Security Agreement executed and delivered by the

Borrower pursuant to Article V substantially in the form of Exhibit C

hereto, as amended, restated, supplemented or otherwise modified from time to

time.

“Borrowing” means

the Revolving Loans and/or the Letters of Credit, as the case may be.

“Borrowing Request”

means a Revolving Loan request and certificate duly completed and executed by

an Authorized Officer of the Borrower, substantially in the form of Exhibit D

hereto, together with such changes thereto as the Lender may from time to time

reasonably request for the purpose of determining Borrower’s satisfaction of

conditions for each Borrowing Request.

“Business Day”

means any day which is neither a Saturday or Sunday nor a legal holiday on

which banks are authorized or required to be closed in New York, New York or

San Diego, California.

“Capital Expenditures”

means, for any period, the aggregate, or separate amount, as the case may be,

of all expenditures of the Borrower and its Subsidiaries for fixed or capital

assets made during such period which, in accordance with GAAP, would be

classified as capital expenditures.

“Capital Stock”

means, with respect to any Person, any and all shares, interests,

participations or other equivalents (however designated, whether voting or

non-voting) of such Person’s capital, whether now outstanding or issued after

the Closing Date.

“Capitalized Lease

Liabilities” means all monetary obligations of the Borrower or any of its

Subsidiaries under any leasing or similar arrangement which have been (or, in accordance

with GAAP, should be) classified as capitalized leases, and for purposes of

each Loan Document the amount of such obligations shall be the capitalized

amount thereof, determined in accordance with GAAP, and the stated maturity

thereof shall be the date of the last payment of rent or any other amount due

under such lease prior to the first date upon which such lease may be

terminated by the lessee without payment of a premium or a penalty.

 

2

 

“Cash Equivalents”

means (a) marketable direct obligations issued or unconditionally guaranteed by

the United States government and backed by the full faith and credit of the

United States government; (b) domestic and Eurodollar certificates of deposit

and time deposits, bankers’ acceptances and floating rate certificates of

deposit issued by any commercial bank organized under the laws of the United

States, any State thereof, the District of Columbia, any foreign bank, or its

branches or agencies (fully protected against currency fluctuations), which, at

the time of acquisition, are rated A-1 (or better) by S&P or P-1 (or

better) by Moody’s; (c) commercial paper of United States and foreign

banks and bank holding companies and their Subsidiaries and United States and

foreign finance, commercial industrial or utility companies which, at the time

of acquisition, are rated A-1 (or better) by S&P or P-1 (or better) by

Moody’s; (d) marketable direct obligations of any State of the United States of

America or any political subdivision of any such State given on the date of

such investment the highest credit rating by Moody’s and S&P; provided,

that the maturities of all obligations of the type specified in clauses (a) through

(d) above shall not exceed one hundred eighty (180) days; and (e)

reverse purchase agreements covering obligations of the type specified in clause

(a) above.

“Cash Equivalent

Investment” means, at any time:

(a)           any direct obligation of (or

unconditionally guaranteed by) the United States of America or a State thereof

(or any agency or political subdivision thereof, to the extent such obligations

are supported by the full faith and credit of the United States of America or a

State thereof) maturing not more than one year after such time;

(b)           commercial paper maturing not more

than 270 days from the date of issue, which is issued by:

(i)            a corporation (other than an

Affiliate of any Obligor) organized under the laws of any State of the United

States or of the District of Columbia and rated A-1 or higher by S&P or P-1

or higher by Moody’s;

(c)           any certificate of deposit, time

deposit or bankers acceptance, maturing not more than one year after its date

of issuance, which is issued by any bank organized under the laws of the United

States (or any State thereof) and which has (x) a credit rating of A2 or higher

from Moody’s or A or higher from S&P and (y) a combined capital and surplus

greater than $500,000,000;

(d)           any repurchase agreement having a

term of 30 days or less entered into with any commercial banking institution

satisfying the criteria set forth in clause (c) which:

(i)            is secured by a fully perfected

security interest in any obligation of the type described in clause (a);

and

(ii)           has a market value at the time such

repurchase agreement is entered into of not less than 100% of the repurchase

obligation of such commercial banking institution thereunder;

(e)           Investments, classified in accordance

with GAAP as current assets, in money market investment programs registered

under the Investment Company Act of 1940, as amended, which are administered by

financial institutions that have the highest rating obtainable from either

Moody’s or S & P’s and the portfolios of which are limited solely to

Investments of the character, quality and maturity described in clauses (a),

(b),

(c)

and (d)

above.

 

3

 

“CERCLA” means the

Comprehensive Environmental Response, Compensation and Liability Act of 1980,

as amended.

“CERCLIS” means

the Comprehensive Environmental Response Compensation Liability Information

System List.

“Change in Control”

means (i) the acquisition by any person, entity or “group”, within the meaning

of Section 13(d)(3) or 14(d)(2) of the Exchange Act, (excluding,

for this purpose, the Lender, the Borrower or its Subsidiaries, or any employee

benefit plan of the Borrower or its Subsidiaries which acquires beneficial

ownership of voting securities of the Borrower) of beneficial ownership (within

the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-three

percent (33%) or more of either the then outstanding shares of common stock of

the Borrower or the combined voting power of the Borrower’s then outstanding

voting securities entitled to vote generally in the election of directors; or

(ii) individuals who immediately following the distribution date for the

Spin-off (the “Distribution

Date”) constitute the Board of Directors (the “Incumbent Board”)

cease for any reason to constitute at least a majority of the Board of

Directors; provided that any person becoming a director subsequent to

the Distribution Date whose election, or nomination for election by the

Borrower’s stockholders, was approved by a vote of at least a majority of the

directors then comprising the Incumbent Board shall be considered as though

such person were a member of the Incumbent Board; or (iii) approval by the stockholders

of the Borrower of a reorganization, merger or consolidation, in each case with

respect to which Persons who were the stockholders of the Borrower immediately

prior to such reorganization, merger or consolidation do not, immediately

thereafter, own more than sixty-six percent (66%) of the combined voting power

entitled to vote generally in the election of directors of the reorganized,

merged or consolidated company’s then outstanding voting securities or (iv) any

“Change of Control” (or substantially similar provision) under (and as defined

in) any Sub Debt Document; provided, however, any changes that

occur directly as a result of the Spin-off shall not constitute a Change in

Control.

“Closing Date”

means the first date on which all of the conditions precedent set forth in Section

5.1 have been satisfied, but in no event shall such date be later than

August 2, 2002.

“Code” means the

Internal Revenue Code of 1986, and the regulations thereunder, in each case as

amended, reformed or otherwise modified from time to time.

“Collateral Assignment

of Rights under License Agreement” means the Collateral Assignment of

Rights Under License Agreement executed and delivered by SB OperatingCo, Inc.,

now known as SB OperatingCo, LLC, 

pursuant to Article V substantially in the form of Exhibit E

hereto, as amended, restated, supplemented or otherwise modified from time to

time.

“Collateral Documents”

means the Borrower Pledge Agreement, the Borrower Security Agreement, the

Collateral Assignment of Rights under License Agreement; the Subsidiary

Guaranty, the Subsidiary Pledge Agreement, the Subsidiary Security Agreement,

each Copyright Security Agreement, each Trademark Security Agreement and each

Patent Security Agreement.

 

4

 

“Commitment”

means, as the context may require, the Revolving Loan Commitment and the Letter

of Credit Commitment.

“Commitment

Termination Event” means:

(a)           the occurrence of any Event of

Default described in Section 9.1(i); or

(b)           the occurrence and continuance of any

other Event of Default and either

(i)            the declaration by the Lender of all

or any portion of the Revolving Loans to be due and payable pursuant to Section

9.3, or

(ii)           the giving of notice by the Lender to

the Borrower that the Revolving Loan Commitment has been terminated.

“Compliance

Certificate” means a certificate duly completed and executed by an

Authorized Officer of the Borrower, substantially in the form of Exhibit F

hereto, together with such changes thereto as the Lender may from time to time

reasonably request for the purpose of monitoring the Borrower’s compliance with

Section 8.4 of this Agreement.

“Contingent Liability”

means any agreement, undertaking or arrangement by which any Person guarantees,

endorses or otherwise becomes or is contingently liable upon (by direct or

indirect agreement, contingent or otherwise, to provide funds for payment, to

supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a

creditor against loss) the Indebtedness or any other obligation of any other

Person (other than (i) by endorsements of instruments in the course of

collection and (ii) guarantees of obligations of Subsidiaries incurred in the

ordinary course of business and not constituting Indebtedness).  The amount of any Person’s obligation under

any Contingent Liability shall (subject to any limitation set forth therein) be

deemed to be the outstanding principal amount of the debt, obligation or other

liability guaranteed thereby.

“Controlled Group”

means all members of a controlled group of corporations and all members of a

controlled group of trades or businesses (whether or not incorporated) under

common control which, together with the Borrower, are treated as a single

employer under Section 414(b) or 414(c) of the Code or Section

4001 of ERISA.

“Copyright Security

Agreement” means any Copyright Security Agreement executed and delivered by

any Obligor in substantially the form of Exhibit G to any Security

Agreement, as amended, restated, supplemented or otherwise modified from time

to time.

“Credit Extension”

means the making of a Revolving Loan by the Lender or the issuance of a Letter

of Credit.

“Credit Extension

Request” means any Borrowing Request.

 

5

 

“Default” means

any Event of Default or any condition, occurrence or event which, after notice

or lapse of time or both, would constitute an Event of Default.

“Disclosure Schedule”

means the Disclosure Schedule attached hereto as Schedule I, as it may be

amended, restated, supplemented or otherwise modified from time to time by the

Borrower with the written consent of the Lender.

“Disbursement” is

defined in Section 2.7(b).

“Disbursement Date”

is defined in Section 2.7(b).

“Disqualified Stock”

means any Capital Stock of the Borrower or any Subsidiary of the Borrower which

by its terms (or by the terms of any security into which it is convertible or

for which it is exchangeable or exercisable) or upon the happening of any event

(a) matures or is mandatorily redeemable pursuant to a sinking fund obligation

or otherwise, (b) is convertible or exchangeable for Indebtedness or

Disqualified Stock, or (c) is redeemable or subject to required repurchase at

the option of the holder thereof, in whole or in part, in each case in this clause

(c) before the final Revolving Loan Maturity Date.

“Dollar” and the

sign “$” mean lawful money of the United States.

“EBITDA” means,

for the Borrower and its Subsidiaries, for any applicable period, the sum

(without duplication) of the following:

(a)   Net Income,

minus

(b)   all amounts added by the Borrower and its

Subsidiaries, in determining Net Income, representing either non-cash or

non-recurring gains, including as a result of changes in accounting treatment

under GAAP and including all royalty income recognized by the Borrower and its

Subsidiaries in accordance with that certain Amended and Restated License

Agreement dated October 17, 2001 between SB OperatingCo, Inc., now known as SB

OperatingCo, LLC and the Lender,

plus

(c)   the amount deducted by the Borrower and its

Subsidiaries, in determining Net Income, representing amortization, as

determined in accordance with GAAP,

plus

(d)   the amount deducted, in determining Net

Income, of all federal, state and local income taxes (whether paid in cash or

deferred) of the Borrower and its Subsidiaries,

plus

 

6

 

(e)   the amount deducted, in determining Net

Income, of Interest Expense of the Borrower and its Subsidiaries,

plus

(f)    the amount deducted, in

determining Net Income, representing depreciation of assets of the Borrower and

its Subsidiaries, as determined in accordance with GAAP.

“EBITDA AOP

Target” means that amount set forth as the Borrower’s EBITDA Target for the

particular period in the Borrower’s Annual Operating Plan.

“Environmental Laws”

means all applicable federal, state or local statutes, laws, ordinances, codes,

rules, regulations and guidelines (including consent decrees and administrative

orders) relating to pollution, public health and safety and protection of the

environment.

“ERISA” means the

Employee Retirement Income Security Act of 1974, as amended, and any successor

statute thereto of similar import, together with the regulations thereunder, in

each case as in effect from time to time. 

References to sections of ERISA also refer to any successor sections

thereto.

“Event of Default”

is defined in Section 9.1.

“Exchange Act”

means the Securities Exchange Act of 1934, as amended.

“Fiscal Quarter”

means a quarter ending on the last day of each March, June, September or

December.

“Fiscal Year”

means any period of twelve consecutive calendar months ending on December 31 of

each year; references to a Fiscal Year with a number corresponding to any

calendar year (e.g., the “Fiscal Year 2001”) refer to the Fiscal Year ending on

December 31 of such calendar year.

“Foreign Subsidiary”

means any Subsidiary that is not a U.S. Subsidiary.

“F.R.S. Board”

means the Board of Governors of the Federal Reserve System or any successor

thereto.

“GAAP” is defined

in Section 1.4.

“Governmental

Authority” means the government of the United States of America, any other

nation or any political subdivision thereof, whether state or local, and any

agency, authority, instrumentality, regulatory body, court, central bank or

other entity exercising executive, legislative, judicial, taxing, regulatory or

administrative powers or functions of or pertaining to government.

“Guarantor” means

each direct and indirect U.S. Subsidiary and Foreign Subsidiary of the Borrower

whether now existing or hereafter acquired or organized, each of which shall be

required to execute and deliver the Subsidiary Guaranty, or a supplement

thereto; provided, however, with respect to Foreign Subsidiaries,

Guarantor shall not include Foreign Subsidiaries to the extent that the

granting of such Subsidiary Guaranty would cause material adverse tax

consequences to the Borrower or such Foreign Subsidiary or would be violative

of applicable law.

 

7

 

“Hazardous Material”

means

(a)           any “hazardous substance”, as defined

by CERCLA;

(b)           any “hazardous waste”, as defined by

the Resource Conservation and Recovery Act, as amended; or

(c)           any pollutant or contaminant or

hazardous, dangerous or toxic chemical, material or substance (including any

petroleum product) within the meaning of any other applicable federal, state or

local law, regulation, ordinance or requirement (including consent decrees and

administrative orders) relating to or imposing liability or standards of

conduct under any Environmental Law, all as amended.

“Hedging Agreements”

means currency exchange agreements, interest rate swap agreements, interest

rate cap agreements and interest rate collar agreements, and all other

agreements or arrangements designed to protect such Person against fluctuations

in interest rates or currency exchange rates.

“Hedging Obligations”

means, with respect to any Person, all liabilities of such Person under Hedging

Agreements.

“herein”, “hereof”,

“hereto”, “hereunder” and similar terms contained in this

Agreement or any other Loan Document refer to this Agreement or such other Loan

Document, as the case may be, as a whole and not to any particular Section,

paragraph or provision of this Agreement or such other Loan Document.

“Impermissible

Qualification” means, relative to the opinion or certification of any

independent public accountant as to any financial statement of the Borrower,

any qualification or exception to such opinion or certification:

(a)           which is of a “going concern” or

similar nature;

(b)           which relates to the limited scope of

examination of matters relevant to such financial statement; or

(c)           which relates to the treatment or

classification of any item in such financial statement and which, as a

condition to its removal, would require an adjustment to such item the effect

of which would be to cause the Borrower to be in default of any of its

obligations under Section 8.4.

“including” and “include”

means including without limiting the generality of any description preceding

such term, and, for purposes of this Agreement and each other Loan Document,

the parties hereto agree that the rule of ejusdem

generis shall not be applicable to limit a general statement, which

is followed by or referable to an enumeration of specific matters, to matters

similar to the matters specifically mentioned.

 

8

 

“Incumbent Board”

is defined in the definition of “Change in Control.”

“Indebtedness” of

any Person means, without duplication:

(a)           all obligations of such Person for

borrowed money or advances and all obligations of such Person evidenced by

bonds, debentures, notes or similar instruments;

(b)           all obligations, contingent or

otherwise, relative to the face amount of all letters of credit, whether or not

drawn, and banker’s acceptances issued for the account of such Person;

(c)           all Capitalized Lease Liabilities of

such Person;

(d)           net liabilities of such Person under

all Hedging Obligations;

(e)           whether or not so included as

liabilities in accordance with GAAP, all obligations of such Person to pay the

deferred purchase price of property or services excluding trade accounts

payable in the ordinary course of business which are not overdue for a period of

more than ninety (90) days or, if overdue for more than ninety (90) days, as to

which a dispute exists and adequate reserves in conformity with GAAP have been

established on the books of such Person, and indebtedness or other obligations

secured by (or for which the holder of such indebtedness or other obligations

has an existing right, contingent or otherwise, to be secured by) a Lien on

property owned or being acquired by such Person (including indebtedness or

other obligations arising under conditional sales or other title retention

agreements), whether or not such indebtedness or other obligations shall have

been assumed by such Person or is limited in recourse;

(f)            all Contingent Liabilities of such

Person;

(g)           the principal portion of all

obligations of such Person under any Synthetic Lease;

(h)           all Disqualified Stock of such

Person; and

(i)            all Lender Guaranties and Letters of

Credit issued by or caused to be issued by the Lender on behalf of the

Borrower.

 

9

 

For all purposes of this

Agreement, the Indebtedness of any Person shall include the Indebtedness of any

other entity (including any partnership in which such Person is a general

partner) to the extent such Person is liable therefor as a result of such

Person’s ownership interest in or other relationship with such entity, except

to the extent the terms of such Indebtedness provide that such Person is not

liable therefor (provided, Indebtedness shall not be calculated twice for

purposes of this Agreement).

“Intellectual Property”

is defined in Section 6.19.

“Indemnified

Liabilities” is defined in Section 10.4.

“Indemnified Parties”

is defined in Section 10.4.

 “Interest Expense” means, for any

Fiscal Quarter, the aggregate interest expense of the Borrower and its

Subsidiaries for such Fiscal Quarter, as determined in accordance with GAAP,

including the portion of any payments made in respect of Capitalized Lease

Liabilities allocable to interest expense.

“Investment”

means, relative to any Person, (a) any direct or indirect purchase or other acquisition

by such Person of, or of a beneficial interest in, the Capital Stock or other

debt or equity securities (including options, warrants or other rights to

acquire such Capital Stock or other securities) of any other Person, (b) any

direct or indirect purchase or other acquisition by such Person of any assets

constituting a business unit of any Person or all or substantially all of a

Person’s assets, (c) any direct or indirect loan, advance (excluding

commission, travel, petty cash, relocation and similar advances to officers,

directors, and employees made in the ordinary course of business) or capital

contribution by such Person to any other Person, including all Indebtedness and

accounts receivable acquired from that other Person that are not current assets

or did not arise from sales to that other Person in the ordinary course of

business, (c) any Hedging Agreements of such Person and (d) any Contingent

Liability of such Person.  The amount of

any Investment shall be the original principal or capital amount thereof less

all returns of principal or equity thereon and shall, if made by the transfer

or exchange of property other than cash, be deemed to have been made in an

original principal or capital amount equal to the fair market value of such

property at the time of such Investment.

“Issuance Request”

means a Letter of Credit request duly completed and executed by an Authorized

Officer of the Borrower, substantially in the form of Exhibit H

hereto, together with such changes thereto as the Lender may from time to time

reasonably request for the purpose of determining the Borrower’s satisfaction

of conditions for each Issuance Request.

“Lender” is

defined in the preamble.

“Lender Guaranties”

means those outstanding guaranties of the Borrower’s obligations by the Lender

set forth on Item 2.7 of the Disclosure Schedule.

“Lender Guaranty

Disbursement” is defined in Section 2.7(b).

“Lender Guaranty

Disbursement Date” is defined in Section 2.7(b).

“Lender Guaranty

Outstandings” means, on any date, an amount equal to the sum of:

(a)   the then aggregate amount which is guarantied

by the Lender under all issued and outstanding Lender Guaranties,

plus

 

10

 

                                (b)

the then aggregate amount of all outstanding Lender Guaranty Reimbursement

Obligations.

“Lender Guaranty

Reimbursement Obligation” is defined in Section 2.7(c).

“Lender’s Credit

Agreement” means that certain Senior Secured Credit Agreement dated as of

May 23, 2002 among the Lender, various financial institutions from time to time

parties thereto, Wachovia Bank, National Association, as administrative agent,

The Bank of Nova Scotia and Comerica Bank-California, as syndication agents,

and Branch Banking and Trust Company and Toronto Dominion (New York), Inc., as

documentation agents (as such Senior Secured Credit Agreement may be amended,

restated, supplemented, renewed, replaced, refinanced or otherwise modified

from time to time whether or not with the same financial institutions).

“Lender’s

Environmental Liability” means any and all losses, liabilities, obligations,

penalties, claims, litigation, demands, defenses, costs, judgments, suits,

proceedings, damages (including consequential damages), disbursements or

expenses of any kind or nature whatsoever (including reasonable attorneys’ fees

at trial and appellate levels and experts’ fees and disbursements and expenses

incurred in investigating, defending against or prosecuting any litigation,

claim or proceeding) which may at any time be imposed upon, incurred by or

asserted or awarded against the Lender or any of the Lender’s Affiliates,

shareholders, directors, officers, employees, and agents (all such parties to

the extent of their capacity only as lender and relating thereto, but not in

any other capacity) in connection with or arising from:

(a)           any Hazardous Material on, in, under

or affecting all or any portion of any property of the Borrower or any of its

Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to

the extent caused by Releases from the Borrower’s or any of its Subsidiaries’

or any of their respective predecessors’ properties;

(b)           any misrepresentation, inaccuracy or

breach of any warranty, contained or referred to in Section 6.12;

(c)           any violation or claim of violation

by the Borrower or any of its Subsidiaries of any Environmental Laws; or

(d)           the imposition of any lien for

damages caused by, or the recovery of any costs for, the cleanup, release or

threatened release of any Hazardous Material (i) by the Borrower or any of its

Subsidiaries or (ii) in connection with any property owned or formerly owned by

the Borrower or any of its Subsidiaries.

“Letter of Credit”

is defined in Section 2.3.

“Letter of Credit

Commitment” means the Lender’s obligation to cause the issuance of Letters

of Credit pursuant to Section 2.3.

“Letter of Credit

Commitment Amount” means, on any date, a maximum amount of Five Million

Dollars ($5,000,000), as such amount may be permanently reduced from time to

time pursuant to Section 2.2 or Section 3.1.

 

11

 

“Letter of Credit

Outstandings” means, on any date, an amount equal to the sum of:

(a)   the then aggregate amount which is undrawn

and available under all issued and outstanding Letters of Credit,

plus

                                (b)  the then aggregate amount of all outstanding

Reimbursement Obligations.

“Lien” means any

security interest, mortgage, pledge, hypothecation, assignment, deposit

arrangement, encumbrance, lien (statutory or otherwise), charge against or

interest in property, or other priority or preferential arrangement of any kind

or nature whatsoever, to secure payment of a debt or performance of an

obligation.

“Loan Documents”

collectively means this Agreement, the Collateral Documents, each agreement

pursuant to which the Lender is granted a Lien to secure the Obligations and

each other agreement, certificate, document or instrument delivered in

connection with this Agreement or such other Loan Documents, whether or not

specifically mentioned herein or therein.

“Material Adverse

Effect” means the result of one or more events, changes or effects which,

individually or in the aggregate, would reasonably be expected to have a

material adverse effect on (i) the business, results of operations, condition

(financial or otherwise) or prospects of the Obligors, in each case, taken as a

whole, or (ii) the validity or enforceability of any of the Loan Documents, or

the rights, remedies and benefits available to the parties thereunder.

 “Moody’s” means Moody’s Investors

Service, Inc.

“Net Income” means

for any period, the aggregate of all amounts which would be included as net

income on the consolidated financial statements of the Borrower and its

Subsidiaries for such period, as determined in accordance with GAAP.

“Net Proceeds”

means (a) with respect to the issuance of any equity securities in excess of

Twenty-Five Million Dollars ($25,000,000) (other than the issuance or exercise

of stock options in connection with employee incentive programs or employee

benefit programs or similar programs) of the Borrower or any of its

Subsidiaries, the excess of (i) the proceeds received by the Borrower or any of

its Subsidiaries from the sale or issuance to any Person of any stock,

warrants, convertible securities or options or the exercise of any such

warrants or options in excess of Twenty-Five Million Dollars ($25,000,000),

over (ii) all reasonable and customary underwriting commissions and legal,

investment banking, brokerage and accounting and other professional fees, sales

commissions and disbursements actually incurred in connection with such sale or

issuance; (b) with respect to any Asset Sale (other than sales of inventory or

equipment or systems built for customers in the ordinary course of the

Borrower’s business), the excess of (i) the proceeds received from any Asset

Sale over (ii) the reasonable cash costs of such Asset Sale, taxes paid or

payable as a result thereof, and all reasonable and customary legal, investment

banking, accounting, and other professional fees, sales commissions or

disbursements actually incurred in connection with such Asset Sale which have

not been paid to Affiliates of the Borrower in connection therewith; and (c)

with respect to the incurrence or issuance of

 

12

 

Indebtedness, the

excess of (i) the proceeds received from the incurrence or issuance of any

Indebtedness (except for Indebtedness permitted by Section 8.2) of the

Borrower or any of its Subsidiaries over (ii) the reasonable costs incurred in

such transaction, and all reasonable and customary legal, investment banking,

accounting, and other professional fees, sales commissions or disbursements

actually incurred in connection with such transaction.

The amount of the

proceeds described in clauses  (a) and (b) above may, at

the option of the Borrower and so long as no Default or Event of Default shall

have occurred and be continuing, be used by the Borrower or a Subsidiary, as

applicable, to purchase (x) (i) with respect to the proceeds described in clause

(a), assets reasonably acceptable to the Lender and (ii) with respect to

the proceeds described in clause (b), substantially similar assets

useful in the business of the Borrower or such Subsidiary, (with such assets or

interests described in clause (x), collectively, referred to as “Qualified Assets”)

within 180 days (with respect to the proceeds described in clause (a)),

and 360 days (with respect to the proceeds described in clause (b)),

after the consummation (and with the proceeds) of such sale, conveyance or

disposition. In the event the Borrower or such Subsidiary elects to exercise

its right to purchase Qualified Assets with the Net Proceeds pursuant to this

provision, the Borrower shall deliver a certificate of an Authorized Officer to

the Lender within 120 days following the receipt of Net Proceeds (with respect

to the proceeds described in clause (a) above) or within 180 days following

receipt of Net Proceeds (with respect to the proceeds described in clause

(b) above) setting forth the amount of the Net Proceeds which the Borrower

or such Subsidiary expects to use to purchase Qualified Assets during such

180-day or 360-day period, as applicable. 

Any amount of such Net Proceeds which the Borrower does not expect to

use to purchase Qualified Assets shall be paid to the Lender in accordance with

Section 3.1(d) on the 120th day following receipt of such Net Proceeds

(with respect to the proceeds described in clause (a) above) or the

180th day following receipt of such Net Proceeds (with respect to the proceeds

described in clause (b) above). 

If the Borrower fails to deliver a certificate within such 120- or

180-day period, as applicable, specifying the amount of Net Proceeds which the

Borrower expects to use to purchase Qualified Assets, all of the Net Proceeds

received shall be paid to the Lender in accordance with Section 3.1(d)

on the 120th day following receipt of such Net Proceeds (with respect to the

proceeds described in clause (a) above) or the 180th day following

receipt of such Net Proceeds (with respect to the proceeds described in clause

(b) above).

If and to the extent that

the Borrower or such Subsidiary has elected to reinvest Net Proceeds referred

to in clauses (a) and (b) as permitted above, then on the date

which is 180 days or 360 days, as appropriate, after the relevant sale,

conveyance or disposition, the Borrower shall deliver a certificate of an

Authorized Officer to the Lender certifying as to the amount and use of such

Net  Proceeds actually used to purchase

Qualified Assets.  To the extent such

Net Proceeds are not so used to purchase Qualified Assets then the Revolving

Loans shall be repaid as set forth in Section 3.1(d) and the Revolving

Loan Commitment Amount, pursuant to Section 2.2(b), shall be

automatically reduced by an amount equal to the aggregate amount of such

proceeds not so used to purchase Qualified Assets.

 “Non-Excluded Taxes” means any Taxes

other than net income and franchise taxes imposed with respect to the Lender by

the Governmental Authority under the laws of which the Lender is organized or

in which it maintains its corporate office.

 

13

 

 “Obligations” means all obligations

(monetary or otherwise, whether absolute or contingent, matured or unmatured)

of the Borrower and each other Obligor arising under or in connection with this

Agreement, each other Loan Document and any Hedging Agreement between the

Borrower and the Lender or an Affiliate of the Lender.

“Obligor” means,

as the context may require, the Borrower and each other Person (other than the

Lender) obligated under any Loan Document.

“Operating Expenses”

means all research and development expenses plus all sales, general and

administrative expenses of the Borrower and its Subsidiaries on a consolidated

basis, excluding only non-cash asset impairment charges, as such expenses are

determined under GAAP consistent with the Borrower’s historical accounting

practices and classifications of expenses and consistent with the Annual

Operating Plan.

“Organic Document”

means, relative to any Obligor, as applicable, its certificate of

incorporation, articles of organization, by-laws, certificate of partnership,

partnership agreement, certificate of formation, limited liability agreement,

operating agreement and all shareholder agreements, voting trusts and similar

arrangements applicable to any of such Obligor’s partnership interests, limited

liability company interests or authorized shares of Capital Stock.

“Other Taxes”

means any and all stamp, documentary or similar taxes, or any other excise or

property taxes or similar levies that arise on account of any payment being

made or being required to be made hereunder or under the Revolving Note or from

the execution, delivery, registration, recording or enforcement of this

Agreement or any other Loan Document (but excluding income, franchise and

related taxes of the Lender).

“Overadvance” is

defined in Section 3.1(c).

“Patent Security

Agreement” means any Patent Security Agreement executed and delivered by

any Obligor in substantially the form of Exhibit A to any Security

Agreement, as amended, restated, supplemented, or otherwise modified from time

to time.

“PBGC” means the

Pension Benefit Guaranty Corporation and any entity succeeding to any or all of

its functions under ERISA.

“Pension Plan”

means a “pension plan”, as such term is defined in Section 3(2) of

ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan

as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any

corporation, trade or business that is, along with the Borrower, a member of a

Controlled Group, may have liability, including any liability by reason of

having been a substantial employer within the meaning of Section 4063 of ERISA

at any time during the preceding five years, or by reason of being deemed to be

a contributing sponsor under Section 4069 of ERISA.

“Permitted

Acquisitions” means an acquisition (whether pursuant to an acquisition of

stock, assets or otherwise) by the Borrower or any Guarantor of any Person or

the assets of any Person which meets all of the following conditions: (i) such

Person is primarily engaged in a similar line of business as the Borrower or

such Guarantor as of the Closing Date; (ii) all or substantially all of the

assets acquired or owned by the Person being acquired are located in the

 

14

 

United States and

such Person (in the case of an acquisition of Capital Stock) is organized under

the laws of the United States or a state thereof or the District of Columbia

and will become a Guarantor upon the consummation of such acquisition and

otherwise comply with Section 7.7; (iii) all or substantially all of the

Capital Stock or assets so acquired will become subject to Liens created under

the Loan Documents; (iv) with respect to any single acquisition, or a series of

related acquisitions with a single or aggregate net purchase price of greater

than Two Million Dollars ($2,000,000), including any assumed Indebtedness (with

any non-cash consideration being valued in good faith by senior management of

the Borrower as set forth in an Officer’s Certificate delivered to the Lender),

the Borrower has obtained the prior consent of the Lender (which consent shall

not be unreasonably withheld); (v) immediately before and after giving effect

to such acquisition, no Default or Event of Default shall have occurred and be

continuing or would result therefrom (including under Section 8.1); (vi)

the Borrower shall have delivered to the Lender a Compliance Certificate for

the period of four (4) full Fiscal Quarters immediately preceding such

acquisition (prepared in good faith and in a manner and using such methodology

which is consistent with the most recent financial statements delivered

pursuant to Section 7.1) giving pro forma effect in accordance with this

Agreement to the consummation of such acquisition and evidencing compliance

with the covenants set forth in Section 8.4; and (vii) the Lender shall

have received a certificate, dated a date reasonably acceptable to the Lender,

of an Authorized Officer of the Borrower certifying as to a true and complete

copy of each purchase agreement, and all other documents and instruments

delivered in connection with the consummation of any Permitted Acquisitions and

that are required to be delivered pursuant to the terms of the relevant

purchase agreement and the Lender shall be reasonably satisfied with all

amendments, waivers or other modifications of, or other forebearance to

exercise any rights with respect to, any of the terms or provisions of such

purchase agreements and the exhibits and schedules thereto.

“Permissive

Prepayments” is defined in Section 3.1.

“Person” means any

natural person, corporation, limited liability company, partnership, joint

venture, association, trust or unincorporated organization, Governmental

Authority or any other legal entity, whether acting in an individual, fiduciary

or other capacity.

“Plan” means any

Pension Plan or Welfare Plan.

“Pledge Agreement”

means, as the context may require, the Borrower Pledge Agreement or the

Subsidiary Pledge Agreement.

“Pledged Subsidiary”

means, at any time, each Subsidiary in respect of which the Lender has been

granted, at such time, a security interest in and to, or a pledge of, (i) any

of the issued and outstanding shares of Capital Stock of such Subsidiary, or

(ii) any intercompany notes of such Subsidiary owing to the Borrower or another

Subsidiary of the Borrower.

“Pro Forma Financial

Statements” is defined in Section 5.1(j).

“Qualified Assets”

is defined in the definition of “Net Proceeds”.

“Quarterly Maximum”

is defined in Section 2.1.

 

15

 

“Quarterly Payment

Date” means the first Business Day of January, April, July and October of

each Fiscal Year.

“Regulation S-X”

means Regulation S-X promulgated by the SEC.

“Reimbursement

Obligation” is defined in Section 2.6(c).

“Release” means a

“release”, as such term is defined in CERCLA.

“Resource Conservation

and Recovery Act” means the Resource Conservation and Recovery Act, 42 U.S.C.

Section 6901, et seq., as amended.

“Restricted Payment”

means the declaration or payment of any dividend (other than dividends payable

solely in common stock of the Borrower) on, or the making of any payment or

distribution on account of, or setting apart assets for a sinking or other

analogous fund for, the purchase, redemption, defeasance, retirement or other

acquisition of any class of Capital Stock of the Borrower or any Subsidiary or

any warrants or options to purchase any such Capital Stock, whether now or

hereafter outstanding, or the making of any other distribution in respect

thereof, either directly or indirectly, whether in cash or property,

obligations of the Borrower or any Subsidiary or otherwise.

“Revenue” means,

for the Borrower and its Subsidiaries, revenue determined on a consolidated

basis in accordance with GAAP.

“Revolving Loan”

is defined in Section 2.1.

“Revolving Loan

Commitment” means the Lender’s obligation to make Revolving Loans pursuant

to Section 2.1.

“Revolving Loan Commitment

Amount” means, on any date, Fifty Million Dollars ($50,000,000), as such

amount may be reduced from time to time pursuant to Sections 2.2 and 3.1.

“Revolving Loan

Commitment Termination Date” means December 31, 2003.  Upon such date, the Revolving Loan

Commitment shall terminate automatically and without any further action.

“Revolving Loan

Maturity Date” means December 31, 2005.

“Revolving Note”

means a promissory note of the Borrower payable to the Lender, in the form of Exhibit

I hereto (as such promissory note may be amended, endorsed or otherwise

modified from time to time), evidencing the aggregate Indebtedness of the

Borrower to the Lender resulting from outstanding Revolving Loans, and also

means all other promissory notes accepted from time to time in substitution

therefor or renewal thereof.

“S&P” means

Standard & Poor’s Rating Services.

“SEC” means the

Securities and Exchange Commission.

 

16

 

“Security Agreement”

means, as the context may require, the Borrower Security Agreement and the Subsidiary

Security Agreement, in each case as amended, restated, supplemented, or

otherwise modified from time to time.

“Solvent” means,

with respect to any Person, that as of the date of determination both (i) (a)

the then fair saleable value of the property sold as a going concern of such

Person is (y) greater than the total amount of liabilities (including

contingent liabilities but excluding amounts payable under intercompany

promissory notes) of such Person and (z) not less than the amount that will be

required to pay the probable liabilities on such Person’s then existing debts

as they become absolute and matured considering all financing alternatives and

potential asset sales reasonably available to such Person; (b) such Person’s

capital is not unreasonably small in relation to its business or any

contemplated or undertaken transaction; and (c) such Person does not intend to

incur, or believe that it will incur, debts beyond its ability to pay such

debts as they become due; and (ii) such Person is “solvent” within the meaning

given that term and similar terms under applicable laws relating to fraudulent

transfers and conveyances.  For purposes

of this definition, the amount of any contingent liability at any time shall be

computed as the amount that, in light of all of the facts and circumstances

existing at such time, represents the amount that can reasonably be expected to

become an actual or matured liability, taking into account the amount that can

reasonably be expected to be reimbursed or paid by a Person that is not

affiliated with such Person.

“Spin-off” is

defined in the first paragraph in the Recitals to this Agreement.

“Stated Amount”

means on any date and with respect to a particular Letter of Credit, the total

amount then available to be drawn under such Letter of Credit.

“Stated Expiry Date”

is defined in Section 2.6(a).

“Sub Debt Documents”

means, collectively, the loan agreements, indentures, note purchase agreements,

promissory notes, guarantees, and other instruments and agreements evidencing

the terms of Subordinated Debt, as amended, supplemented, amended and restated

in accordance with Section 8.11.

“Subordinated Debt”

means unsecured Indebtedness of the Borrower subordinated in right of payment

to the Obligations pursuant to documentation containing maturities,

amortization schedules, covenants, defaults, remedies, subordination provisions

and other terms reasonably satisfactory to the Lender.

“Subordinated Notes”

means, collectively, any promissory notes evidencing Subordinated Debt, as such

notes or instruments may be amended, supplemented or otherwise modified from

time to time in accordance with Section 8.11.

“Subsidiary”

means, with respect to any Person, any corporation, limited liability company,

partnership or other entity of which more than fifty percent (50%) of the

outstanding securities (or other ownership interest) having ordinary voting

power to elect the board of directors, managers or other voting members of the

governing body of such corporation, limited liability company, partnership or

other entity (irrespective of whether at the time securities (or other

ownership interest) of any other class or classes of such corporation, limited

liability

 

17

 

company,

partnership or other entity shall or might have voting power upon the

occurrence of any contingency) is at the time directly or indirectly owned or

controlled by such Person, by such Person and one or more other Subsidiaries of

such Person, or by one or more other Subsidiaries of such Person.  Unless the context otherwise specifically

requires, the term “Subsidiary” shall be a reference to a Subsidiary of the

Borrower.

“Subsidiary Guaranty”

means the subsidiary guaranty executed and delivered by each Guarantor pursuant

to the terms of this Agreement, substantially in the form of Exhibit J

hereto, as amended, restated, supplemented or otherwise modified from time to

time.

“Subsidiary Pledge

Agreement” means the Pledge Agreement executed and delivered by each

Subsidiary that in turn has any Subsidiaries, substantially in the form of Exhibit K

hereto, in each case as amended, restated, supplemented or otherwise modified

from time to time.

“Subsidiary Security

Agreement” means, collectively, each Security Agreement executed and

delivered by any Subsidiary in favor of the Lender pursuant to the terms of

this Agreement, in substantially the form of Exhibit L, in each

case, as amended, restated, supplemented or otherwise modified from time to

time.

“Synthetic Lease”

means any synthetic lease, tax retention operating lease or off-balance sheet

financing product where such transaction is considered borrowed money

Indebtedness for tax purposes but which is classified as an operating lease

pursuant to GAAP.

“Taxes” means any

and all income, stamp or other taxes, duties, levies, imposts, charges, fees,

deductions or withholdings, now or hereafter imposed, levied, collected,

withheld or assessed by any Governmental Authority, and all interest, penalties

or similar liabilities with respect thereto.

“Trademark Security

Agreement” means any Trademark Security Agreement executed and delivered by

any Obligor substantially in the form of Exhibit B to any Security

Agreement, as amended, restated, supplemented or otherwise modified from time

to time.

“U.C.C.” means the

Uniform Commercial Code as from time to time in effect in the State of

California.

“United States” or

“U.S.” means the United States of America, its fifty states and the

District of Columbia.

“Unutilized Amount”

is defined in Section 2.1(f).

“U.S. Subsidiary”

means any Subsidiary that is incorporated or organized under the laws of the

United States or a state thereof or the District of Columbia.

 “Voting Stock” means, with respect to

any Person, Capital Stock of any class or kind ordinarily having the power to

vote for the election of directors, managers or other voting members of the

governing body of such Person.

“Welfare Plan”

means a “welfare plan”, as such term is defined in section 3(1) of ERISA.

 

18

 

“Weighted Average Term

Debt Rate” means the rate obtained by, for any date of determination,

multiplying the Lender’s average daily debt outstanding on the Lender’s Credit

Agreement by the average daily effective interest rate under the Lender’s

Credit Agreement divided by the total number of days for that given period.  The Effective Weighted Average Term Debt

Rate shall include, but not be limited to, the interest rate charged, the

non-utilization fees charged and any other debt financing costs incurred by the

Lender or charged by the Lender’s syndicated bank group under the Lender’s

Credit Agreement.

“wholly owned”

means any Subsidiary all of the outstanding common stock (or similar equity

interest) of which (other than any director’s qualifying shares or investments

by foreign nationals mandated by applicable laws) is owned directly or

indirectly by the Borrower and the officers, directors or employees of such

Subsidiary.

Section 1.2             Use of Defined Terms.  Unless otherwise defined or the context

otherwise requires, terms for which meanings are provided in this Agreement

shall have such meanings when used in each other Loan Document and the

Disclosure Schedule.

Section 1.3             Cross-References.  Unless otherwise specified, references in

this Agreement and in each other Loan Document to any Article or Section are

references to such Article or Section of this Agreement or such other Loan

Document, as the case may be, and, unless otherwise specified, references in

any Article, Section or definition to any clause are references to such clause

of such Article, Section or definition.

Section 1.4             Accounting and Financial Determinations.    Unless otherwise specified, all accounting

terms used herein or in any other Loan Document shall be interpreted, and all

accounting determinations and computations hereunder or thereunder (including

under Section 8.4) shall be made, in accordance with, those

generally accepted accounting principles (“GAAP”) in effect on the Closing Date. Unless

otherwise expressly provided, all financial covenants and defined financial

terms shall be computed on a consolidated basis for the Borrower and its

Subsidiaries, in each case without duplication.

ARTICLE II

COMMITMENTS,

BORROWING AND ISSUANCE

PROCEDURES AND NOTES

Section 2.1              Revolving Loan Commitment/Availability.  (a)             On

the terms and subject to the conditions set forth in this Agreement, from time

to time on any Business Day occurring after the Closing Date but prior to the

Revolving Loan Commitment Termination Date, the Lender will make loans (“Revolving Loans”) to

the Borrower in an aggregate principal amount outstanding not to exceed at any

one time the Revolving Loan Commitment Amount less the Letter of Credit

Outstandings and the Lender Guaranty Disbursements; provided, however,

outstanding Revolving Loans may exceed the Revolving Loan Commitment Amount if,

and only to the extent that, a Lender Guaranty Disbursement is made at a time

when the sum of outstanding Revolving Loans, plus Letter of Credit

Outstandings, plus Lender Guaranty Outstandings exceeds the Revolving Loan

Commitment Amount.  To the extent there is

availability under the Revolving Loan Commitment Amount at the time a Revolving

Loan is

 

19

 

made on account of a Lender Guaranty Disbursement,

such Revolving Loan will reduce the availability on a dollar for dollar

basis.  Notwithstanding the foregoing,

in no event shall the Lender be obligated to make Revolving Loans (and for this

purpose only, Revolving Loans shall not include Revolving Loans made pursuant

to Section 2.6(b)) or to cause to be issued Letters of Credit on behalf

of the Borrower that collectively have an aggregate principal amount and an

aggregate undrawn face amount exceeding Twelve Million Five Hundred Thousand

Dollars ($12,500,000) during any one (1) of Lender’s Fiscal Quarters (the “Quarterly Maximum”);

provided, however, for the third Fiscal Quarter in Fiscal Year 2002, such

Quarterly Maximum shall be Seventeen Million Dollars ($17,000,000), provided

however, that Ten Million Dollars ($10,000,000) of the Fifteen Million Dollar

($15,000,000) Borrowing to be made on the Closing Date and the One Hundred

Fifty Three Thousand Seven Hundred Fifty Nine and 72/100 Dollar ($153,759.72)

Borrowing to be made on the Closing Date (the “Interest Borrowing”) shall not be

applied toward such Quarterly Maximum; provided further that Revolving Loans made

during a particular Fiscal Quarter may exceed the Quarterly Maximum or the

Allowed Quarterly Maximum (defined below) if, and only to the extent, that a

Revolving Loan made on account of a Lender Guaranty Disbursement would cause

the Revolving Loans plus the Letters of Credit issued during such Fiscal

Quarter to exceed the Quarterly Maximum or Allowed Quarterly Maximum for such

Fiscal Quarter.  To the extent there is

availability under the Quarterly Maximum or the Allowed Quarterly Maximum at

the time a Revolving Loan is made on account of a Lender Guaranty Disbursement,

such Revolving Loan will reduce the availability of the Quarterly Maximum or

the Allowed Quarterly Maximum on a dollar for dollar basis.  The Quarterly Maximum may be reduced as set

forth in the following paragraphs.

(b)           For the third and fourth Fiscal

Quarters in Fiscal Year 2002 and the first Fiscal Quarter of Fiscal Year 2003,

no Borrowings will be available if the Borrower was not in compliance with its

covenants set forth in Section 8.4 during the immediately preceding Fiscal

Quarter.

(c)           For each of the second, third and

fourth Fiscal Quarters in Fiscal Year 2003, the Quarterly Maximum shall be

subject to the following:  (i) if the

Borrower’s EBITDA for the immediately preceding Fiscal Quarter (or for the

second preceding Fiscal Quarter in accordance with Section 2.5) is less

than twenty-five percent (25%) of the EBITDA AOP Target for such preceding

Fiscal Quarter, then the Borrower is limited to Borrowings of Five Million

Dollars ($5,000,000) for such Fiscal Quarter, provided that no Borrowings shall

be available to the Borrower unless the Borrower covenants in writing to the

Lender to restrict its Operating Expenses during the current Fiscal Quarter to

an amount not to exceed Five Million Dollars ($5,000,000), not taking into

account amounts allowed to be carried forward as provided in Section 8.4(b)

(provided further that if the Borrower makes such a covenant and fails to

comply with such covenant during such Fiscal Quarter, then no Borrowings shall

be available in the next Fiscal Quarter); and (ii) if the Borrower’s EBITDA for

such preceding Fiscal Quarter is twenty-five percent (25%) of the EBITDA AOP

Target for such preceding Fiscal Quarter, the Borrower may borrow up to fifty

percent (50%) of the Quarterly Maximum (the “Allowed Quarterly Maximum”).  The Allowed Quarterly Maximum for such

Fiscal Quarter shall increase pro rata with the percentage increase that the

Borrower’s EBITDA for such preceding Fiscal Quarter was above twenty-five

percent (25%) of the EBITDA AOP Target for such preceding Fiscal Quarter, but

in no event to exceed the Quarterly Maximum. 

During the second Fiscal Quarter of Fiscal Year 2003, the following

shall apply in determining the portion of the Quarterly Maximum

 

20

 

available for Borrowing during such Fiscal

Quarter:  The EBITDA AOP Target for the

first Fiscal Quarter of Fiscal Year 2003 is negative $2,169,000.  If the Borrower’s EBITDA is negative

$2,350,000 or better during the first Fiscal Quarter of Fiscal Year 2003, then

one hundred percent (100%) of the Quarterly Maximum ($12,500,000) will be

available for Borrowings during the second Fiscal Quarter of Fiscal Year

2003.  If the Borrower’s EBITDA is

negative $3,000,000 during such Fiscal Quarter, then fifty percent (50%) of the

Quarterly Maximum or $6,250,000 will be available for Borrowings during the

second Fiscal Quarter of Fiscal Year 2003. 

If the Borrower’s EBITDA is between negative $2,350,000 and negative

$3,000,000 during such Fiscal Quarter, then the amount of the Quarterly Maximum

shall be determined by linear interpolation between fifty percent (50%) of the

Quarterly Maximum and one hundred percent (100%) of the Quarterly Maximum.  No Borrowings shall be available in the

second Fiscal Quarter of Fiscal Year 2003 if Borrower achieves negative EBITDA

in excess of $3,000,000 during the first Fiscal Quarter of Fiscal Year 2003.

(d)           Beginning with the second Fiscal

Quarter of Fiscal Year 2003, if the Borrower has negative EBITDA in any Fiscal

Quarter, the Borrower may not make any Borrowings in the Fiscal Quarter

immediately following.

(e)           If the Borrower or any of its

Subsidiaries receives proceeds from the sale or issuance to any Person of any

stock, warrants or options or the exercise of such warrants or options and such

proceeds are not used to prepay the Revolving Loans in accordance with Section

3.1, the Borrower must exhaust such proceeds before any Borrowings may be

made hereunder.

(f)            Subject to Sections 2.6(b)

and 2.7(b), no Revolving Loan will be made after the Revolving Loan

Commitment Termination Date.  Subject to

Section 2.1(a), no Revolving Loan will be made which will result in the

aggregate principal amount of the Revolving Loans then outstanding exceeding

the Revolving Loan Commitment Amount less the Letter of Credit Outstandings and

the Lender Guaranty Disbursements, or which would result, in any Fiscal

Quarter, in Borrowings in excess of the Quarterly Maximum.  However, notwithstanding the foregoing, to

the extent that the Borrower borrows less than the Quarterly Maximum available

for Borrowings (as determined in accordance with Section 2.1) in any prior

Fiscal Quarter in Fiscal Year 2002 (such unutilized Quarterly Maximum being

referred to herein as the “Unutilized

Amount”), then such Unutilized Amount shall be available, in

addition to the Quarterly Maximum, for Borrowings during such subsequent Fiscal

Quarter in Fiscal Year 2002.

(g)           Any amounts paid by the Borrower as a

Permissive Prepayment under Section 3.1 during any Fiscal Quarter, may

be reborrowed or issued as Letters of Credit in any subsequent Fiscal Quarter

notwithstanding that the Borrower has not delivered the Compliance Certificate

as required under Section 2.5, and such amounts when so borrowed or

issued as Letters of Credit shall not be calculated as part of the Quarterly

Maximum and shall not be subject to reduction as provided in Section 2.1(c),

provided that, subject to Sections 2.6(b) and 2.7(b) no Revolving

Loan will be made after the Revolving Loan Commitment Termination Date and,

subject to Section 2.1(a),  no

Revolving Loan will be made which will result in the aggregate principal amount

of the Revolving Loans then outstanding exceeding the Revolving Loan Commitment

Amount less the Letter of Credit Outstandings and Lender Guaranty

Disbursements.

 

21

 

Section 2.2             Reduction of the Commitment Amounts.  The Borrower may, from time to time on any

Business Day occurring after the Closing Date, voluntarily reduce the Revolving

Loan Commitment Amount or the Letter of Credit Commitment Amount, on the

Business Day so specified by the Borrower; provided, however,

that all such reductions shall require at least one (1) Business Day’s prior

notice to the Lender and be permanent, and any partial reduction of the

Revolving Loan Commitment Amount shall be in a minimum amount of One Million

Dollars ($1,000,000) and in an integral multiple of Five Hundred Thousand

Dollars ($500,000).

Section 2.3             Letter of Credit Commitment.  On the terms and subject to the conditions

set forth in this Agreement, from time to time on any Business Day occurring

from and after the Closing Date, but prior to the fifth (5th)  Business

Day prior to the Revolving Loan Commitment Termination Date, the Lender will

(a) cause to be issued one or more standby letters of credit (each a “Letter of Credit”)

for the account of the Borrower in the Stated Amount requested by the Borrower

on such day or (b) cause to be extended the Stated Expiry Date of a standby

Letter of Credit previously issued hereunder to a date not later than the

earlier of (i) five (5) Business Days prior to the Revolving Loan Maturity Date

or (ii) twelve (12) months from the date of such extension or issuance;

provided, however, that with respect to Letters of Credit with an aggregate

undrawn face amount not exceeding Five Hundred Thousand Dollars ($500,000), the

Stated Expiry Date of such Letters of Credit may be up to twenty-four (24)

months following the issuance or extension thereof.  No Letter of Credit will be caused to be issued which, taking

into account the issuance of such Letter of Credit, would either cause the

Letter of Credit Outstandings to exceed the Letter of Credit Commitment Amount

or cause the aggregate principal amount of the Revolving Loans then outstanding

plus the Letter of Credit Outstandings and the Lender Guaranty Disbursements to

exceed the Revolving Loan Commitment Amount.

Section 2.4             Borrowing Procedure for Revolving Loans.  By delivering a Borrowing Request to the

Lender on or before 11:00 a.m., California time, on a Business Day prior to the

Revolving Loan Commitment Termination Date, the Borrower may from time to time

irrevocably request, on not less five (5) Business Days’ notice and not more

than seven (7) Business Days’ notice, that a Borrowing of a Revolving Loan be

made in a minimum amount of One Million Dollars ($1,000,000) and an integral

multiple of Five Hundred Thousand Dollars ($500,000), subject to the Quarterly

Maximum and the other terms and conditions contained herein.  On the terms and subject to the conditions

of this Agreement, each Borrowing of a Revolving Loan shall be made on the

Business Day specified in such Borrowing Request.  The Lender shall make such funds available to transfer to the

accounts the Borrower shall have specified in its Borrowing Request.  The Borrower may not request more than one

(1) Borrowing (excluding Letters of Credit) per calendar month; provided, for

the month of August 2002, the Borrower may request two (2) Borrowings, two (2)

on the Closing Date and one (1) additional Borrowing.

Section 2.5             Borrowing Procedure for Revolving Loans

and Letters of Credit. The Borrower may not request any Borrowing

(and no Borrowing shall be made) during any particular Fiscal Quarter of the

Borrower after sixty (60) days following the end of a prior Fiscal Quarter of

the Borrower prior to the Borrower’s completion and delivery to the Lender of a

Compliance Certificate that includes the Borrower’s certification as to the

Borrower’s compliance for the preceding Fiscal Quarter.  During the first sixty (60) days of any of

the Borrower’s Fiscal Quarters, prior to the Borrower’s completion and delivery

of the Compliance

 

22

 

Certificate for the preceding Fiscal Quarter, the

availability under the Revolving Loan Commitment and the Letter of Credit

Commitment will be based upon the Borrower’s Compliance Certificate for the

second preceding Fiscal Quarter.

Section 2.6             Letters of Credit.

(a)   Issuance Procedures.  By delivering to the Lender an Issuance

Request on or before 12:00 noon, New York time, on a Business Day, the Borrower

may from time to time irrevocably request on not less than seven (7) nor more

than fifteen (15) Business Days’ notice, that the Lender cause to be issued, or

cause to be extended the Stated Expiry Date of, as the case may be, an

irrevocable Letter of Credit in such form as may be requested by the Borrower

and approved by the Lender and the issuer of the Letter of Credit, solely for

the purposes described in Section 7.8. 

Borrower agrees that it shall work directly with the issuing bank in

connection with the issuance of any Letter of Credit.  Each Letter of Credit shall by its terms be stated to expire on a

date (its “Stated Expiry

Date”) no later than the earlier to occur of (i) five (5)

Business Days prior to the Revolving Loan Maturity Date or (ii) twelve (12)

months from the date of its issuance; provided, however, that

with respect to Letters of Credit with an aggregate undrawn face amount not

exceeding Five Hundred Thousand Dollars ($500,000), the Stated Expiry Date of

such Letters of Credit may be up to twenty-four (24) months following the

issuance or extension thereof. No Letter of Credit will be caused to be issued

which, taking into account the issuance of such Letter of Credit, would either

cause the Letter of Credit Outstandings to exceed the Letter of Credit

Commitment Amount or cause the aggregate principal amount of the Revolving

Loans then outstanding plus the Letter of Credit Outstandings to exceed the

Revolving Loan Commitment Amount.

(b)   Disbursements.  The Lender will notify the Borrower,

promptly upon the Lender receiving knowledge thereof, of the presentment for

payment of any Letter of Credit, together with notice of the date (the “Disbursement Date”)

such payment shall have been or be made (each such payment, a “Disbursement”).  Prior to 1:00 p.m., California time, on the

first (1st) Business Day following the Lender giving written notice

to the Borrower of the Disbursement Date, the Borrower will reimburse the

Lender for all amounts which the Lender has disbursed to reimburse the issuing

bank in connection with such issuing bank’s honor of a draw under such Letter

of Credit, together with interest thereon at a rate per annum equal to the

Weighted Average Term Debt Rate for the period from the Disbursement Date

through the date of such reimbursement (a “Lender Disbursement”).  Without limiting in any way the foregoing

and notwithstanding anything to the contrary contained herein or in any

separate application for any Letter of Credit, the Borrower hereby acknowledges

and agrees that it shall be obligated to reimburse the Lender upon each Lender

Disbursement of a Letter of Credit, and it shall be deemed to be the obligor

for purposes of each such Letter of Credit issued pursuant hereto (whether the

account party on such Letter of Credit is the Borrower or a Subsidiary).  In the event the Borrower fails to so

reimburse the Lender for any Lender Disbursement, the Lender shall be deemed to

have made, without further notice to the Borrower, a Revolving Loan (notwithstanding

that the Revolving Loan Commitment Termination Date may have passed), and

interest shall accrue from the Disbursement Date, in the principal amount equal

to the amount drawn under such Letter of Credit, and, for this purpose, the

conditions precedent in Article V or any other Borrower requirements hereunder

shall not apply.  Any Revolving Loan

deemed to be

 

23

 

made pursuant to this Section

2.6(b) and advanced after the Revolving Loan Maturity Date shall be

immediately due and payable.

(c)   Reimbursement.  The obligation (a “Reimbursement Obligation”)

of the Borrower under Section 2.6(b) to reimburse the Lender with

respect to each Lender Disbursement (including interest thereon)  shall be absolute and unconditional under

any and all circumstances and irrespective of any setoff, counterclaim or

defense to payment which the Borrower may have or have had against the Lender

or the issuer of the Letter of Credit, including any defense based upon the

failure of any Disbursement to conform to the terms of the applicable Letter of

Credit (if, in the Lender’s or the issuer’s good faith opinion, such

Disbursement is determined to be appropriate) or any non-application or

misapplication by the beneficiary of the proceeds of such Letter of Credit,

except to the extent of the Lender’s and the issuer’s gross negligence or

willful misconduct.

(d)   Deemed Disbursements.  Upon the occurrence and during the

continuation of any Event of Default under Section 9.1(i) or upon

notification by the Lender to the Borrower of its obligations under this

Section following the occurrence and during the continuation of any other Event

of Default:

(i)            the aggregate Stated Amount of all

Letters of Credit shall, without demand upon or notice to the Borrower or any

other Person, be deemed to have been paid or disbursed by the Lender

(notwithstanding that such amount may not in fact have been paid or disbursed);

and

(ii)           the Borrower shall be immediately

obligated to reimburse the Lender for the amount deemed to have been so paid or

disbursed.

Amounts payable by the

Borrower pursuant to this Section shall be deposited in immediately available

funds with the Lender and held as collateral security for the Reimbursement

Obligations and all other Obligations. 

When all Events of Default giving rise to the deemed disbursements under

this Section have been cured or waived, the Lender shall, if no other Events of

Default is then existing, return to the Borrower all amounts then on deposit

with the Lender pursuant to this Section which have not been applied to the

satisfaction of the Reimbursement Obligations and/or all other Obligations.

(e)   Nature of Reimbursement Obligations.  The Borrower and each other Obligor shall

assume all risks of the acts, omissions or misuse of any Letter of Credit by the

beneficiary thereof.  Neither the Lender

nor any other issuer of the Letter of Credit (except to the extent of its own

gross negligence or willful misconduct) shall be responsible for:

(i)            the form, validity, sufficiency,

accuracy, genuineness or legal effect of any Letter of Credit or any document

submitted by any party in connection with the application for and issuance of a

Letter of Credit, even if it should in fact prove to be in any or all respects

invalid, insufficient, inaccurate, fraudulent or forged;

(ii)           the form, validity, sufficiency,

accuracy, genuineness or legal effect of any instrument transferring or

assigning or purporting to transfer or assign

 

24

 

a Letter of Credit or the

rights or benefits thereunder or the proceeds thereof in whole or in part,

which may prove to be invalid or ineffective for any reason;

(iii)          failure of the beneficiary to comply

fully with conditions required in order to demand payment under a Letter of

Credit;

(iv)          errors, omissions, interruptions or

delays in transmission or delivery of any messages, by mail, cable, telegraph,

telex or otherwise; or

(v)           any loss or delay in the transmission

or otherwise of any document or draft required in order to make a Disbursement

under a Letter of Credit.

None of the foregoing

shall affect, impair or prevent the vesting of any of the rights or powers

granted to the Lender hereunder.  In

furtherance and not in limitation or derogation of any of the foregoing, any

action taken or omitted to be taken by the Lender in good faith (and not

constituting gross negligence or willful misconduct) shall be binding upon each

Obligor, and shall not put the Lender under any resulting liability to any

Obligor.

Section 2.7             Lender Guaranties.

(a)   Lender Guaranties.  The Lender has issued guaranties for those

obligations of the Borrower set forth on Item 2.7 of the Disclosure Schedule.

(b)   Disbursements.  The Lender will notify the Borrower promptly

of any demand for payment under a Lender Guaranty, together with notice of the

date (the “Lender Guaranty

Disbursement Date”) such payment shall be made (each such

payment, a “Lender

Guaranty Disbursement”). 

Subject to the terms and provisions of such Lender Guaranty and

applicable laws, the Lender shall make such payment to the beneficiary (or its

designee) of such Lender Guaranty.  Each

Lender Guaranty Disbursement and any obligation of the Borrower for payment

assumed by the Lender shall be deemed to have made, without further notice to

the Borrower, as a Revolving Loan (notwithstanding that the Revolving Loan

Commitment Termination Date may have passed) in the principal amount equal to

the amount demanded of and paid by the Lender under such Lender Guaranty, and,

for this purpose, the conditions precedent in Article V or any other Borrower

requirements shall not apply.

(c)   Reimbursement.  The obligation (a “Lender Guaranty Reimbursement

Obligation”) of the Borrower under Section 2.7(b) to

reimburse the Lender with respect to each Lender Guaranty Disbursement

(including interest thereon)  shall be

absolute and unconditional under any and all circumstances and irrespective of

any setoff, counterclaim or defense to payment which the Borrower may have or

have had against the Lender, including any defense based upon the failure of

any Lender Guaranty Disbursement to conform to the terms of the applicable

Lender Guaranty (if, in the Lender’s good faith opinion, such Lender Guaranty

Disbursement is determined to be appropriate) or any non-application or

misapplication by the beneficiary of the proceeds of such Lender Guaranty

Disbursement, except to the extent of the Lender’s gross negligence or willful

misconduct.

(d)   Deemed Disbursements.  Upon the occurrence and during the

continuation of any Event of Default under Section 9.1(i) or upon

notification by the Lender to the Borrower of

 

25

 

its obligations under

this Section following the occurrence and during the continuation of any other

Event of Default:

(i)            the aggregate amount guarantied

under all Lender Guaranties shall, without demand upon or notice to the

Borrower or any other Person, be deemed to have been paid or disbursed by the

Lender (notwithstanding that such amount may not in fact have been paid or

disbursed); and

(ii)           the Borrower shall be immediately

obligated to reimburse the Lender for the amount deemed to have been so paid or

disbursed.

Amounts payable by the

Borrower pursuant to this Section shall be deposited in immediately available

funds with the Lender and held as collateral security for the Lender Guaranty

Reimbursement Obligations and all other Obligations.  Provided, however, if the Borrower can provide adequate

assurances that the Lender Guaranties are not reasonably likely to be drawn

upon, the Lender may, in its sole and absolute discretion, waive the Borrower’s

requirements under this Section 2.7(d). 

When all Events of Default giving rise to the deemed disbursements under

this Section have been cured or waived, the Lender shall, if no other Event of

Default is then existing, return to the Borrower all amounts then on deposit

with the Lender pursuant to this Section which have not been applied to the

satisfaction of the Lender Guaranty Reimbursement Obligations and/or all other

Obligations.

(e)   Nature of Lender Guaranty Reimbursement

Obligations.  The Borrower and each

other Obligor shall assume all risks of the acts, omissions or misuse of any

Lender Guaranty by the beneficiary thereof. 

The Lender (except to the extent of its own gross negligence or willful

misconduct) shall not be responsible for:

(i)            the form, validity, sufficiency,

accuracy, genuineness or legal effect of any Lender Guaranty, even if it should

in fact prove to be in any or all respects invalid, insufficient, inaccurate or

fraudulent;

(ii)           the form, validity, sufficiency,

accuracy, genuineness or legal effect of any instrument transferring or

assigning or purporting to transfer or assign a Lender Guaranty or the rights

or benefits thereunder or the proceeds thereof in whole or in part, which may

prove to be invalid or ineffective for any reason;

(iii)          failure of the beneficiary to comply

fully with conditions required in order to demand payment under a Lender

Guaranty;

(iv)          errors, omissions, interruptions or

delays in transmission or delivery of any messages, by mail, cable, telegraph,

telex or otherwise; or

(v)           any loss or delay in the transmission

or otherwise of any document or draft required in order to make a Lender

Guaranty Disbursement under a Lender Guaranty.

(f)    Release of Lender Guaranties.  The Borrower shall use reasonable efforts to

obtain the Lender’s full and unconditional release from the Lender Guaranties

as soon as

 

26

 

reasonably possible, but

in any event prior to the Revolving Loan Maturity Date.  In the event that one or more of the Lender

Guaranties is outstanding on the Revolving Loan Maturity Date, if all of the

other Obligations hereunder and under each of the other Loan Documents have

been fully and indefeasibly satisfied, and no Event of Default then exists,

neither this Agreement nor the other Loan Documents shall govern or apply to Lender

Guaranty Reimbursement Obligations of the Borrower with respect to Lender

Guaranty Disbursements advanced after the Revolving Loan Maturity Date,

provided that the Borrower shall have entered into a reimbursement agreement

and provided collateral to the Lender to secure its reimbursement obligations

under the Lender Guaranties in form and amount reasonably satisfactory to the

Lender.

Section 2.8             Disclaimer.  None of the foregoing shall affect, impair

or prevent the vesting of any of the rights or powers granted to the Lender

hereunder.  In furtherance and not in

limitation or derogation of any of the foregoing, any action taken or omitted

to be taken by the Lender in good faith (and not constituting gross negligence

or willful misconduct) shall be binding upon each Obligor, and shall not put

the Lender under any resulting liability to any Obligor.

Section 2.9             Guaranty Fee.  The Borrower shall pay the Lender a monthly

fee equal to ten percent (10%) of the monthly payment amount guaranteed

pursuant to the Lender Guaranties then outstanding and ten percent (10%) of the

monthly payments of any kind made by the Lender under the leases entered into

by the Lender on behalf of the Borrower identified on Item 2.9 of the

Disclosure Schedule (collectively, the “Guaranty Fee”).  The Borrower shall pay the Guaranty Fee quarterly in arrears on

the last day of each Fiscal Quarter.  If

the Borrower fails to pay any Guaranty Fee when due, then the amount unpaid

shall be deemed to be made, without further notice to the Borrower, as a

Revolving Loan.

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

Section 3.1             Repayments and Prepayments.  The Borrower shall repay in full the unpaid

principal amount of each Revolving Loan upon the Revolving Loan Maturity

Date.  Prior thereto, payments and

prepayments of Revolving Loans shall or may be made as set forth below.

(a)           The Borrower shall make the following

principal reductions on the last day of each Fiscal Quarter during each of the

following periods:

(i)            during Fiscal Year 2002       None

(ii)           during

Fiscal Year 2003                       None

(iii)          during

Fiscal Year 2004                       quarterly

payments equal to thirteen and three-quarters percent (13.75%) of the

outstanding principal balance of the Revolving Loans as of December 31, 2003

 

27

 

(iv)          during

Fiscal Year 2005                       quarterly

payments equal to twenty-five percent (25%) of the outstanding principal

balance of the Revolving Loans as of December 31, 2004

(iv)          on

December 31, 2005                          one

hundred percent (100%) of the then outstanding principal balance of the Revolving

Loans and all accrued interest

                Repayments under Section

3.1(a) shall permanently reduce the Revolving Loan Commitment Amount in the

amount of each required principal payment as of the date that such payment is

required to be made, and the Letter of Credit Commitment Amount shall be

correspondingly reduced.

(b)           From time to time on any Business

Day, the Borrower may make a voluntary prepayment, in whole or in part, of the

outstanding principal amount of any Revolving Loan, provided, however,

that:

(i)            all such voluntary prepayments shall

require at least three (3) but no more than seven (7) Business Days’ prior

written notice to the Lender; and

(ii)           all such voluntary partial

prepayments shall be in an aggregate minimum amount of One Million Dollars ($1,000,000)

and an integral multiple of Five Hundred Thousand Dollars ($500,000).

(c)           Subject to Section 2.1(a), on

each date when the sum of the aggregate outstanding principal amount of all

Revolving Loans exceeds the Revolving Loan Commitment Amount (as it may be

reduced from time to time, including pursuant to Section 2.2) less the

Letter of Credit Outstandings and the Lender Guaranty Disbursements (the amount

of such excess being an “Overadvance”),

the Borrower shall make a mandatory prepayment of the Overadvance, together

with accrued interest thereon.

(d)           Concurrently with the receipt (or

deemed receipt) of any Net Proceeds or any insurance proceeds or condemnation

proceeds (or after the expiration of any period designated for the purchase of

Qualified Assets, if appropriate) by the Borrower or any of its Subsidiaries,

the Borrower shall make a mandatory prepayment of the Revolving Loans in an

amount equal to one hundred percent (100%) of such Net Proceeds (provided,

however, the Borrower shall only be required to make a mandatory prepayment of

the Revolving Loans in an amount equal to fifty percent (50%) of the Net

Proceeds described in clause (a) of the definition of Net Proceeds) which has

not been used to purchase Qualified Assets, insurance proceeds or condemnation

proceeds to be applied as set forth in Section 3.2.  Provided, however, the Borrower may, with

the Lender’s prior written consent, which consent shall not be unreasonably

withheld, use insurance proceeds for the purchase of Qualified Assets or the

rebuilding of any structure to which the insurance proceeds relate, upon

conditions reasonably acceptable to the Lender.  The Borrower will, prior to prepaying the Revolving Loans, give

the Lender telephone notice (promptly confirmed in writing) thereof.

 

28

 

(e)           On or before the last Business Day of

each Fiscal Quarter of the Borrower, the Borrower shall make a mandatory

prepayment of the Revolving Loans in an amount equal to the aggregate amount of

cash and cash equivalents in the Borrower’s and its Subsidiaries’ accounts, as

of the last day of such Fiscal Quarter in excess of Five Million Dollars

($5,000,000) (excepting Net Proceeds which are not subject to mandatory

prepayment pursuant to Section 3.1(d) above), however, such mandatory

prepayment shall not exceed the amount of the Revolving Loans outstanding at

that time.  Such mandatory prepayment

shall be made by wire transfer of immediately available funds.

(f)            The Borrower shall make a scheduled

repayment of the aggregate outstanding principal amount of the Revolving Loans

immediately upon any acceleration of the Revolving Loan Maturity Date pursuant

to Section 9.2 or Section 9.3.

Each prepayment of the

Revolving Loans made pursuant to this Section shall be without premium or

penalty, unless as a result of such prepayment the Lender uses the proceeds of

such prepayment to repay or prepay indebtedness outstanding under the Lender’s

Credit Agreement (in the Lender’s sole discretion) and the Lender is thereby

subject to a premium or penalty under the Lender’s Credit Agreement, in which

case the Borrower shall promptly reimburse the Lender for such premium or

penalty.  No prepayment of principal of

the Revolving Loans pursuant to clause (b), (c), (d) or (e)

shall cause a reduction in the Revolving Loan Commitment Amount and such

amounts may be reborrowed prior to the Revolving Loan Commitment Termination

Date.  Prepayments under clauses (b),

(d) or (e) shall be referred to herein as the “Permissive

Prepayments”.

Section 3.2             Application.  Each prepayment or repayment of the

principal of the Revolving Loans shall be made together with accrued interest

in accordance with Section 3.5 and shall be applied, to the extent of

such prepayment or repayment, first, to accrued interest and then to the

principal amount thereof.

Section 3.3             Interest Rate.  Except as specifically provided in the next

succeeding sentence, the Revolving Loans shall accrue interest at the Weighted

Average Term Debt Rate plus three percent (3.0%) per annum, or the maximum

interest rate allowable by law, if and to the extent applicable, whichever is

lower.  The Interest Borrowing shall not

bear or accrue interest on the principal amount thereof during the period from

the Closing Date through December 31, 2002. 

The outstanding principal amount of the Interest Borrowing shall

commence to bear interest on January 1, 2003, and shall thereafter accrue

interest at the rates applicable to other Revolving Loans under this Agreement.

Section 3.4             Default Rate.  Upon the occurrence and during the continuation

of an Event of Default, the Borrower shall pay interest on all Obligations,

including, without limitation, overdue interest and other amounts due under

this Agreement, at a rate per annum equal to two percent (2.0%) above the

otherwise applicable interest rate.

Section 3.5             Interest Payment Dates.  Interest accrued on each Revolving Loan

shall be payable, without duplication:

(a)           on the Revolving Loan Maturity Date;

 

29

 

(b)           on the date of any payment or

prepayment, in whole or in part, of principal outstanding on any Revolving

Loan, on the principal amount so paid or prepaid;

(c)           beginning as of January of Fiscal

Year 2003, on the third Business Day of each month after the Lender provides

the Borrower notice of the amount of the interest payment due, including

information as to the applicable interest rate; provided, however, the

cumulative amount of all interest accrued on the outstanding principal amount

of the Revolving Loans for the period from the Closing Date through December

31, 2002 (the “Cumulative

2002 Interest”) shall automatically, provided no Default of

Event of Default has occurred and is continuing, constitute a Borrowing on and

as of January 1, 2003 in the principal amount equal to the Cumulative 2002

Interest and shall thereafter accrue interest at the rates applicable to other

Borrowings, and shall correspondingly reduce the amount available under the

Revolving Loan Commitment Amount (but shall not be deemed a Borrowing for

purposes of determining the number of Borrowings that the Borrower may request

under this Agreement in any given month or be counted toward the Quarterly

Maximum in any given month).  The Lender

may provide notice of the interest payment due by facsimile or electronic mail

addressed to the Chief Financial Officer of the Borrower and notice shall be

deemed given when such notice is sent by the Lender;

(d)           on that portion of any Revolving

Loans the Revolving Loan Maturity Date of which is accelerated pursuant to Section

9.2 or Section 9.3, immediately upon such acceleration.

Interest accrued

on Revolving Loans or other monetary Obligations arising under this Agreement

or any other Loan Document after the date such amount is due and payable

(whether on the Revolving Maturity Date, any scheduled date for repayment of

the Revolving Loans, upon acceleration or otherwise) shall be payable upon

demand.

Section 3.6             Letter of Credit Fees.   The Borrower agrees to pay to the Lender,

on demand, any fees or expenses, of any kind, reasonably incurred by the Lender

in securing the issuance of any Letter of Credit hereunder, whether pursuant to

Lender’s Credit Agreement or otherwise.

ARTICLE IV

TAXES AND OTHER PROVISIONS

Section 4.1             Increased Capital Costs.  If any change in, or the introduction,

adoption, effectiveness, interpretation, reinterpretation or phase-in of, any

law or regulation, directive, guideline, decision or request (whether or not

having the force of law) of any court, central bank, regulator or other

Governmental Authority affects or would affect the amount of capital required

or expected to be maintained by the lenders under the Lender’s Credit Agreement

or any Person controlling such lenders, and costs or expenses or other amounts

associated with such increased capital costs are passed on to the Lender under

Lender’s Credit Agreement, then, in any such case upon notice from time to time

by the Lender to the Borrower, the Borrower shall immediately pay directly to

the Lender additional amounts (or in the case of amounts passed on to the

Lender under Lender’s Credit Agreement, the pro rata portion (defined as a

percentage

 

30

 

equal to the percentage obtained by the Revolving Loan

Commitment Amount divided by the amount available to the Lender under Lender’s

Credit Agreement) of such amounts) sufficient to compensate the Lender for such

increased capital costs.  A statement of

the Lender, or a statement provided to the Lender under Lender’s Credit

Agreement, as to any such additional amount or amounts (including calculations

thereof in reasonable detail) shall be rebuttably presumptive evidence of the

amount of such loss or expense.  In

determining such amount, the Lender may use any method of averaging and

attribution that it (in its sole and absolute discretion) shall deem

applicable.

Section 4.2             Taxes.

(a)           Any and all payments by the Borrower

and each other Obligor under this Agreement and each other Loan Document shall

be made without setoff, counterclaim or other defense, and free and clear of,

and without deduction or withholding for or on account of, any Taxes, except to

the extent such Taxes are required by law to be deducted or withheld.  In the event that any Taxes are required by

law to be deducted or withheld from any payment required to be made by the

Borrower or any other Obligor to or on behalf of the Lender hereunder or under

any other Loan Document, then:

(i)            if such Taxes are Non-Excluded

Taxes, the amount of such payment shall be increased as may be necessary such

that such payment is made, after withholding or deduction for or on account of

such Taxes, in an amount that is not less than the amount provided for herein

or in such other Loan Document; and

(ii)           the Borrower shall withhold the full

amount of such Taxes from such payment (as increased pursuant to clause (a)

(i)) and shall pay such amount to the Governmental Authority imposing such

Taxes in accordance with applicable law.

(b)           In addition, the Borrower and each

other Obligor shall pay any and all Other Taxes imposed to the relevant

Governmental Authority imposing such Other Taxes in accordance with applicable

law.

(c)           As promptly as practicable after the

payment of any Taxes or Other Taxes, and in any event within forty-five (45)

days of any such payment being due, the Borrower shall furnish to the Lender a

copy of an official receipt (or a certified copy thereof) evidencing the

payment of such Taxes or Other Taxes.

(d)           The Borrower shall indemnify the

Lender for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed

on (and whether or not paid directly by) the Lender (and whether or not such

Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the

relevant Governmental Authority) arising out of this Agreement.  Promptly upon having knowledge that any such

Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and

promptly upon notice thereof by the Lender, the Borrower shall pay such

Non-Excluded Taxes or Other Taxes directly to the relevant Governmental

Authority (provided, however, that the Lender shall be under no

obligation to provide any such notice to the Borrower).   In addition, the Borrower shall indemnify

the Lender for any incremental Taxes that may become payable by the Lender as a

result of any failure of the Borrower to pay any Taxes

 

31

 

when due to the appropriate Governmental Authority or

to deliver to the Lender, pursuant to clause (c), documentation

evidencing the payment of Taxes or Other Taxes.  With respect to indemnification for Non-Excluded Taxes and Other

Taxes actually paid by the Lender or the indemnification provided in the

immediately preceding sentence, such indemnification shall be made within

thirty (30) days after the date the Lender makes written demand therefor.  The Borrower acknowledges that any payment

made to the Lender or to any Governmental Authority in respect of the

indemnification obligations of the Borrower provided in this clause shall

constitute a payment in respect of which the provisions of this clause shall

apply.

Section 4.3             Payments, Computations, etc.  Unless otherwise expressly provided, all payments

by the Borrower pursuant to this Agreement, the Revolving Note, or any other

Loan Document shall be made by the Borrower to the Lender.  All such payments required to be made to the

Lender shall be made, without setoff, deduction or counterclaim, not later than

1:00 p.m., California time, on the date due, in same day or immediately

available funds, to such account as the Lender shall specify from time to time

by notice to the Borrower.  Funds

received after that time shall be deemed to have been received by the Lender on

the next succeeding Business Day. All interest and fees shall be computed on

the basis of the actual number of days (including the first day but excluding

the last day) occurring during the period for which such interest or fee is payable

over a year comprised of 360 days. 

Whenever any payment to be made shall otherwise be due on a day which is

not a Business Day, such payment shall be made on the next succeeding Business

Day and such extension of time shall be included in computing interest and

fees, if any, in connection with such payment.

Section 4.4             Setoff.  The Lender shall, upon the occurrence and

during the continuance of any Event of Default described in Section 9.1(i),

have the right to appropriate and apply to the payment of the Obligations

(whether or not then due), and (as security for such Obligations) the Borrower

hereby grants to the Lender a continuing security interest in, any and all

balances, credits, deposits, accounts or moneys of the Borrower then or

thereafter maintained with the Lender or any Affiliate of the Lender.  The Lender agrees promptly to notify the

Borrower after any such setoff and application made by the Lender or its

Affiliate; provided, however, that the failure to give such

notice shall not affect the validity of such setoff and application.  The rights of the Lender under this Section

are in addition to other rights and remedies (including other rights of setoff

under applicable law or otherwise) which the Lender may have.  Notwithstanding the foregoing, nothing in

this Agreement or other Loan Documents is intended to affect rights or

obligations or apply in any way to agreements other than the Loan Documents.

ARTICLE V

CONDITIONS TO CREDIT EXTENSIONS

Section 5.1             Conditions Precedent to the Effectiveness

of this Agreement.  This

Agreement shall become effective on the date when each of the conditions

precedent set forth in this Section 5.1 have been satisfied (unless

waived by the Lender or unless the deadline for delivery has been extended by

the Lender).  All such conditions may

occur contemporaneously but shall be deemed to have occurred simultaneously.

 

32

 

(a)           Execution of Agreement. The

Lender shall have received this Agreement, duly executed and delivered on

behalf of the Borrower.

(b)           Resolutions, etc.  The Lender shall have received from the

Borrower and each Guarantor, (i) a copy of a good standing certificate, dated a

date reasonably near the Closing Date, and (ii) a certificate, dated the

Closing Date, duly executed and delivered by such Person’s Secretary or

Assistant Secretary, as to:

(i)            resolutions of such Person’s Board

of Directors then in full force and effect authorizing the execution, delivery

and performance of each Loan Document to be executed by such Person and the

transactions contemplated by the Loan Documents to be performed by such Person;

(ii)           the incumbency and signatures of

those of its officers, authorized to act with respect to each Loan Document to

be executed by such Person; and

(iii)          the full force and validity of each

Organic Document of such Person and copies thereof;

upon which

certificates the Lender may conclusively rely until it shall have received a

further certificate of the Secretary or Assistant Secretary, of such Person,

canceling or amending its prior certificate.

(c)           Closing Date Certificate.  The Lender shall have received a certificate

(the “Closing Date

Certificate”), dated the Closing Date and duly executed and

delivered by an Authorized Officer of the Borrower, in which certificate the

Borrower shall agree and acknowledge that the statements made therein shall be

deemed to be true and correct representations and warranties in all material

respects of the Borrower as of such date, and, at the time each such

certificate is delivered, such statements shall in fact be true and correct in

all material respects.  All documents

and agreements required to be appended to the Closing Date Certificate shall be

in form and substance reasonably satisfactory to the Lender.

(d)           Revolving Note.  The Lender shall have received the Revolving

Note.

(e)           Pledge Agreements.  The Lender shall have received,

(i)            the Borrower Pledge Agreement (which

Pledge Agreement shall be substantially in accordance with the provisions of Section

7.7(b)), dated as of the Closing Date, duly executed and delivered by an

Authorized Officer of the Borrower, together with:

(1)   certificates evidencing all of the issued and

outstanding shares of Capital Stock of each of its Subsidiaries, except to the

extent such pledge would be violative of applicable law, owned by the Borrower,

which certificates shall be accompanied by undated stock powers duly executed

in blank; and

 

33

 

(2)   all Pledged Notes (as defined in the Borrower

Pledge Agreement), if any, evidencing Indebtedness of any of the Borrower’s

Subsidiaries payable to the Borrower duly endorsed to the order of the Lender;

(ii)           the Subsidiary Pledge Agreement

(which Pledge Agreement shall be substantially in accordance with the

provisions of Section 7.7(b)), dated as of the Closing Date, duly executed

and delivered by an Authorized Officer of each Guarantor, together with:

(1)   certificates evidencing all of the issued and

outstanding shares of Capital Stock owned by such Guarantor which certificates

shall be accompanied by undated stock powers duly executed in blank; and

(2)   all Pledged Notes (as defined in the

Subsidiary Pledge Agreement), if any, evidencing Indebtedness payable to a

Guarantor duly endorsed to the order of the Lender; and

(iii)          the Lender and its counsel shall be

satisfied that  the Lien granted to the

Lender in the collateral described above is a first priority (or local

equivalent thereof) security interest; and 

no Lien exists on any of the collateral described above other than the

Lien created in favor of the Lender pursuant to a Loan Document.

(f)            Security Agreements.  The Lender shall have received the Borrower

Security Agreement, duly executed by the Borrower, and the Subsidiary Security

Agreement, executed by each Guarantor, each dated as of the Closing Date,

together with:

(i)            copies of Uniform Commercial Code

financing statements (Form UCC-1), naming the applicable Obligor as a debtor

and the Lender as the secured party, or other similar instruments or documents,

to be filed under the Uniform Commercial Code of all jurisdictions as may be

necessary or, in the opinion of the Lender, desirable to perfect the security

interests of the Lender pursuant to the applicable Security Agreement;

(ii)           copies of proper Uniform Commercial

Code Form UCC-2 termination statements necessary to release all Liens and other

rights of any Person in any collateral described in such Security Agreement

previously granted by any Person, together with evidence that the Borrower or

applicable Obligor has the authority to file such termination statements, and

such other Uniform Commercial Code Form UCC-2 termination statements as the

Lender may reasonably request from such Obligors; and

(iii)          certified copies of Uniform Commercial

Code search results, or a similar search report certified by a party acceptable

to the Lender, dated a date reasonably near to the Closing Date, listing all

effective financing statements which name any Obligor (under its present name

and any previous names) as the debtor and which are filed in the jurisdictions

in which filings were made pursuant to clause (a) above, together with

copies of such financing statements.

 

34

 

(iv)          the Lender and its counsel shall be

satisfied that the Lien granted to the Lender in the collateral described above

is a first priority (or local equivalent) security interest (subject to the

filing of the documents described in clause f(i) above); and no other

effective Lien (other than Liens permitted under Section 8.3) exists on

any of the collateral described above other than the Lien created in favor of

the Lender pursuant to a Loan Document.

(g)           Patent Security Agreement,

Copyright Security Agreement and Trademark Security Agreement.  The Lender shall have received the Patent

Security Agreement, the Copyright Security Agreement and the Trademark Security

Agreement, as applicable, each dated as of the Closing Date, duly executed and

delivered by the Borrower and any Subsidiary of the Borrower that is required

to execute and deliver such Loan Documents pursuant to this Agreement.

(h)           Deposit Account Control Agreements.  The Lender shall have received a Deposit

Account Control Agreement, in form and substance satisfactory to the Lender,

dated as of the Closing Date, duly executed and delivered by the Borrower and

any Subsidiary of the Borrower that is required to execute such Loan Documents

pursuant to this Agreement and each financial institution where Borrower or any

Subsidiary maintains cash deposits.

(i)            Collateral Assignment of Rights

under License Agreement.  The Lender

shall have received a Collateral Assignment of Rights Under License Agreement

dated as of the Closing Date, duly executed and delivered by SB OperatingCo,

LLC.

(j)            Financial Information, etc.  The Lender shall have received financial

statements of the Borrower (including notes thereto), consisting of (i)

consolidated financial statements of the Borrower and its Subsidiaries

including balance sheets as of the end of each of the last two Fiscal Years and

income and cash flow statements as of the end of and for each of the last three

Fiscal Years, in each case audited by independent public accountants of

recognized national standing and prepared in conformity with GAAP, together

with the report thereon which shall not contain an Impermissible Qualification;

(ii) comparable unaudited historical and pro forma interim financial statements

covering all quarterly or other appropriate periods subsequent to the Fiscal

Year most recently ended (the “Pro Forma Financial Statements”) and (iii) such final

projections in respect of the Obligors and their respective Subsidiaries as the

Lender may reasonably request; and all such financial statements, historical or

pro forma, delivered pursuant to this clause (i) shall be in compliance

with the requirements of Regulation S-X for a public offering registered under

the Securities Act of 1933, and all financial statements and projections

referred to in this clause (i) shall not be materially inconsistent with

financial statements, projections and estimates previously provided to the

Lender.

(k)           Compliance Certificate.  In the event a Credit Extension is

contemplated to be made on the Closing Date, the Lender shall have received a

Compliance Certificate on a pro forma basis as if the Credit Extension to be

made on the Closing Date had occurred as of June 30, 2002 and as to such

items therein as the Lender reasonably requests, dated the Closing Date, duly

executed (and with all schedules thereto duly completed) and delivered by the

chief executive officer, the chief financial officer, the treasurer or the assistant

treasurer of the Borrower.

 

35

 

(l)            Subsidiary Guaranty.  The Lender shall have received the

Subsidiary Guaranty, dated as of the Closing Date, duly executed and delivered

by each Guarantor.

(m)          Insurance.  The Lender shall have received certificates

of insurance from one or more insurance companies satisfactory to the Lender,

evidencing coverage required to be maintained pursuant to this Agreement and

each other Loan Document.

(n)           Opinions of Counsel.  The Lender shall have received opinions,

dated the Closing Date and addressed to the Lender from Luce Forward Hamilton

& Scripps in form and substance reasonably satisfactory to the Lender.

(o)           Material Adverse Change.  Since March 31, 2002, there shall not have

occurred or become known to the Lender any event or events, adverse condition

or change that, individually or in the aggregate, would reasonably be expected

to have a Material Adverse Effect.

(p)           Payment of Outstanding

Indebtedness, etc.  After giving

effect to the transactions contemplated by this Agreement, no Obligor shall

have outstanding any Indebtedness or preferred stock other than (i) with

respect to the Revolving Loans, Letters of Credit and the Lender Guaranties

hereunder, and (ii) the Indebtedness permitted under Section 8.2.  The Lender shall have received payoff

letters satisfactory in form and substance to the Lender with respect to any

Indebtedness to be repaid on the Closing Date.

(q)           Consents, etc.  All governmental and third party approvals

and consents  required to be obtained prior

to the Closing Date in connection with the financing contemplated pursuant to

this Agreement (including the execution and delivery of this Agreement and each

other Loan Document required hereunder by each Obligor and the performance of

their respective Obligations) and continuing operations of the Borrower and

each Guarantor shall have been obtained and be in full force and effect (and,

to the extent requested by the Lender, the Lender shall have received true and

correct copies of such approvals and consents) and all applicable waiting

periods shall have expired without any action being taken or threatened by any

competent authority which would restrain, prevent or otherwise impose adverse

conditions on the transactions contemplated by this Agreement and the other

Loan Documents.

(r)            Litigation, etc.  There shall exist no pending or, to the

knowledge of the Borrower, threatened, litigation, proceedings or

investigations which involve any Loan Document or which could reasonably be

expected to have a Material Adverse Effect.

(s)           Due Diligence.  The Lender shall have completed and be

satisfied in its sole discretion with respect to its comprehensive due

diligence in all matters pertaining to the business, properties, operations,

financial condition or prospects of the Borrower and its Subsidiaries,

including, without limitation, business, accounting, tax, legal and

environmental due diligence and any documentation as the Lender may require in

its sole discretion.

(t)            Closing Fees, Expenses, etc.  The Lender shall have received for its own

account all fees, costs and expenses due and payable pursuant to Section

10.3 of this Agreement, if then invoiced (in reasonable detail).

 

36

 

(u)           Legal Details, etc.  All documents executed or submitted pursuant

hereto shall be reasonably satisfactory in form and substance to the Lender and

its counsel.  The Lender and its counsel

shall be satisfied as of the Closing Date with the terms and conditions of each

agreement entered into in connection herewith and with all legal, tax and

accounting matters relating to this Agreement and the other Loan Documents,

including, without limitation, any such matters pertaining to the Lender’s

unconditional release from all guaranties or surety or indemnification

arrangements with respect to the Borrower’s Indebtedness or Indebtedness of the

Borrower’s customers (or the Borrower’s reimbursement of the Lender with

respect to any liabilities that the Lender may become subject to under such

guaranties or surety or indemnification arrangements).  In addition, the corporate, capital and

legal structure of the Borrower and its Subsidiaries, and all organizational

documents of the Borrower and its Subsidiaries, shall be satisfactory to the

Lender.  The Lender and its counsel

shall have received all information and such counterpart originals or such

certified or other copies or such materials, as the Lender or its counsel may

reasonably request.

(v)           No Material Adverse Change in the

Market.  There shall not have

occurred and be continuing (i) any general suspension of trading in securities

on the New York or American Stock Exchange or in the NASDAQ National Market

System (other than circuit breakers), (ii) the declaration of a banking

moratorium or any suspension of payments in respect of banks in the United

States, or (iii) any other material adverse change in banking or capital market

conditions that has had or could reasonably be expected to have a material

adverse effect on the syndication of leveraged bank credit facilities or the

consummation of high yield offerings, as the case may be.

(w)          Margin Regulations.  All Revolving Loans and other Credit

Extensions made by the Lender shall be in full compliance with all applicable

requirements of Regulations T, U and X of the F.R.S. Board.

Section 5.2             All Credit Extensions.  The obligation of the Lender to make any

Credit Extension (including the initial Credit Extension, if any) shall be

subject to Section 2.1 and the satisfaction of each of the conditions

precedent set forth in this Section 5.2.

(a)           Compliance with Warranties, No

Default, etc.  Both before and after

giving effect to any Credit Extension, the following statements shall be true

and correct:

(i)            the representations and warranties

set forth in Article VI and in each other Loan Document shall, in each

case, be true and correct in all respects (with respect to representations and

warranties qualified by materiality or Material Adverse Effect) and in all

material respects (with respect to all other representations and warranties)

with the same effect as if then made (unless stated to relate solely to an

earlier date, in which case such representations and warranties shall be true

and correct in all material respects as of such earlier date unless such

representations and warranties are qualified by materiality or Material Adverse

Effect, in which case such representations and warranties shall be true and

correct as of such earlier date);

(ii)           except as disclosed by the Borrower

to the Lender pursuant to Section 6.7,

 

37

 

(1)   no labor controversy, litigation, action,

arbitration or governmental investigation or proceeding shall be pending or, to

the knowledge of the Borrower, threatened against the Borrower or any of its

Subsidiaries or any Obligor, or any of their respective properties, business,

assets or revenues, which is reasonably likely to, if adversely determined,

have a Material Adverse Effect, or which purports to involve the transactions

contemplated by this Agreement or would adversely affect the legality, validity

or enforceability of this Agreement or any other Loan Document; and

(2)   no development shall have occurred in any

labor controversy, litigation, action, arbitration or governmental

investigation or proceeding disclosed pursuant to Section 6.7 which

could reasonably be expected to have a Material Adverse Effect; and

(iii)          no Default or Event of Default shall

have then occurred and be continuing.

(b)           Credit Extension Request, etc.  The Lender shall have received a Borrowing

Request for Revolving Loans being requested or an Issuance Request for Letters

of Credit being requested.  Each of the

delivery of a Borrowing Request or an Issuance Request, as applicable, and the

acceptance by the Borrower of the proceeds of such Credit Extension shall

constitute a representation and warranty by the Borrower that on the date of

such Credit Extension (both immediately before and after giving effect to such

Credit Extension and the application of the proceeds thereof) the statements

made in Section 5.2(a) are true and correct in all material respects.

(c)           Satisfactory Legal Form.  All documents executed or submitted pursuant

hereto by or on behalf of the Borrower or any of its Subsidiaries or any other

Obligors shall be reasonably satisfactory in form and substance to the Lender

and its counsel; the Lender and its counsel shall have received all

information, approvals, opinions, documents or instruments as the Lender or its

counsel may reasonably request.

(d)           Compliance Certificate.  The Lender shall have received a Compliance

Certificate on a pro forma basis as if the Credit Extension had been made as of

the most recent practicable date for demonstrating compliance with the

covenants set forth in Section 8.4 and as to such items therein as the

Lender reasonably requests, dated the proposed date of the Credit Extension,

duly executed (and with all schedules thereto duly completed) and delivered by

the chief executive officer, the chief financial officer, the treasurer or the

assistant treasurer of the Borrower.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

In order to induce the

Lender to enter into this Agreement and to make Credit Extensions hereunder,

the Borrower represents and warrants to Lender as set forth in this Article.

Section 6.1             Organization, etc.  The Borrower and each of its Subsidiaries is

(a)  validly organized and existing and

in good standing, or if a Foreign Subsidiary the equivalent of

 

38

 

good standing, under the laws of the state or

jurisdiction of its incorporation or organization, and (b) duly qualified to do

business and is in good standing as a foreign entity in each jurisdiction where

the nature of its business requires such qualification, except where the

failure to so qualify would not result in a Material Adverse Effect, and has

full power and authority and holds all requisite governmental licenses, permits

and other approvals to enter into and perform its Obligations under this

Agreement and each other Loan Document to which it is a party and to own and

hold under lease its property and to conduct its business substantially as

currently conducted by it except where the failure to hold such licenses,

permits and other approvals would not result in a Material Adverse Effect.

Section 6.2             Due Authorization, Non-Contravention,

etc.  The execution,

delivery and performance by the Borrower of this Agreement and each other Loan

Document executed or to be executed by it, the execution, delivery and

performance by each other Obligor of each Loan Document executed or to be

executed by it and the execution, delivery and performance by the Borrower and

any of its applicable Subsidiaries of each agreement entered into in connection

herewith are in each case within each such Person’s powers, have been duly

authorized by all necessary action, and do not:

(a)           contravene any such Person’s Organic

Documents;

(b)           contravene any contractual

restriction binding on or affecting any such Person;

(c)           contravene (i) any court decree or

order binding on or affecting any such Person or (ii) any law or governmental

regulation binding on or affecting any such Person; or

(d)           result in, or require the creation or

imposition of, any Lien on any of such Person’s properties (except as permitted

by this Agreement).

Section 6.3             Government Approval, Regulation, etc.  Except as set forth in Item 6.3 of the Disclosure

Schedule, and except for filings or recordings to perfect the Lender’s security

interests, no authorization or approval or other action by, and no notice to or

filing with, any Governmental Authority or regulatory body or other Person

other than those that have been duly obtained or made and which are in full

force and effect is required for the due execution, delivery or performance by

the Borrower or any other Obligor of any Loan Document to which it is a party

or in connection with the transactions contemplated under this Agreement.  Neither the Borrower nor any of its

Subsidiaries is an “investment company” within the meaning of the Investment

Company Act of 1940, as amended, or a “holding company”, or a “subsidiary

company” of a “holding company”, or an “affiliate” of a “holding company” or of

a “subsidiary company” of a “holding company”, within the meaning of the Public

Utility Holding Company Act of 1935, as amended.

Section 6.4             Validity, etc.  This Agreement and each other Loan Document

executed by the Borrower will, on the due execution and delivery thereof,

constitute, the legal, valid and binding obligations of the Borrower,

enforceable against the Borrower in accordance with their respective terms; and

each other Loan Document executed by each other Obligor will, on the due

execution and delivery thereof by such Obligor, constitute the legal, valid and

binding obligation

 

39

 

of such Obligor enforceable against such Obligor in

accordance with its terms (except, in any case, as such enforceability may be

limited by applicable bankruptcy, insolvency, reorganization or similar laws

affecting creditors’ rights generally and by principles of equity).

Section 6.5             Financial Information.  The financial statements of the Borrower and

its Subsidiaries furnished to the Lender pursuant to Section 5.1(i) have

been prepared in accordance with GAAP consistently applied, and present fairly

the consolidated financial condition of the Persons covered thereby as at the

dates thereof and the results of their operations for the periods then

ended.  All balance sheets, all

statements of operations, shareholders’ equity and cash flow and all other

financial information of each of the Borrower and its Subsidiaries furnished

pursuant to Section 7.1 have been and will for periods following the

Closing Date be prepared in accordance with GAAP consistently applied, and do

or will present fairly the consolidated financial condition of the Persons

covered thereby as at the dates thereof and the results of their operations for

the periods then ended.

Section 6.6             No Material Adverse Effect.  No Material Adverse Effect has occurred

since March 31, 2002 with respect to the Borrower and its Subsidiaries.

Section 6.7             Litigation, Labor Controversies, etc.  There is no pending or, to the knowledge of

the Borrower or its Subsidiaries, threatened litigation, action, proceeding,

arbitration, governmental investigation or labor controversy (a) affecting the

Borrower or any of its Subsidiaries or any Obligor, or any of their respective

properties, businesses, assets or revenues, which is reasonably likely to, if

adversely determined, have a Material Adverse Effect, except as disclosed in

Item 6.7 of the Disclosure Schedule or (b) which purports to involve the

transactions contemplated by this Agreement or affect the legality, validity or

enforceability of this Agreement or any other Loan Document.

Section 6.8             Subsidiaries.  The Borrower has no Subsidiaries, except

those Subsidiaries

(a)           which are identified in Item 6.8 of

the Disclosure Schedule; or

(b)           which constitute Investments

permitted by Section 8.5 or which are permitted to have been organized

or acquired in accordance with Sections 8.5 or 8.9.

Section 6.9             Ownership of Properties.  The Borrower and each of its Subsidiaries

owns (a) in the case of owned real property, good and marketable fee title to,

and (b) in the case of owned personal property, good and valid title to, or, in

the case of leased real or personal property, valid and enforceable leasehold

interests (as the case may be) in, all of its properties and assets, real and

personal, tangible and intangible, of any nature whatsoever, free and clear in

each case of all Liens or claims, except for Liens permitted pursuant to Section

8.3.

Section 6.10           Taxes. 

The Borrower and each of its Subsidiaries has timely filed all tax

returns and reports required by law to have been filed by it, and all such tax

returns are complete, accurate and correct in all material respects.  The Borrower and each of its Subsidiaries

has paid all material taxes and governmental charges due and payable on or

prior to the date hereof, except any such taxes or charges which are being

diligently contested in good faith by

 

40

 

appropriate proceedings and for which adequate

reserves in accordance with GAAP shall have been set aside on its books.

Section 6.11           Pension and Welfare Plans.  During the twelve-consecutive-month period

prior to the date of the execution and delivery of this Agreement and prior to

the date of any Credit Extension hereunder, no steps have been taken to

terminate any Pension Plan under circumstances in which the Pension Plan has

insufficient assets to pay all of its benefit liabilities (as required by

section 4041(b)(1) of ERISA), and no contribution failure has occurred with

respect to any Pension Plan, sufficient to give rise to a Lien under section

302(f) of ERISA.  No condition exists or

event or transaction has occurred with respect to any Pension Plan which might

result in the incurrence by the Borrower or any member of the Controlled Group,

if any, of any material liability, material fine or material penalty.  Except as disclosed in Item 6.11 of the

Disclosure Schedule, neither the Borrower nor any member of the Controlled

Group has any material contingent liability with respect to any post-retirement

benefit under a Welfare Plan, other than liability for continuation coverage

described in Part 6 of Title I of ERISA.

Section 6.12           Environmental Warranties.  Except as set forth in Item 6.12 of the

Disclosure Schedule:

(a)           all facilities and property

(including underlying groundwater) owned or leased by the Borrower or any of

its Subsidiaries have been, and continue to be, owned or leased by the Borrower

and its Subsidiaries in material compliance with all Environmental Laws;

(b)           there have been no past, and there

are no pending or to the Borrower’s best knowledge threatened:

(i)            actions, investigations, claims,

complaints, notices or requests for information received by the Borrower or any

of its Subsidiaries with respect to any alleged violation of any Environmental

Law which could result in a liability to the Borrower or its Subsidiaries in

excess of $250,000 individually or $500,000 in the aggregate, or

(ii)           actions, investigations, complaints,

notices or inquiries to the Borrower or any of its Subsidiaries regarding

potential liability under any Environmental Law which could result in a

liability to the Borrower or its Subsidiaries in excess of $250,000

individually or $500,000 in the aggregate;

(c)           to the Borrower’s best knowledge,

there have been no Releases of Hazardous Materials at, on or under any property

now or previously owned or leased by the Borrower or any of its Subsidiaries

that have, or could reasonably be expected to result in a liability to the

Borrower or its Subsidiaries in excess of $250,000 individually or $500,000 in

the aggregate;

(d)           the Borrower and its Subsidiaries

have been issued and are in material compliance with all permits, certificates,

approvals, licenses and other authorizations relating to environmental matters

and necessary for their businesses;

 

41

 

(e)           to the Borrower’s best knowledge, no

property now or previously owned or leased by the Borrower or any of its

Subsidiaries is listed or proposed for listing (with respect to owned property

only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on

any similar state list of sites requiring investigation or clean-up;

(f)            to the Borrower’s best knowledge,

there are no underground storage tanks, active or abandoned, including petroleum

storage tanks, on or under any property now or previously owned or leased by

the Borrower or any of its Subsidiaries that, singly or in the aggregate, have,

or could reasonably be expected to result in a liability to the Borrower or its

Subsidiaries in excess of $250,000 individually or $500,000 in the aggregate;

(g)           neither the Borrower nor any

Subsidiary of the Borrower has directly transported or directly arranged for

the transportation of any Hazardous Material to any location which is listed or

proposed for listing on the National Priorities List pursuant to CERCLA, on the

CERCLIS or on any similar state list or which is the subject of federal, state

or local enforcement actions or other investigations which may lead to material

claims against the Borrower or such Subsidiary for any response costs, remedial

work, damage to natural resources or personal injury, including claims under

CERCLA;

(h)           to the Borrower’s best knowledge,

there are no polychlorinated biphenyls or friable asbestos present at any

property now or previously owned or leased by the Borrower or any Subsidiary of

the Borrower that, singly or in the aggregate, have, or could reasonably be

expected to result in a liability to the Borrower or its Subsidiaries in excess

of $250,000 individually or $500,000 in the aggregate; and

(i)            to the Borrower’s best knowledge, no

conditions exist at, on or under any property now or previously owned or leased

by the Borrower which, with the passage of time, or the giving of notice or

both, would give rise to material liability under any Environmental Law.

Section 6.13           Accuracy of Information.  None of the factual information heretofore

or contemporaneously furnished by or on behalf of the Borrower in writing to

the Lender for purposes of or in connection with this Agreement or any of the

transactions contemplated hereby or the financing contemplated hereby (true and

complete copies of which were furnished to the Lender in connection with its

execution and delivery hereof), contains any untrue statement of a material

fact, and none of the other factual information hereafter furnished in

connection with this Agreement or any other Loan Document  by the Borrower or any other Obligor to

Lender will contain any untrue statement of a material fact on the date as of

which such information is dated or certified and, as of the date of the

execution and delivery of this Agreement by the Lender, the information

delivered prior to the date of execution and delivery of this Agreement (unless

such information specifically relates to a prior date) does not, and the

factual information hereafter furnished shall not on the date as of which such

information is dated or certified, omit to state any material fact necessary to

make any information not misleading.

Section 6.14           Regulations T, U and X.  No Obligor is engaged in the business of

extending credit for the purpose of purchasing or carrying margin stock, and no

proceeds of any Credit Extensions will be used to purchase or carry margin

stock or otherwise for a purpose which violates, or would be inconsistent with,

F.R.S. Board Regulation T, U or X. 

Terms for

 

42

 

which meanings are provided in F.R.S. Board Regulation

T, U or X or any regulations substituted therefor, as from time to time in

effect, are used in this Section with such meanings.

Section 6.15           Compliance with Laws.  None of the Borrower or any of its

Subsidiaries or any of their respective material properties or assets is in

violation of, nor will the continued operation of their material properties and

assets as currently conducted violate in any material respect, any law, rule or

regulation (including any Food and Drug Administration or United States

Department of Agriculture law, rule or regulation or any Environmental Law or

any zoning or building law, rule or regulation or any ordinance, code or

approval or building permits) or any restrictions of record or agreements

affecting such material properties or assets, and none of the Borrower or any

of its Subsidiaries is in default with respect to any judgment, writ,

injunction, decree or order of any Governmental Authority, in each case where

such violation or default could result in a Material Adverse Effect.

Section 6.16           Labor Matters. The hours worked by and

payments made to employees of the Borrower and its Subsidiaries have not been

in violation of the Fair Labor Standards Act or any other applicable federal,

state, local or foreign law dealing with such matters.  All payments due from the Borrower or any of

its Subsidiaries, or for which any claim may be made against the Borrower or

any of its Subsidiaries, on account of wages and employee health and welfare

insurance and other benefits, have been paid or accrued as a liability on the

books of the Borrower or such Subsidiary. 

The consummation of the transactions contemplated by this Agreement will

not give rise to any right of termination or right of renegotiation on the part

of any union under any collective bargaining agreement to which the Borrower or

any of its Subsidiaries is bound.

Section 6.17           Security Documents. (a) Each Pledge

Agreement is effective to create in favor of the Lender a legal, valid and

enforceable security interest in the collateral (as defined in such Pledge

Agreement) and, when such collateral is delivered to the Lender and for so long

as the Lender continues to hold such collateral, such Pledge Agreement shall

constitute a fully perfected first priority Lien on, and security interest in,

all right, title and interest of the pledgors thereunder in such collateral, in

each case prior and superior in right to any other Person.

(b)           Each Security Agreement is effective

to create in favor of the Lender a legal, valid and enforceable security

interest in the collateral (as defined in each such Security Agreement) and,

when financing statements in appropriate form are filed in the appropriate

offices or other necessary steps are taken by the Lender to perfect its

security interests, each Security Agreement shall constitute a fully perfected

Lien on, and security interest in, all right, title and interest of the

grantors thereunder in such collateral, in each case prior and superior in

right to any other Person, other than with respect to Liens expressly permitted

by Section 8.3.

Section 6.18           Insurance. The Borrower and each of its

Subsidiaries maintains insurance on its property with financially sound and

reputable insurance companies against loss and damage in at least the amounts

(and with only those deductibles) customarily maintained, and against such

risks as are typically insured against in the same general area, by Persons of

comparable size engaged in the same or similar business as the Borrower and its

Subsidiaries, and also maintains all worker’s compensation, employer’s

liability insurance or similar insurance as may be required under the laws of

any state or jurisdiction in which it may be engaged in business.

 

43

 

Section 6.19           Intellectual Property. The Borrower and

each of its Subsidiaries own or possess, or can acquire on reasonable terms,

adequate patents, patent rights, licenses, inventions, copyrights, know-how

(including trade secrets and other unpatented and/or unpatentable proprietary

or confidential information, systems or procedures), trademarks, service marks,

trade names or other intellectual property (collectively, “Intellectual Property”)

necessary to carry on the business now operated by them, and, except as

disclosed in Item 6.19 of the Disclosure Schedule, neither the Borrower nor any

of its Subsidiaries have received any notice or are otherwise aware of any infringement

or conflict with asserted rights of others with respect to any Intellectual

Property or of any facts or circumstances which would render any Intellectual

Property invalid or inadequate to protect the interest of the Borrower or any

of its Subsidiaries therein, and which infringement or conflict (if the subject

of any unfavorable decision, ruling or finding) or invalidity or inadequacy,

singly or in the aggregate, could result in a Material Adverse Effect.  To the knowledge of the Borrower, upon due

inquiry, the business of the Borrower and its Subsidiaries as currently

conducted does not infringe or conflict with any Intellectual Property rights

or franchise rights of any Person.

Section 6.20           Solvency. 

The Borrower and its Subsidiaries, taken as a whole, are, and, upon the

incurrence of any Obligations by any Obligor (including, without limitation,

the making of the Revolving Loans, the issuance of the Letters of Credit, the

delivery of each Subsidiary Guaranty and the Liens created by the Collateral

Documents) on any date on which this representation is made, will be, Solvent.

ARTICLE VII

AFFIRMATIVE COVENANTS

The Borrower agrees with

the Lender that until the Commitments have expired or terminated, all Letters

of Credit have been cancelled or otherwise terminated, and all Obligations have

been paid and performed in full, the Borrower will, and will cause its

Subsidiaries to, perform or cause to be performed the obligations set forth

below.

Section 7.1             Financial Information, Reports, Notices,

etc.  The Borrower will

furnish or cause to be furnished to the Lender copies of the following

financial statements, reports, notices and information:

(a)           as soon as available and in any event

within sixty (60) days after the end of each of the first three Fiscal Quarters

of each Fiscal Year, an unaudited consolidated balance sheet of the Borrower

and its Subsidiaries as of the end of such Fiscal Quarter and consolidated

statements of income and cash flow of the Borrower and its Subsidiaries for

such Fiscal Quarter and for the period commencing at the end of the previous

Fiscal Year and ending with the end of such Fiscal Quarter, and including (in

each case), in comparative form the figures for the corresponding Fiscal

Quarter in, and year to date portion of, the immediately preceding Fiscal Year,

certified as complete and correct by the chief financial or accounting

Authorized Officer of the Borrower;

(b)           as soon as available and in any event

within ninety (90) days after the end of each Fiscal Year, a copy of the

consolidated balance sheet of the Borrower and its

 

44

 

Subsidiaries, and the related consolidated statements

of stockholders’ equity and cash flow and the consolidated statements of income

of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in

comparative form the figures for the immediately preceding Fiscal Year, audited

(without any Impermissible Qualification) by independent public accountants

acceptable to the Lender, stating that, in performing the examination necessary

to deliver the audited financial statements of the Borrower, no knowledge was

obtained of any Default or Event of Default;

(c)           concurrently with the delivery of the

financial information pursuant to clauses (a) and (b), a

Compliance Certificate, executed by the chief executive, financial or

accounting Authorized Officer of the Borrower, (i) showing compliance with the

financial covenants set forth in Section 8.4, (ii) stating that no

Default or Event of Default has occurred and is continuing (or, if a Default or

Event of Default has occurred, specifying the details of such Default or Event

of Default and the action that the Borrower has taken or proposes to take with

respect thereto) and (iii) showing the outstanding balance of all Revolving

Loans as of the applicable Fiscal Quarter;

(d)           as soon as possible and in any event

within five (5) days after the Borrower or any of its Subsidiaries obtains

knowledge of the occurrence of a Default or Event of Default, a statement of

the chief executive, financial or accounting Authorized Officer of the Borrower

setting forth details of such Default of Event of Default and the action which

the Borrower has taken and proposes to take with respect thereto;

(e)           as soon as possible and in any event

within five (5) days after the Borrower or any of its Subsidiaries obtains

knowledge of (i) the occurrence of any material adverse development with

respect to any litigation, action, proceeding or labor controversy described in

Item 6.7 of the Disclosure Schedule or (ii) the commencement of any litigation,

action, proceeding or labor controversy of the type and materiality described

in Section 6.7, notice thereof and, to the extent the Lender requests,

copies of all documentation relating thereto;

(f)            promptly after the sending or filing

thereof, copies of all reports, notices, prospectuses and registration

statements which the Borrower or any of its Subsidiaries files with the SEC or

any national securities exchange;

(g)           immediately upon becoming aware of

(i) the institution of any steps by the Borrower or any other Person to

terminate any Pension Plan, (ii) the failure to make a required contribution to

any Pension Plan if such failure is sufficient to give rise to a Lien under

Section 302(f) of ERISA, (iii) the taking of any action with respect to a

Pension Plan which could result in the requirement that the Borrower furnish a

bond or other security to the PBGC or such Pension Plan, or (iv) the occurrence

of any event with respect to any Pension Plan which could result in the

incurrence by the Borrower of any material liability, fine or penalty, notice

thereof and copies of all documentation relating thereto;

(h)           promptly upon receipt thereof from

the Borrower’s audit committee, copies of all “management letters” submitted to

the Borrower by the independent public accountants referred to in clause (b)

in connection with each audit made by such accountants;

 

45

 

(i)            as soon as available and in any

event within fifteen (15) days after the end of each Fiscal Year a copy of

Borrower’s Annual Operating Plan; and

(j)            such other financial and other

information as the Lender may from time to time reasonably request (including

information and reports in such detail as the Lender may request with respect

to the terms of and information provided pursuant to the Compliance

Certificate).

Section 7.2             Maintenance of Existence; Compliance

with Laws, etc.  The

Borrower will, and will cause each of its Subsidiaries to,

(a)           except as otherwise permitted by Section

8.9, preserve and maintain its legal existence; and

(b)           comply in all material respects with

all applicable laws, rules, regulations and orders, including, but not limited

to, ERISA, employee benefits, Food and Drug Administration and United States

Department of Agriculture laws, rules and regulations, and including the

payment, before the same become delinquent, of all taxes, assessments and

governmental charges imposed upon the Borrower or its Subsidiaries or upon

their property except to the extent being diligently contested in good faith by

appropriate proceedings and for which adequate reserves in accordance with GAAP

have been set aside on the books of the Borrower or its Subsidiaries, as

applicable.

Section 7.3             Maintenance of Properties.  The Borrower will, and will cause each of

its Subsidiaries to, maintain, preserve, protect and keep its and their

respective properties in good repair, working order and condition (ordinary

wear and tear excepted), and make necessary repairs, renewals and replacements

so that the business carried on by the Borrower and its Subsidiaries may be

properly conducted at all times, unless the Borrower determines in good faith

that the continued maintenance of such property is no longer economically

desirable.

Section 7.4             Insurance.  The Borrower will, and will cause each of

its Subsidiaries to:

(a)           maintain insurance on its property

with financially sound and reputable insurance companies against loss and

damage in at least the amounts (and with only those deductibles) customarily

maintained, and against such risks as are typically insured against in the same

general area, by Persons of comparable size engaged in the same or similar

business as the Borrower and its Subsidiaries; and

(b)           all worker’s compensation, employer’s

liability insurance or similar insurance as may be required under the laws of

any state or jurisdiction in which it may be engaged in business.

Without limiting

the foregoing, all insurance policies required pursuant to this Section shall

(i) name the Lender as loss payee (in the case of property insurance) or

additional insured (in the case of liability insurance), as applicable, and

provide that no cancellation or modification of the policies will be made

without thirty (30) days’ prior written notice (or ten (10) days’ prior written

notice with respect to failure to pay the premium), to the Lender and (ii) be

in addition to any requirements to maintain specific types of insurance

contained in the other Loan Documents.

 

46

 

Section 7.5             Books and Records.  The Borrower will, and will cause each of its

Subsidiaries to, keep books and records in accordance with GAAP which

accurately reflect all of its business affairs and transactions and permit the

Lender or any of its representatives, at reasonable times and intervals upon

reasonable notice to the Borrower, to visit its offices, to discuss its

financial matters with its officers and employees, and its independent public

accountants (and the Borrower hereby authorizes such independent public

accountants to discuss the Borrower’s and its Subsidiaries’ financial matters

with the Lender or its representatives whether or not any representative of the

Borrower is present so long as the Borrower has been given reasonable prior

written notice of such meeting) and to examine (and photocopy extracts from)

any of its books and records.  The

Borrower shall pay any fees of such independent public accountants incurred in

connection with the Lender’s exercise of its rights pursuant to this Section.

Section 7.6             Environmental Law Covenant.  The Borrower will, and will cause each of

its Subsidiaries to:

(a)           use and operate all of its facilities

and properties in material compliance with all Environmental Laws, keep all

necessary permits, approvals, certificates, licenses and other authorizations

relating to environmental matters in effect and remain in material compliance

therewith, and handle all Hazardous Materials in material compliance with all

applicable Environmental Laws; and

(b)           promptly notify the Lender and

provide copies upon receipt of all material written claims, complaints, notices

or inquiries relating to the condition of its facilities and properties in

respect of, or as to compliance with, Environmental Laws, and shall promptly

resolve any non-compliance with Environmental Laws and keep its property free of

any Lien imposed by any Environmental Law.

Section 7.7             Future Subsidiaries; Collateral.  The Borrower shall promptly notify the

Lender upon any Person becoming a Subsidiary, or upon an Obligor directly or

indirectly acquiring additional Capital Stock of any existing Subsidiary or

real property described in clause (d) below, and (except to the extent

that, for Foreign Subsidiaries, the granting of a Subsidiary Guaranty or

Subsidiary Pledge Agreement would cause material adverse tax consequences to

the Borrower or such Foreign Subsidiary or would be violative of applicable

law):

(a)           such Person shall (i) execute and

deliver to the Lender a supplement to the Subsidiary Guaranty and a supplement

to the Subsidiary Security Agreement and (ii) to the extent such Subsidiary is

required to pledge stock of a Subsidiary pursuant to clause (b) of Section

7.7, execute and deliver to the Lender a supplement to the Subsidiary

Pledge Agreement, if not already a party thereto as a pledgor, in a manner

satisfactory to the Lender;

(b)           the Borrower and each Subsidiary

shall, pursuant to the applicable Pledge Agreement (as supplemented, if

necessary, by a foreign pledge agreement in form and substance satisfactory to

the Lender), pledge to the Lender all of the outstanding shares of Capital

Stock of (i) each U.S. Subsidiary and (ii) any Subsidiary that is not a U.S.

Subsidiary owned (other than where such ownership is in such U.S. Subsidiary’s

capacity as a nominee shareholder) directly by the Borrower or such U.S.

Subsidiary (provided that, subject to the last sentence of the

 

47

 

penultimate paragraph of this Section, not more than

sixty-five percent (65%) of the Capital Stock of any Foreign Subsidiary shall

be so pledged), along with undated stock powers for such certificates, executed

in blank (or, if any such shares of Capital Stock are uncertificated,

confirmation and evidence satisfactory to the Lender that the security interest

in such uncertificated securities has been perfected (as a first priority Lien)

by the Lender, in accordance with the U.C.C. or any other similar or local or

foreign law which may be applicable);

(c)           the Borrower and each Subsidiary

shall, pursuant to the applicable Pledge Agreement, pledge to the Lender, all

intercompany notes evidencing Indebtedness in favor of the Borrower or such

Subsidiary (which shall be in a form acceptable to the Lender); and

(d)           if such Person owns any real

property, such Obligor will execute and deliver to the Lender a Mortgage,

together with, in the case of real property, mortgagee’s title insurance

policies in amounts, in form and substance (including, if available, a

revolving credit endorsement) and issued by insurers satisfactory to the

Lender, and such policies shall be accompanied by evidence of the payment in

full of all premiums thereon;

together, in each

case, with such opinions of legal counsel for the Borrower, which may be the

corporate general counsel of the Borrower (which shall be from counsel

satisfactory to the Lender) relating thereto, which legal opinions shall be in

form and substance satisfactory to the Lender. 

The Borrower agrees that if, as a result of a change in law after the

date hereof, (i) a Foreign Subsidiary can execute and deliver a supplement to

the Subsidiary Guaranty or execute and deliver a supplement to the Subsidiary

Pledge Agreement as a pledgor or (ii) the Borrower or any Subsidiary can pledge

more than sixty-five percent (65%) of the Capital Stock of any Foreign

Subsidiary or any intercompany Indebtedness of any Subsidiary evidenced by a

note or other instrument, in any such case without material adverse tax

consequences to the Borrower or such Subsidiary, then the provisions of clause

(a) of this Section shall thereafter apply to any Foreign Subsidiary and/or

(as the case may be) the provisions of clause (b) of this Section shall

thereafter apply to one hundred percent (100%) of the Capital Stock of such

Foreign Subsidiary.

The Borrower shall, and

shall cause each of its Subsidiaries to, cause the Lender to have at all times

a first priority perfected security interest (subject only to Liens permitted

under Section 8.3) in all of the property (real and personal, including

Capital Stock owned by such Obligors) now or hereafter acquired from time to

time by the Borrower and such Subsidiaries to the extent the same is of the

type of property that constitutes “Collateral” (as defined in any Loan

Document) or is required to be pledged or assigned to the Lender

hereunder.   Without limiting the

generality of the foregoing, the Borrower shall, and shall cause each of its

Subsidiaries to, promptly execute, deliver and/or file (as applicable) Uniform

Commercial Code financing statements and other instruments and documentation

deemed necessary by the Lender to grant and perfect such security interest, in

each case in form and substance satisfactory to the Lender.

Section 7.8             Use Of Proceeds.  The Borrower will apply the Revolving Loans

as set forth below:

(i)            to repay principal and accrued

interest on those certain demand notes dated May 24, 2002, June 14, 2002 and

July 26, 2002, respectively, each in the amount of Five Million Dollars

($5,000,000), provided that the proceeds of such

 

48

 

demand notes shall have

been and shall be after repayment hereunder be used for the purposes set forth

in subsections (ii), (iii) and (iv) hereof;

(ii)           for working capital and general

corporate purposes of the Borrower;

(iii)          to pay fees and expenses related to

the Revolving Loans; and

(iv)          to finance Capital Expenditures.

The Borrower will use the

Letters of Credit for working capital and general corporate purposes of the

Borrower.

Section 7.9             Down Payment on International Sales.  The Borrower shall, and shall cause each

Subsidiary, in connection with agreements entered into after the date of this

Agreement, to receive, on all sales made to buyers located outside of the

United States, prior to shipment, at least a ten percent (10%) cash down

payment of the sales price of the inventory or an irrevocable standby or

documentary letter of credit in favor of the Borrower in an amount equal to at

least ten percent (10%) of the sales price of the inventory, issued by a United

States recognized commercial bank or financial institution which is rated A-1

(or better) by S&P or P-1 (or better) by Moody’s or issued by a foreign bank

and confirmed by a United States recognized commercial bank or financial

institution, which, at the time of confirmation, is rated A-1 (or better) by

S&P or P-1 (or better) by Moody’s and payable at the counter of such bank

or institution that provides customary draw procedures to protect the seller of

goods in international markets; provided, however, the Lender may waive in a

writing signed by the Lender’s chief financial officer such requirement for

contracts entered into after the Closing Date.

Section 7.10           Contract Obligations.  The Borrower shall, and shall cause each

Subsidiary, to perform in accordance with its material terms every contract,

agreement, obligation or other arrangement to which such Person is a party or

by which it or any of its property is bound, including government contracts, if

any.  In the event that any material

default or material performance deficiency occurs, the Borrower shall notify

the Lender promptly in writing.  The

Borrower shall provide the Lender promptly with copies of any cure notices or

default notices it may receive on any contract or from any party and detail the

proposed corrective action.  At the

Lender’s request, the Borrower shall also provide the Lender with copies of any

stop work notices in effect at the date of the Lender’s request.

Section 7.11           Notice of Claims Under Lender Guaranties.  Promptly, and in any case within seven (7)

days notice thereof, notify the Lender of any demand or event or circumstance

that is reasonably likely to cause a demand under any Lender Guaranty.

 

 

49

 

ARTICLE VIII

NEGATIVE COVENANTS

The Borrower covenants

and agrees with the Lender that until the Revolving Loan Commitment has expired

or terminated and all Obligations have been paid and performed in full, the

Borrower will not, and will not permit its Subsidiaries to, do any of the

following.

Section 8.1             Business Activities. 

The Borrower will not, and will not permit any of its Subsidiaries to,

engage in any business activity except those business activities primarily

engaged in by the Borrower and its Subsidiaries as of the Closing Date and

activities reasonably incidental thereto.

Section 8.2             Indebtedness. 

The Borrower will not, without the Lender’s prior written consent, and

will not permit any of its Subsidiaries to, create, incur, assume or permit to

exist any Indebtedness, other than:

(a)           Indebtedness in respect of the

Obligations;

(b)           Indebtedness existing as of the

Closing Date which is identified in Item 8.2 of the Disclosure Schedule;

(c)           unsecured Indebtedness (i) incurred

in the ordinary course of business of the Borrower and the Guarantors

(including open accounts extended by suppliers on normal trade terms in

connection with purchases of goods and services which are not overdue for a

period of more than ninety (90) days or, if overdue for more than ninety (90)

days, as to which a dispute exists and adequate reserves in conformity with

GAAP have been established on the books of the Borrower or such Guarantor) and

(ii) in respect of performance, surety, statutory, appeal or similar bonds

provided in the ordinary course of business, but excluding (in each case),

Indebtedness incurred through the borrowing of money or Contingent Liabilities

in respect thereof;

(d)           unsecured Indebtedness not to exceed

Two Million Dollars ($2,000,000) in the aggregate, which is convertible into

equity upon terms and conditions reasonably acceptable to the Lender;

(e)           Indebtedness of any Guarantor owing

to the Borrower or any other Guarantor, which Indebtedness shall be evidenced

by one or more promissory notes in form and substance satisfactory to the

Lender, duly executed and delivered in pledge to the Lender pursuant to a Loan

Document, and shall not be forgiven or otherwise discharged for any

consideration other than payment in full or in part in cash (provided, that

only the amount repaid in part shall be discharged); and

(f)            Indebtedness of the Borrower and the

Guarantors in respect of purchase money Indebtedness and Capitalized Lease

Liabilities which does not exceed $5,000,000 in the aggregate at any time

outstanding;

provided, however, that no Indebtedness

otherwise permitted by clause (d) shall be assumed or otherwise incurred

if a Default or Event of Default has occurred and is then continuing or would

result therefrom.

 

50

 

Section 8.3             Liens.  The Borrower will not, and will not permit

any of its Subsidiaries to, create, incur, assume or permit to exist any Lien

upon any of its property (including Capital Stock of any Person), revenues or

assets, whether now owned or hereafter acquired, except:

(a)           Liens securing payment of the

Obligations;

(b)           Liens existing as of the Closing Date

and disclosed in Item 8.3 of the Disclosure Schedule securing Indebtedness

described in clause (b) of Section 8.2; provided that no such

Lien shall encumber any additional collateral and the amount of Indebtedness

secured by such Lien is not increased from that existing on the Closing Date;

(c)           Liens for taxes, assessments or other

governmental charges or levies not at the time delinquent or thereafter payable

without penalty or being diligently contested in good faith by appropriate

proceedings and for which adequate reserves in accordance with GAAP shall have

been set aside on its books;

(d)           Liens in favor of carriers,

warehousemen, mechanics, materialmen and landlords granted in the ordinary

course of business for amounts not overdue or being diligently contested in

good faith by appropriate proceedings and for which adequate reserves in

accordance with GAAP shall have been set aside on its books;

(e)           Liens incurred or deposits made in

the ordinary course of business in connection with workmen’s compensation,

unemployment insurance or other forms of governmental insurance or benefits, or

to secure performance of tenders, statutory obligations, bids, leases or other

similar obligations (other than for borrowed money) entered into in the

ordinary course of business or to secure obligations on surety, statutory and

appeal bonds or performance and similar bonds;

(f)            judgment Liens in existence for less

than forty-five (45) days after the entry thereof or with respect to which

execution has been stayed or the payment of which is covered in full (subject

to a customary deductible) by insurance maintained with responsible insurance

companies and which do not otherwise result in an Event of Default under Section

9.1(f), or attachment, pre-judgment or similar Liens in existence less than

twenty (20) days after the entry thereof or which have been vacated,

discharged, released or bonded over in a manner reasonably satisfactory to the

Lender within such time period;

(g)           easements, rights-of-way, zoning

restrictions, minor defects or irregularities in title and other similar

encumbrances not interfering in any material respect with the value or use of

the property to which such Lien is attached; and

(h)           Liens securing payment of

Indebtedness of the type described in clause (f) of Section 8.2

used to purchase or lease assets of the Borrower or any Guarantor so long as

such Lien extends only to the asset or assets so financed.

 

51

 

Section 8.4             Financial Condition and Operations.  The Borrower will not permit to occur any of

the events set forth below:

(a)           Maximum Capital Expenditures.  (i) If the Borrower’s Revenue for any Fiscal

Quarter in Fiscal Year 2002 is greater than eighty-five percent (85%) of the

quarterly revenue target set forth in the Annual Operating Plan for such Fiscal

Quarter, the Borrower will not incur cumulative Capital Expenditures during the

next Fiscal Quarter (including Capital Expenditures incurred during such Fiscal

Quarter and all prior Fiscal Quarters during Fiscal Year 2002) greater than

Five Hundred Thousand Dollars ($500,000) in excess of the capital expenditure

budget for that next Fiscal Quarter and all prior Fiscal Quarters during Fiscal

Year 2002, set forth in the Annual Operating Plan.

(ii)  If the Borrower’s Revenue for any Fiscal

Quarter in Fiscal Year 2002 is less than eighty-five percent (85%) of the

quarterly revenue target set forth in the Annual Operating Plan for such Fiscal

Quarter, the Borrower will not incur cumulative Capital Expenditures during the

next Fiscal Quarter (including Capital Expenditures incurred during such Fiscal

Quarter and all prior Fiscal Quarters during Fiscal Year 2002) greater than

Five Hundred Thousand Dollars ($500,000) in excess of the “adjusted plan” model

capital expenditure budget for that next Fiscal Quarter and all prior Fiscal

Quarters during Fiscal Year 2002, set forth in the Annual Operating Plan.

(b)           Operating Expenses.  (i) 

If the Borrower’s Revenue for any Fiscal Quarter in Fiscal Year 2002 is

greater than eighty-five percent (85%) of the quarterly revenue target set

forth in the Annual Operating Plan for such Fiscal Quarter, then for the

following Fiscal Quarter, the Borrower may not incur Operating Expenses in

excess of Five Hundred Thousand Dollars ($500,000) more than the Operating

Expenses, excluding amortization and depreciation included in Operating Expenses,

for such Fiscal Quarter set forth in the Annual Operating Plan.  However, notwithstanding the foregoing, to

the extent that in any Fiscal Quarter Borrower was limited in the incurrence of

Operating Expenses as provided herein, and its Operating Expenses for such

Fiscal Quarter were less than Five Hundred Thousand Dollars ($500,000) more

than the Operating Expenses, excluding amortization and depreciation included

in Operating Expenses, for such Fiscal Quarter set forth in the Annual

Operating Plan, the Borrower may use such unincurred Operating Expenses in the

subsequent Fiscal Quarter.

(ii)  If the Borrower’s Revenue for any Fiscal

Quarter in Fiscal Year 2002 is equal to or less than eighty-five percent (85%)

of the quarterly revenue target set forth in the Annual Operating Plan for such

Fiscal Quarter, then for the following Fiscal Quarter:

the Borrower may not

incur Operating Expenses in excess of Five Hundred Thousand Dollars ($500,000)

more than the product of ((D-E) x ((C-B)/(A-B))) + E, where:

 

                                                A=Fiscal Quarter

Revenue of the immediately preceding Fiscal Quarter from the Annual Operating

Plan.

                                                B=Fiscal Quarter

Revenue of the immediately preceding Fiscal Quarter from the “adjusted plan”

model in the Annual Operating Plan.

                                                C=Actual Revenue from

the immediately preceding Fiscal Quarter.

 

52

 

                                                D=Operating Expenses

of the following Fiscal Quarter from the Annual Operating Plan.

E=Operating

Expenses of the following Fiscal Quarter from the “adjusted plan” model in the

Annual Operating Plan.

(c)           Any calculation to determine

compliance with clauses (a), (b), (d), (e) or (f)

of this Section 8.4 or to determine whether a Default or Event of

Default has occurred or would occur as a result of a particular transaction

under those clauses shall be on a pro forma basis and calculated on the

assumption that any Permitted Acquisitions or other relevant transaction which

occurred during the relevant period were consummated on the first day of such

period.

Section 8.5             Investments.  The Borrower will not, and will not permit

any of its Subsidiaries to, purchase, make, incur, assume or permit to exist

any Investment in any other Person, except:

(a)           Investments existing on the Closing

Date and identified in Item 8.5 of the Disclosure Schedule, and Investments in

SB OperatingCo, Inc. after its conversion (the “Conversion”) to a limited liability

company;

(b)           Cash Equivalent Investments;

(c)           without duplication, Investments to

the extent permitted as Indebtedness pursuant to Section 8.2;

(d)           Investments by way of contributions

to capital or purchases of equity (i) by the Borrower in any Guarantor or by

such Guarantor in other Guarantors; or (ii) by any Subsidiary in the Borrower;

(e)           Investments constituting (i) accounts

receivable arising, (ii) trade debt granted, or (iii) deposits made in

connection with the purchase price of goods or services, in each case in the

ordinary course of business;

(f)            Investments by way of Permitted

Acquisitions;

(g)           Investments received in connection

with the bankruptcy or reorganization of, or settlement of delinquent accounts

and disputes with, customers and suppliers, in each case in the ordinary course

of business;

(h)           Investments consisting of any

deferred portion of the sales price received by the Borrower or any Guarantor

in connection with any Asset Sale permitted under Section 8.10;

(i)            Hedging Agreements; and

 

53

 

(j)            after the Closing Date, other

Investments (other than any acquisition of any Person) in an amount not to

exceed $500,000 in the aggregate over the remaining term of this Agreement;

provided, however, that

(i)            any Investment which when made

complies with the requirements of clauses (a), (b) or (c)

of the definition of the term “Cash Equivalent Investment” may continue to be

held notwithstanding that such Investment if made thereafter would not comply

with such requirements;

(ii)           no Investment otherwise permitted by clauses

(c), (d), (e), (f), (g) or (j) shall be

permitted to be made if any Default or Event of Default has occurred and is

continuing or would result therefrom; and

(iii)          after the Closing Date the aggregate

amount of acquisitions (whether pursuant to an acquisition of stock, assets

constituting a business unit of any Person or all or substantially all of the

assets of any Person or Persons or otherwise and including any assumed debt) by

the Borrower or any Guarantor of any Person or Persons or the assets of any

Person or Persons shall not exceed $2,000,000 over the remaining term of this

Agreement.

Section 8.6             Restricted Payments, etc.  The Borrower will not, and will not permit

any of its Subsidiaries to, declare or make a Restricted Payment, or make any

deposit for any Restricted Payment, other than:

(a)           dividends or distributions payable in

common stock of the Borrower and its Subsidiaries;

(b)           Restricted Payments made by

Subsidiaries to the Borrower or wholly owned Subsidiaries of the Borrower; or

(c)           redemptions of Capital Stock in

accordance with the exercise of mandatory put rights under existing agreements

with employees, and future agreements with employees that have been consented

to by the Lender in writing, provided that the aggregate amount of such

redemptions shall not exceed One Million Dollars ($1,000,000) in any Fiscal

Year.

provided, however, both before and after giving effect

to such Restricted Payment, no Default or Event of Default shall have occurred

and be continuing or caused thereby.

Section 8.7             Subordinated Debt.  The Borrower will not, and will not permit

any of its Subsidiaries to, (a) make any payment or prepayment of principal of,

or premium or interest on, any Subordinated Debt; (b) pay or cause to be paid

any consideration, whether by way of payment of principal, interest, fee,

indemnity or otherwise, to (i) any holder of any Indebtedness (in its capacity

as such) that is subordinate or junior in right of payment to amounts owing

hereunder or (ii) any holder (in its capacity as such) of any Capital Stock or

other securities of any Obligor or any warrants, options or subscription rights

with respect to any Capital Stock of

 

54

 

any Obligor (whether as payment of such obligations,

Capital Stock, securities, warrants, options or subscription rights or

otherwise or as inducement to, any consent, waiver or amendment of any of the

terms or provisions of the documentation evidencing such Subordinated Debt or

such Capital Stock, securities, warrants, options or subscription rights); (c)

refinance, redeem, retire, purchase, defease or otherwise acquire any

Subordinated Debt; or (d) make any deposit (including the payment of amounts

into a sinking fund or other similar fund) for any of the foregoing purposes;

provided that:

(a)           the Borrower and its Subsidiaries may

pay, in the case of interest only, interest on such Subordinated Debt no

earlier than the stated, scheduled date for such payment of interest set forth

in the Sub Debt Documents governing such Subordinated Debt, so long as no

Default or Event of Default shall have occurred and be continuing or would

result therefrom; and

(b)           the Borrower and its Subsidiaries may

make Restricted Payments as permitted under Section 8.6.

Section 8.8             Stock of Subsidiaries.  The Borrower will not permit any of its

Subsidiaries to, (a) issue any Capital Stock (whether for value or otherwise)

to any Person other than (i) officers or employees of the Guarantors, in

connection with incentive compensation programs or employee benefit plans or

(ii) the Borrower or another wholly owned Guarantor, or (b) other than as set

forth in Section 8.6, become liable in respect of any obligation

(contingent or otherwise) to purchase, redeem, retire, acquire or make any

other payment in respect of any shares of Capital Stock of the Borrower or any

Subsidiary or any option, warrant or other right to acquire any such shares of

Capital Stock; provided, however, that the options and warrants

issued by the Guarantors as set forth in Item 8.8 of the Disclosure Schedule

shall be permitted.

Section 8.9             Consolidation, Merger, etc.  The Borrower will not, and will not permit

any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge

into or with, any other Person, or purchase or otherwise acquire all or

substantially all of the assets of any Person (or of any division thereof) or

change its corporate structure, except:

(a)           as contemplated by the Conversion;

(b)           any Guarantor may liquidate or

dissolve voluntarily into, and may merge with and into, the Borrower or any

other Guarantor, and the assets or stock of any Guarantor may be purchased or

otherwise acquired by the Borrower or any other Guarantor; provided, that in no

event shall any Guarantor consolidate with or merge with and into any other

Guarantor unless after giving effect thereto, the Lender shall have a perfected

pledge of and security interest in and to, at least the same percentage of the

issued and outstanding shares of Capital Stock of the surviving Person as the

Lender had immediately prior to such merger or consolidation in form and

substance satisfactory to the Lender and its counsel, pursuant to such

documentation and opinions as shall be necessary in the opinion of the Lender

to create, perfect or maintain the collateral position of the Lender therein as

contemplated by this Agreement; and

(c)           so long as no Default or Event of

Default has occurred and is continuing or would occur after giving effect

thereto, the Borrower or any Guarantor may (to the extent permitted by clause

(f) and clause (iii) following clause (j) of Section 8.5) purchase

all or

 

55

 

substantially all of the assets or stock of any Person

(or any division thereof) (other than the Borrower or any Subsidiary, such

intercompany transactions being subject to clause (b)), or acquire such

Person by merger.

Section 8.10           Permitted Dispositions.  Other than in connection with the Borrower’s

incentive compensation arrangements, the Borrower will not, and will not permit

any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise

convey (including by way of merger), or grant options, warrants or other rights

with respect to, any of the Borrower’s or such Subsidiaries’ assets (including

accounts receivable of the Borrower and its Subsidiaries and Capital Stock of

its Subsidiaries) to any Person in one transaction or series of transactions

unless such transaction is (a) in the ordinary course of its business,

including sales of inventory or equipment or systems built for customers in the

ordinary course of the Borrower’s business within the United States or sales of

inventory or equipment or systems built for customers in the ordinary course of

Borrower’s business outside of the United States in accordance with the

provisions of Section 8.15; or (b) a transaction among the Borrower

and/or the Guarantors permitted by Section 8.9(b).

Section 8.11           Modification of Certain Agreements.  The Borrower will not, and will not permit any

of its Subsidiaries to, consent to any amendment, supplement, waiver or other

modification of, or enter into any forbearance from exercising any rights with

respect to the terms or provisions contained in:

(a)           the Sub Debt Documents, other than

any amendment, supplement, waiver or modification which (x) extends the date or

reduces the amount of any required repayment, prepayment or redemption of the

principal of such Subordinated Debt, (y) reduces the rate or extends the date

of payment of the interest, premium (if any) or fees payable on such

Subordinated Debt, or (z) makes the covenants, events of default or remedies in

such Sub Debt Documents less restrictive on the Borrower; or

(b)           the Borrower’s or any Subsidiary’s

Organic Documents (provided that SB OperatingCo, LLC may enter into documents

relating to its conversion to a limited liability company provided the Lender

has reviewed and approved the terms of such documents) to the extent that any

such change would be adverse to the interests of the Lender.

Section 8.12           Transactions with Affiliates.  The Borrower will not, and will not permit

any of its Subsidiaries to, enter into or cause or permit to exist any

arrangement or contract (including for the purchase, lease or exchange of

property or the rendering of services) with any of its other Affiliates, unless

such arrangement or contract (i) is on fair and reasonable terms no less

favorable to the Borrower or such Subsidiary than it could obtain in an

arm’s-length transaction with a Person that is not an Affiliate and (ii) is of

the kind which would be entered into by a prudent Person in the position of the

Borrower or such Subsidiary with a Person that is not one of its Affiliates.

Section 8.13           Restrictive Agreements, etc.  The Borrower will not, and will not permit

any of its Subsidiaries to, enter into any agreement prohibiting:

 

56

 

(a)           the creation or assumption of any

Lien upon its properties, revenues or assets, whether now owned or hereafter

acquired (except for usual terms in contracts or agreements providing for

restrictions on transfer or assignment);

(b)           the ability of any Obligor to amend

or otherwise modify this Agreement or any other Loan Document; or

(c)           the ability of any Subsidiary to make

any payments, directly or indirectly, to the Borrower, including by way of

dividends, advances, repayments of loans, reimbursements of management and

other intercompany charges, expenses and accruals or other returns on

investments.

The foregoing

prohibitions shall not apply to restrictions contained in this Agreement and

any other Loan Document.

Section 8.14           Sale and Leaseback.  The Borrower will not, and will not permit

any of its Subsidiaries to, directly or indirectly enter into any agreement or

arrangement providing for the sale or transfer by it of any property (now owned

or hereafter acquired) to a Person and the subsequent lease or rental of such

property or other similar property from such Person involving an amount of sale

proceeds in excess of $2,500,000 in the aggregate.  The Net Proceeds of such sale and leaseback shall be applied by

the Borrower pursuant to Section 3.1(d).

Section 8.15           Shipment of Assets Outside of U.S.  Without the Lender’s prior written consent,

which consent shall not be unreasonably withheld, the Borrower will not ship

any fixed assets or a group of fixed assets, in one or more shipments, outside

of the United States; provided, however, that without the Lender’s prior

written consent, the Borrower may ship inventory to an unaffiliated customer in

the ordinary course of business if the Borrower receives a minimum payment of

at least ten percent (10%) of the sales price of the inventory or an

irrevocable standby or documentary letter of credit in favor of the Borrower in

an amount equal to at least ten percent (10%) of the sales price of the

inventory, issued by a United States recognized commercial bank or financial

institution which is rated A-1 (or better) by S&P or P-1 (or better) by

Moody’s or issued by a foreign bank and confirmed by a United States recognized

commercial bank or financial institution, which, at the time of confirmation,

is rated A-1 (or better) by S&P or P-1 (or better) by Moody’s and payable

at the counter of such bank or financial institution that provides customary

draw procedures to protect the seller of goods in the international

markets.  Provided further, that the

Borrower, within eighteen (18) months following the Closing Date may ship to

its existing Tech Ion facility under construction in Brazil up to four

accelerator guns and related system components, without further consent from

the Lender.

Section 8.16           Modification of Lender Guaranty Documents.  So long as the Lender remains a guarantor

under any of the Lender Guaranties, the Borrower shall not agree to and shall

not permit any modifications, amendments, consents or waivers of any provisions

to the underlying documents relating to the Lender Guaranties, nor shall the

Borrower exercise any option to extend the term of the underlying documents

relating to the Lender Guaranties, without the prior written consent of the

Lender, which consent may be withheld in the Lender’s sole and absolute

discretion, provided that the Lender shall not unreasonably withhold its

consent to a

 

57

 

modification, amendment, consent or waiver if such

modification, amendment, consent or waiver could not, in any way, have an

adverse effect upon the Lender’s obligations under the Lender Guaranties.

ARTICLE IX

EVENTS OF DEFAULT

Section 9.1             Events of Default.  Each of the following events or occurrences

described in this Article shall constitute an “Event of Default”.

(a)           Non-Payment of Obligations.  The Borrower shall default in the payment or

prepayment when due of:

(i)            any principal of or interest on any

Revolving Loan and such default shall continue unremedied for three (3)

Business Days after such amount becomes due; or

(ii)           any fee described in Article III

or any other monetary Obligation and such default shall continue unremedied for

a period of three (3) days (including one Business Day) after such amount was

due.

(b)           Breach of Warranty.  Any representation or warranty of any

Obligor made or deemed to be made in any Loan Document (including any

certificates delivered pursuant to Article V) is or shall be incorrect

(i) in any respect when made or deemed to have been made (with respect to

representations and warranties qualified by materiality or a Material Adverse

Effect) or (ii) in any material respect when made or deemed to have been made

(with respect to all other representations or warranties).

(c)           Non-Performance of Certain

Covenants and Obligations.  The

Borrower shall default in the due performance or observance of any of its

obligations under Section 7.1, Section 7.8, Section 7.9 or

Article VIII or any Obligor shall default in the due performance or

observance of its obligations under (i) Articles III or IV of the

Subsidiary Guaranty, (ii) Articles III or IV of a Security

Agreement, or (iii) Articles III or IV of a Pledge Agreement.

(d)           Non-Performance of Other Covenants

and Obligations.  Any Obligor shall

default in the due performance and observance of any other agreement contained

herein or in any other Loan Document executed by it, and such default shall

continue unremedied for a period of thirty (30) days after notice thereof shall

have been given to the Borrower by the Lender.

(e)           Default on Other Indebtedness.  A default shall occur in the payment when

due (subject to any applicable grace period), whether by acceleration or

otherwise, of any Indebtedness (including for purposes of this Section

9.1(e), all items which, in accordance with GAAP, would be included as

liabilities on the liability side of the balance sheet of a Person as of the

date at which Indebtedness is to be determined, but excluding Indebtedness

described in Section 9.1(a)) of the Borrower or any of its Subsidiaries

or any other Obligor having a principal amount, individually or in the

aggregate, in excess of $500,000, or a default shall occur in the performance

or observance of any obligation or condition with respect to such Indebtedness if

 

58

 

the effect of such default is to accelerate the

maturity of any such Indebtedness or such default shall continue unremedied for

any applicable period of time sufficient to permit the holder or holders of

such Indebtedness, or any trustee or agent for such holders, to cause or

declare such Indebtedness to become due and payable or to require such

Indebtedness to be prepaid, redeemed, purchased or defeased, or require an

offer to purchase or defease such Indebtedness to be made, prior to its expressed

maturity.

(f)            Judgments.  Any judgment or order for the payment of

money in excess of $250,000 (exclusive of any amounts fully covered by

insurance (less any applicable deductible) and as to which the insurer has

acknowledged its responsibility to cover such judgment or order) shall be

rendered against the Borrower or any of its Subsidiaries or any other Obligor

and such judgment shall not have been vacated or discharged or stayed or bonded

pending appeal within thirty (30) days after the entry thereof.

(g)           Pension Plans.  Any of the following events shall occur with

respect to any Pension Plan:

(i)            the institution of any steps by the

Borrower, any member of its Controlled Group, if any, or any other Person to

terminate a Pension Plan if, as a result of such termination, the Borrower or

any such member could be required to make a contribution to such Pension Plan,

or could reasonably expect to incur a liability or obligation to such Pension

Plan, in excess of $250,000; or

(ii)           a contribution failure occurs with

respect to any Pension Plan sufficient to give rise to a Lien under section

302(f) of ERISA.

(h)           Change in Control.  Any Change in Control shall occur, and

Lender determines, in its sole and absolute discretion, that such Change in

Control shall constitute an Event of Default.

(i)            Bankruptcy, Insolvency, etc.  The Borrower or any of its Subsidiaries

shall:

(i)            become insolvent or generally fail

to pay, or admit in writing its inability or unwillingness generally to pay,

debts as they become due;

(ii)           apply for, consent to, or acquiesce

in the appointment of a trustee, receiver, sequestrator or other custodian for

any substantial part of the property of any thereof, or make a general

assignment for the benefit of creditors;

(iii)          in the absence of such application,

consent or acquiescence, permit or suffer to exist the appointment of a

trustee, receiver, sequestrator or other custodian for a substantial part of

the property of any thereof, and such trustee, receiver, sequestrator or other

custodian shall not be discharged within sixty (60) days; provided, that the

Borrower, each Subsidiary and each other Obligor hereby expressly authorizes

the Lender to appear in any court conducting any relevant proceeding during

such sixty (60) day period to preserve, protect and defend its rights under the

Loan Documents;

 

59

 

(iv)          permit or suffer to exist the

commencement of any bankruptcy, reorganization, debt arrangement or other case

or proceeding under any bankruptcy or insolvency law or any dissolution, winding

up or liquidation proceeding, in respect thereof, and, if any such case or

proceeding is not commenced by the Borrower, any Subsidiary or any Obligor,

such case or proceeding shall be consented to or acquiesced in by the Borrower,

such Subsidiary or such Obligor, as the case may be, or shall result in the

entry of an order for relief or shall remain for sixty (60) days undismissed;

provided, that the Borrower, each Subsidiary and each Obligor hereby expressly

authorizes the Lender to appear in any court conducting any such case or

proceeding during such sixty (60) day period to preserve, protect and defend

its rights under the Loan Documents; or

(v)           take any action authorizing, or in

furtherance of, any of the foregoing.

(j)            Impairment of Security, etc.  Any Loan Document or any Lien granted

thereunder shall (except in accordance with its terms), in whole or in part,

terminate, cease to be effective or cease to be the legally valid, binding and

enforceable obligation of any Obligor party thereto; any Obligor or any other

party shall, directly or indirectly, contest in any manner such effectiveness,

validity, binding nature or enforceability; or, except as permitted under any

Loan Document, any Lien securing any Obligation shall, in whole or in part,

cease to be a perfected first priority Lien (except due solely to any action or

inaction by the Lender).

(k)           Failure of Subordination.  Unless otherwise waived or consented to by

the Lender in writing, the subordination provisions relating to any

Subordinated Debt (the “Subordination

Provisions”) shall fail to be enforceable by the Lender in

accordance with the terms thereof, or the monetary Obligations shall fail to

constitute “Senior Indebtedness” or “Secured Debt” (or similar term) referring

to the Obligations; or the Borrower or any of its Subsidiaries shall, directly

or indirectly, disavow or contest in any manner (i) the effectiveness, validity

or enforceability of any of the Subordination Provisions, (ii) that the

Subordination Provisions exist for the benefit of the Lender or (iii) that all

payments of principal of or premium and interest on the Subordinated Debt, or

realized from the liquidation of any property of any Obligor, shall be subject

to any of such Subordination Provisions.

Section 9.2             Action if Bankruptcy.  If any Event of Default described in Section

9.1(i) shall occur, the Revolving Loan Commitment (if not theretofore

terminated) shall automatically terminate and the outstanding principal amount

of all outstanding Revolving Loans and all other Obligations shall

automatically be and become immediately due and payable, without presentment,

protest, notice or demand (all of which are hereby expressly waived by the

Borrower).

Section 9.3             Action if Other Event of Default.  If any Event of Default (other than any

Event of Default described in Section 9.1(i)) shall occur for any

reason, whether voluntary or involuntary, and be continuing, the Lender may, at

its option, by notice to the Borrower declare all or any portion of the

outstanding principal amount of the Revolving Loans and other Obligations to be

due and payable and/or the Revolving Loan Commitment (if not theretofore

terminated) to be terminated, whereupon the full unpaid amount of such

Revolving Loans and

 

60

 

other Obligations which shall be so declared due and

payable shall be and become immediately due and payable, without further

presentment, protest, notice or demand (all of which are hereby expressly

waived by the Borrower).

ARTICLE X

MISCELLANEOUS PROVISIONS

Section 10.1           Waivers, Amendments, etc.  The provisions of this Agreement and of each

other Loan Document may from time to time be amended, modified or waived, if

such amendment, modification or waiver is in writing and consented to by the

Borrower and the Lender.

No failure or delay on

the part of the Lender in exercising any power or right under this Agreement or

any other Loan Document shall operate as a waiver thereof, nor shall any single

or partial exercise of any such power or right preclude any other or further

exercise thereof or the exercise of any other power or right.  No notice to or demand on the Borrower or

any other Obligor in any case shall entitle it to any notice or demand in

similar or other circumstances.  No

waiver or approval by the Lender under this Agreement or any other Loan

Document shall, except as may be otherwise stated in such waiver or approval,

be applicable to subsequent transactions. 

No waiver or approval hereunder shall require any similar or dissimilar

waiver or approval thereafter to be granted hereunder.

Section 10.2           Notices. 

All notices and other communications provided to any party hereto under

this Agreement or any other Loan Document shall be in writing or by facsimile

and addressed, delivered or transmitted to such party at its address or facsimile

number set forth below its signature hereto or at such other address or

facsimile number as may be designated by such party in a notice to the other

party.  Any notice, if mailed and

properly addressed with postage prepaid or if properly addressed and sent by

pre-paid courier service, shall be deemed given when received; any notice, if

transmitted by facsimile, shall be deemed given when the confirmation of

transmission thereof is received by the transmitter.

Section 10.3           Payment of Costs and Expenses.  The Borrower agrees to pay on demand all

reasonable expenses of the Lender 

(including the reasonable fees, costs and out-of-pocket expenses of

counsel to the Lender) in connection with:

(a)           (i) any due diligence investigation

of the Borrower and its Subsidiaries and (ii) the negotiation, preparation,

execution and delivery and administration of this Agreement and of each other

Loan Document, including schedules and exhibits, and any amendments, waivers,

consents, supplements or other modifications to this Agreement or any other

Loan Document as may from time to time hereafter be required, whether or not

the transactions contemplated hereby or thereby are consummated;

(b)           the filing, recording, refiling or

rerecording of any Loan Document and/or any Uniform Commercial Code financing

statements relating thereto and all amendments, supplements, amendments and

restatements and other modifications to any thereof and any and

 

61

 

all other documents or instruments of further

assurance required to be filed or recorded or refiled or rerecorded by the

terms hereof or the terms of any Loan Document; and

(c)           the preparation and review of the

form of any document or instrument relevant to this Agreement or any other Loan

Document.

The Borrower further

agrees to pay, and to save the Lender harmless from all liability for, any

stamp or other taxes which may be payable by it in connection with the

execution or delivery of this Agreement, the Credit Extensions hereunder, or

the issuance of the Revolving Note, or any other Loan Documents.  The Borrower also agrees to reimburse the

Lender upon demand for all reasonable out-of-pocket expenses (including

reasonable attorneys’ fees and legal expenses of counsel to the Lender) incurred

by the Lender in connection with (y) the negotiation of any restructuring or

“work-out” with the Borrower, whether or not consummated, of any Obligations

and (z) the enforcement of any Obligations.

Section 10.4           Indemnification.  In consideration of the execution and delivery of this Agreement

by the Lender, the Borrower hereby indemnifies, exonerates and holds Lender and

its officers, directors, employees and agents (collectively, the “Indemnified Parties”)

free and harmless from and against any and all actions, causes of action,

suits, losses, costs, liabilities and damages, and expenses incurred in

connection therewith (irrespective of whether any such Indemnified Party is a

party to the action for which indemnification hereunder is sought), including

reasonable attorneys’ fees and disbursements, whether incurred in connection

with actions between or among the parties hereto or the parties hereto and

third parties (collectively, the “Indemnified Liabilities”), incurred by the

Indemnified Parties or any of them as a result of, or arising out of, or

relating to:

(a)           any transaction financed or to be

financed in whole or in part, directly or indirectly, with the proceeds of any

Credit Extension, including all Indemnified Liabilities arising in connection

with transactions contemplated hereby or by any other Loan Document or

transactions which are financed with proceeds of any Revolving Loan;

(b)           the entering into and performance of

this Agreement and any other Loan Document by any of the Indemnified Parties

(including any action brought by or on behalf of the Borrower as the result of

any determination by the Lender pursuant to Article V not to fund any

Credit Extension);

(c)           any Indemnified Liabilities (as

defined in Lender’s Credit Agreement) which Lender is required to pay under

Lender’s Credit Agreement and that arise out of or relate to the Lender’s

borrowings under the Lender’s Credit Agreement that are used to finance any

Revolving Loans;

(d)           any investigation, litigation or

proceeding related to any acquisition or proposed acquisition by the Borrower

or any of its Subsidiaries of all or any portion of the stock or assets of any

Person, whether or not an Indemnified Party is party thereto;

(e)           any investigation, litigation or

proceeding related to any environmental cleanup, audit, compliance or other

matter relating to Environmental Laws or the protection of

 

62

 

the environment or the Release by the Borrower or any

of its Subsidiaries of any Hazardous Material;

(f)            the presence on or under, or the

Release or threatened Release from, any real property owned or operated by the

Borrower or any Subsidiary thereof of any Hazardous Material (including any

losses, liabilities, damages, injuries, costs, expenses or claims asserted or

arising under any Environmental Law), regardless of whether caused by, or

within the control of, the Borrower or such Subsidiary; or

(g)           Lender’s Environmental Liability (the

indemnification herein shall survive repayment of the Obligations and any

transfer of the property of the Borrower or any of its Subsidiaries by foreclosure

or by a deed in lieu of foreclosure for any Lender’s Environmental Liability,

regardless of whether caused by, or within the control of, the Borrower or such

Subsidiary);

except for any

such Indemnified Liabilities arising for the account of a particular

Indemnified Party to the extent caused by or resulting from the relevant

Indemnified Party’s gross negligence or willful misconduct.  The Borrower and its successors and assigns

hereby waive, release and agree not to make any claim or bring any cost recovery

action against, the Lender under CERCLA or any state equivalent, or any similar

law now existing or hereafter enacted, except to the extent the Lender is

liable due to its ownership, possession, or operation of property.  It is expressly understood and agreed that

to the extent that any of such Persons is strictly liable under any

Environmental Laws, the Borrower’s obligation to such Person under this

indemnity shall likewise be without regard to fault on the part of the Borrower

with respect to the violation or condition which results in liability of such

Person.  If and to the extent that the

foregoing undertaking may be unenforceable for any reason, the Borrower hereby

agrees to make the maximum contribution to the payment and satisfaction of each

of the Indemnified Liabilities which is permissible under applicable law.

Section 10.5           Survival. 

The obligations of the Borrower under Sections  4.1, 4.2,

10.3 and 10.4 shall survive any termination of this Agreement,

the payment in full of all the Obligations and the termination of the Revolving

Loan Commitment.  The representations

and warranties made by the Borrower and each other Obligor in this Agreement

and in each other Loan Document shall survive the execution and delivery of

this Agreement and each such other Loan Document.

Section 10.6           Severability.  Any provision of this Agreement or any other Loan Document which

is prohibited or unenforceable in any jurisdiction shall, as to such provision

and such jurisdiction, be ineffective to the extent of such prohibition or

unenforceability without invalidating the remaining provisions of this

Agreement or such Loan Document or affecting the validity or enforceability of

such provision in any other jurisdiction.

Section 10.7           Headings. 

The various headings of this Agreement and of each other Loan Document

are inserted for convenience only and shall not affect the meaning or

interpretation of this Agreement or such other Loan Document or any provisions

hereof or thereof.

 

63

 

Section 10.8           Execution in Counterparts, Effectiveness, etc.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be an original and

all of which shall constitute together but one and the same agreement.  This Agreement shall become effective when

counterparts hereof executed on behalf of the Borrower and the Lender  shall have been received by the Lender.

Section 10.9           Governing Law; Entire Agreement.  THIS AGREEMENT, THE REVOLVING NOTE AND EACH

OTHER LOAN DOCUMENT (INCLUDING PROVISIONS WITH RESPECT TO INTEREST, LOAN

CHARGES AND COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER

AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, EXCEPT TO THE

EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR MORTGAGE HEREUNDER,

OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY

THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.  This Agreement, the Revolving Note and the

other Loan Documents constitute the entire understanding among the parties

hereto with respect to the subject matter hereof and thereof and supersede any

prior agreements, written or oral, with respect thereto.

Section 10.10         Successors and Assigns.  This Agreement shall be binding upon and

shall inure to the benefit of the parties hereto and their respective

successors and assigns; provided, however:

(a)           that the Borrower may not assign or

transfer its rights or obligations hereunder without the prior written consent

of the Lender;

(b)           the Lender may transfer, sell or

assign its rights hereunder to:

(i)            to one or more commercial banks,

other financial institutions or special purpose investment funds which are

organized for the specific purpose of making, acquiring, participating in or

investing in loans of the type made pursuant to this Agreement;

(ii)           to any of its Affiliates.

Section 10.11         Confidentiality.  The Lender shall hold all non-public information (which has been

identified as such by the Borrower or any of its Subsidiaries) provided to it

by the Borrower or any of its Subsidiaries pursuant to or in connection with

this Agreement in accordance with its customary procedures for handling

confidential information of this nature, but may make disclosure to any of its

examiners, regulators, Affiliates, outside auditors, counsel and other

professional advisors in connection with this Agreement or any other Loan

Document or as reasonably required by any potential bona fide transferee or

assignee, or in connection with the exercise of remedies under a Loan Document,

or to any nationally recognized rating agency that requires access to

information about the Lender’s investment portfolio in connection with ratings

issued with respect to the Lender, or as requested by any governmental agency

or representative thereof or pursuant to legal process; provided, however,

that unless specifically prohibited by applicable law or court order, the

Lender shall use reasonable efforts to promptly

 

64

 

notify the Borrower of any request by any governmental

agency or representative thereof (other than any such request in connection

with an examination of the financial condition of the Lender by such

governmental agency) for disclosure of any such non-public information and,

where practicable, prior to disclosure of such information; provided further,

however, that the Lender shall not be liable to the Borrower if any such

Person fails to provide such notice; prior to any such disclosure pursuant to

this Section 10.11, the Lender shall require any such bona fide

transferee and assignee receiving a disclosure of non-public information to

agree, for the benefit of the Borrower and its Subsidiaries, in writing to be

bound by this Section 10.11; and to require such Person to require any

other Person to whom such Person discloses such non-public information to be

similarly bound by this Section 10.11; and except as may be required by

an order of a court of competent jurisdiction or other applicable law, and to

the extent set forth therein, the Lender shall not be obligated or required to

return any materials furnished by the Borrower or any of its Subsidiaries.

Section 10.12         Forum Selection and Consent to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT

OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR

ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)

OR ACTIONS OF THE LENDER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH

SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF

CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT

AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER’S

OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER

PROPERTY MAY BE FOUND.  THE BORROWER

IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE

PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA AT

THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2.  THE BORROWER HEREBY EXPRESSLY AND

IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH

IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION

BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH

LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY

IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER

THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF

EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER

HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY

IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN

DOCUMENTS.

Section 10.13         Waiver of Jury Trial.  THE LENDER AND THE BORROWER HEREBY

KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED

BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION

BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT

OR ANY OTHER LOAN

 

65

 

DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,

STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER

IN CONNECTION HEREWITH OR THEREWITH. 

THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND

SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH

OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A

MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT AND EACH SUCH

OTHER LOAN DOCUMENT.

 

66

 

IN WITNESS WHEREOF, the

parties hereto have caused this Agreement to be executed by their respective

officers thereunto duly authorized as of the day and year first above written.

	

   

  	

  SUREBEAM CORPORATION

  
	

   

  	

  By:

  	

  /s/ L. A. OBERKFELL

  
	

   

  	

   

  	

  L.

  A. Oberkfell

  President 

  Chief Executive Office

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  9276

  Scranton Road, Suite 600

  San Diego, California  92121

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  THE TITAN CORPORATION

  
	

   

  	

  By:

  	

  /s/ MARK

  W. SOPP

  
	

   

  	

   

  	

  Mark

  W. Sopp

  Senior Vice President 

  Chief Financial Officer

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  3033

  Science Park Road

  San Diego, CA  92121

  

 

 

67

 

EXHIBITS

 

 

Exhibit A          Annual

Operating Plan

 

Exhibit B          Borrower

Pledge Agreement

 

Exhibit C          Borrower

Security Agreement

 

Exhibit D          Borrowing

Request

 

Exhibit E           Collateral

Assignment or Rights under License Agreement

 

Exhibit F           Compliance

Certificate

 

Exhibit G          Copyright

Security Agreement

 

Exhibit H          Issuance

Request

 

Exhibit I            Revolving

Note

 

Exhibit J           Subsidiary

Guaranty

 

Exhibit K          Subsidiary

Pledge Agreement

 

Exhibit L           Subsidiary

Security Agreement

 

 

 

SCHEDULE  I

 

 

DISCLOSURE SCHEDULE TO CREDIT AGREEMENT

 

 

ITEM 2.7  Lender Guaranties

 

	

  Description

  
	

   

  
	

  Chicago

  Facility Lease dated November 17, 2000 with Bradley Associates Limited

  Partnership

  
	

  Los

  Angeles Facility Lease dated March 26, 2002 with XH Partners, L.P.

  
	

  Iowa

  Dept. of Economic Development

  
	

   

  
	

   

  

 

 

ITEM 2.9  Leases entered into by the Lender on behalf

of the Borrower

 

	

  Description

  
	

   

  
	

  Lease dated August 22, 2000

  with B/G Management Co for the lease of certain property in Dublin, California

  
	

  Lease dated August 15, 2000

  with Czapla DBA Zendex for the lease of certain property in Dublin,

  California

  
	

  Lease dated February 1, 2001

  with Cloverleaf Cold Storage Co for the lease of certain property in Sioux

  City, Iowa

  
	

  Lease dated May 15, 2000 with

  Embassy Tower Limited Partnership for the lease of certain property in Omaha,

  Nebraska

  
	

  Lease dated January 1, 2001

  with Cooperative Real Estate Investment Company for the lease of certain

  property

  In Saudi Arabia

  
	

   

  

 

 

ITEM 6.3   Governmental Approval, Regulation.

 

N/A

 

ITEM 6.7  Litigation.

 

Corporate

Brands, Inc. — Seeking $185,408.44.

 

ITEM

6.8  Existing Subsidiaries*.

 

1.                             SB OperatingCo, Inc. (wholly-owned)

                                                which

was previously named SureBeam Corporation

                                                and

before that was named Titan Scan Corp.

                                                and

before that was named Titan Purification, Inc.

 

                                                This

entity has been or will be converted to a Delaware limited

liability company, SB

OperatingCo, LLC.

 

 

1

 

 

                2.                             Titan SureBeam

Brazil Inc.

 

                3.                             SureBeam Brasil

Ltda

 

*There may be other Subsidiaries, the Borrower agrees to update this

Item 6.8 upon confirming information regarding other Subsidiaries.

 

ITEM

6.11  Employee Benefit Plans.

 

N/A

 

ITEM

6.12  Environmental Matters.

 

N/A

 

ITEM

8.2 Outstanding Indebtedness.

 

None, except (i) in favor of Lender, (ii) accounts payable that occur

in the ordinary course of business, (iii) endorser liability arising in the

ordinary course of business, and (iv) as disclosed in the financial statements

as of March 31, 2002 filed with the SEC and furnished to Lender.

 

ITEM 8.3  Liens.

 

Crown Credit Company—Lease for forklift equipment

 

Certain vendors may have purported to retain purchase money security

interests pursuant to their standard purchase agreements or invoices in the

ordinary course of business, but there have been no UCC Financing Statements

filed.

 

ITEM 8.5  Investments.

 

Investments in Subsidiaries to the Closing Date.

Investments as disclosed in the financial statements as of March 31,

2002 filed with the SEC and furnished to Lender.

Investments in Hawaii Pride LLC.—loan of approximately $5,400,000

Investments in SureBeam Middle East—joint venture wherein the Borrower

has invested approximately $250,000

 

ITEM 8.8  Options and Warrants.

 

None.

 

2

 

 

 

EXHIBIT A

 

 

SureBeam Corporation

FY 2002 AOP

 

	

   

  	

   

  	

  Q1

  	

   

  	

  Q2

  	

   

  	

  Q3

  	

   

  	

  Q4

  	

   

  	

  Total

  	

   

  
	

  Capital Expenditures

  	

   

  	

  9,325

  	

   

  	

  9,625

  	

   

  	

  6,900

  	

   

  	

  11,600

  	

   

  	

  37,450

  	

   

  

 

 

SureBeam Corporation

FY 2002 Adjusted AOP

 

	

   

  	

   

  	

  Q1

  	

   

  	

  Q2

  	

   

  	

  Q3

  	

   

  	

  Q4

  	

   

  	

  Total

  	

   

  
	

  Revenue

  	

   

  	

  6,000

  	

   

  	

  3,950

  	

   

  	

  3,400

  	

   

  	

  3,500

  	

   

  	

  16,850

  	

   

  
	

  Operating Expenses (excluding amortization & depreciation)

  	

   

  	

  7,528

  	

   

  	

  4,688

  	

   

  	

  3,775

  	

   

  	

  3,137

  	

   

  	

  19,128

  	

   

  
	

  Capital Expenditures

  	

   

  	

  9,325

  	

   

  	

  5,900

  	

   

  	

  3,000

  	

   

  	

  1,000

  	

   

  	

  19,225

  	

   

  

 

 

 

 

SureBeam Corporation

2002 AOP

 

 

 

	

   

  	

   

  	

  FY 2002

  	

   

  
	

   

  	

   

  	

  FY02 Q1

  Actual

  	

   

  	

  FY02 Q2

  Actual

  	

   

  	

  FY02 Q3

  Forecast

  	

   

  	

  FY02 Q4

  Forecast

  	

   

  	

  FY02 Total

  Forecast

  	

   

  
	

  Revenue

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Processing

  	

   

  	

  272

  	

   

  	

  284

  	

   

  	

  400

  	

   

  	

  750

  	

   

  	

  1,706

  	

   

  
	

  System Sales

  	

   

  	

  2,242

  	

   

  	

  2,557

  	

   

  	

  4,392

  	

   

  	

  8,684

  	

   

  	

  17,875

  	

   

  
	

  Affiliate

  	

   

  	

  4,502

  	

   

  	

  7,944

  	

   

  	

  3,360

  	

   

  	

  3,030

  	

   

  	

  18,836

  	

   

  
	

  Total

  	

   

  	

  7,016

  	

   

  	

  10,785

  	

   

  	

  8,152

  	

   

  	

  12,464

  	

   

  	

  38,417

  	

   

  
	

  COS

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Processing

  	

   

  	

  1,161

  	

   

  	

  1,535

  	

   

  	

  1,500

  	

   

  	

  1,930

  	

   

  	

  6,126

  	

   

  
	

  System Sales

  	

   

  	

  1,856

  	

   

  	

  1,853

  	

   

  	

  2,689

  	

   

  	

  5,142

  	

   

  	

  11,540

  	

   

  
	

  Affiliate

  	

   

  	

  2,831

  	

   

  	

  3,631

  	

   

  	

  2,800

  	

   

  	

  2,525

  	

   

  	

  11,787

  	

   

  
	

  Total

  	

   

  	

  5,848

  	

   

  	

  7,019

  	

   

  	

  6,989

  	

   

  	

  9,597

  	

   

  	

  29,453

  	

   

  
	

  Gross Margin

  	

   

  	

  1,168

  	

   

  	

  3,766

  	

   

  	

  1,163

  	

   

  	

  2,867

  	

   

  	

  8,964

  	

   

  
	

   

  	

   

  	

  17

  	

  %

  	

  35

  	

  %

  	

  14

  	

  %

  	

  23

  	

  %

  	

  23

  	

  %

  
	

  Operating Expenses

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Sales and Marketing

  	

   

  	

  1,778

  	

   

  	

  3,096

  	

   

  	

  3,400

  	

   

  	

  2,840

  	

   

  	

  11,114

  	

   

  
	

  Administration

  	

   

  	

  2,463

  	

   

  	

  2,538

  	

   

  	

  2,275

  	

   

  	

  2,397

  	

   

  	

  9,673

  	

   

  
	

  Total SG&A

  	

   

  	

  4,241

  	

   

  	

  5,634

  	

   

  	

  5,675

  	

   

  	

  5,237

  	

   

  	

  20,787

  	

   

  
	

  R&D

  	

   

  	

  315

  	

   

  	

  181

  	

   

  	

  500

  	

   

  	

  600

  	

   

  	

  1,596

  	

   

  
	

  Corp Allocation

  	

   

  	

  1,100

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  1,100

  	

   

  
	

  Amortization

  	

   

  	

  812

  	

   

  	

  229

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  1,317

  	

   

  
	

  Deferred Comp.

  	

   

  	

  3,800

  	

   

  	

  3,800

  	

   

  	

  6,412

  	

   

  	

  2,555

  	

   

  	

  16,567

  	

   

  
	

  Total Operating Exp

  	

   

  	

  10,268

  	

   

  	

  9,844

  	

   

  	

  12,725

  	

   

  	

  8,530

  	

   

  	

  41,367

  	

   

  
	

  Operating Income

  	

   

  	

  (9,100

  	

  )

  	

  (6,078

  	

  )

  	

  (11,562

  	

  )

  	

  (5,663

  	

  )

  	

  (32,403

  	

  )

  
	

  Other Income

  	

   

  	

  (1,007

  	

  )

  	

  (1,041

  	

  )

  	

  (1,000

  	

  )

  	

  (1,000

  	

  )

  	

  (4,048

  	

  )

  
	

  Interest Net

  	

   

  	

  886

  	

   

  	

  65

  	

   

  	

  425

  	

   

  	

  625

  	

   

  	

  2,001

  	

   

  
	

  Income Before Taxes

  	

   

  	

  (8,979

  	

  )

  	

  (5,102

  	

  )

  	

  (10,987

  	

  )

  	

  (5,288

  	

  )

  	

  (30,356

  	

  )

  
	

  Taxes (0%)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  
	

  Net Income

  	

   

  	

  (8,979

  	

  )

  	

  (5,102

  	

  )

  	

  (10,987

  	

  )

  	

  (5,288

  	

  )

  	

  (30,356

  	

  )

  
	

  EPS

  	

   

  	

  (0.14

  	

  )

  	

  (0.08

  	

  )

  	

  (0.16

  	

  )

  	

  (0.08

  	

  )

  	

  (0.46

  	

  )

  
	

  Shares

  	

   

  	

  62,794

  	

   

  	

  66,877

  	

   

  	

  67,500

  	

   

  	

  69,500

  	

   

  	

  65,900

  	

   

  
	

  EBITDA

  	

   

  	

  (3,894

  	

  )

  	

  (1,254

  	

  )

  	

  (4,012

  	

  )

  	

  (2,070

  	

  )

  	

  (11,230

  	

  )

  
	

  EBITDA RECONCILIATION

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Deferred Comp

  	

   

  	

  3,800

  	

   

  	

  3,800

  	

   

  	

  6,412

  	

   

  	

  2,555

  	

   

  	

  16,567

  	

   

  
	

  Amortization

  	

   

  	

  812

  	

   

  	

  357

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  1,445

  	

   

  
	

  Depreciation

  	

   

  	

  594

  	

   

  	

  667

  	

   

  	

  1,000

  	

   

  	

  900

  	

   

  	

  3,161

  	

   

  
	

   

  	

   

  	

  5,206

  	

   

  	

  4,824

  	

   

  	

  7,550

  	

   

  	

  3,593

  	

   

  	

  21,173

  	

   

  

 

 

 

 

SureBeam Corporation

2003 AOP

 

	

   

  	

   

  	

  FY 2003

  	

   

  
	

   

  	

   

  	

  FY03 Q1

  Forecast

  	

   

  	

  FY03 Q2

  Forecast

  	

   

  	

  FY03 Q3

  Forecast

  	

   

  	

  FY03 Q4

  Forecast

  	

   

  	

  FY03 Total

  Forecast

  	

   

  
	

  Revenue

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Processing

  	

   

  	

  2,175

  	

   

  	

  3,262

  	

   

  	

  4,894

  	

   

  	

  7,341

  	

   

  	

  17,672

  	

   

  
	

  System Sales

  	

   

  	

  7,384

  	

   

  	

  10,500

  	

   

  	

  13,484

  	

   

  	

  15,659

  	

   

  	

  47,027

  	

   

  
	

  Affiliate

  	

   

  	

  4,441

  	

   

  	

  3,238

  	

   

  	

  4,622

  	

   

  	

  3,000

  	

   

  	

  15,301

  	

   

  
	

  Total

  	

   

  	

  14,000

  	

   

  	

  17,000

  	

   

  	

  23,000

  	

   

  	

  26,000

  	

   

  	

  80,000

  	

   

  
	

  COS

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Processing

  	

   

  	

  2,220

  	

   

  	

  2,500

  	

   

  	

  2,900

  	

   

  	

  3,300

  	

   

  	

  10,900

  	

   

  
	

  System Sales

  	

   

  	

  4,530

  	

   

  	

  6,400

  	

   

  	

  8,190

  	

   

  	

  9,495

  	

   

  	

  28,616

  	

   

  
	

  Affiliate

  	

   

  	

  3,701

  	

   

  	

  2,698

  	

   

  	

  3,852

  	

   

  	

  2,500

  	

   

  	

  12,751

  	

   

  
	

  Total

  	

   

  	

  10,431

  	

   

  	

  11,598

  	

   

  	

  14,942

  	

   

  	

  15,295

  	

   

  	

  52,267

  	

   

  
	

  Gross Margin

  	

   

  	

  3,569

  	

   

  	

  5,402

  	

   

  	

  8,058

  	

   

  	

  10,705

  	

   

  	

  27,733

  	

   

  
	

   

  	

   

  	

  25

  	

  %

  	

  32

  	

  %

  	

  35

  	

  %

  	

  41

  	

  %

  	

  35

  	

  %

  
	

  Operating Expenses

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Sales and Marketing

  	

   

  	

  4,500

  	

   

  	

  4,500

  	

   

  	

  4,000

  	

   

  	

  4,000

  	

   

  	

  17,000

  	

   

  
	

  Administration

  	

   

  	

  2,500

  	

   

  	

  2,600

  	

   

  	

  2,700

  	

   

  	

  2,800

  	

   

  	

  10,600

  	

   

  
	

  Total SG&A

  	

   

  	

  7,000

  	

   

  	

  7,100

  	

   

  	

  6,700

  	

   

  	

  6,800

  	

   

  	

  27,600

  	

   

  
	

  R&D

  	

   

  	

  400

  	

   

  	

  400

  	

   

  	

  400

  	

   

  	

  400

  	

   

  	

  1,600

  	

   

  
	

  Corp Allocation

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  
	

  Amortization

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  552

  	

   

  
	

  Deferred Comp.

  	

   

  	

  2,555

  	

   

  	

  2,555

  	

   

  	

  2,468

  	

   

  	

  1,320

  	

   

  	

  8,898

  	

   

  
	

  Total Operating Exp

  	

   

  	

  10,093

  	

   

  	

  10,193

  	

   

  	

  9,706

  	

   

  	

  8,658

  	

   

  	

  38,650

  	

   

  
	

  Operating Income

  	

   

  	

  (6,524

  	

  )

  	

  (4,791

  	

  )

  	

  (1,648

  	

  )

  	

  2,047

  	

   

  	

  (10,917

  	

  )

  
	

  Other Income

  	

   

  	

  (900

  	

  )

  	

  (900

  	

  )

  	

  (900

  	

  )

  	

  —

  	

   

  	

  (2,700

  	

  )

  
	

  Interest Net

  	

   

  	

  625

  	

   

  	

  625

  	

   

  	

  625

  	

   

  	

  625

  	

   

  	

  2,500

  	

   

  
	

  Income Before Taxes

  	

   

  	

  (6,249

  	

  )

  	

  (4,516

  	

  )

  	

  (1,373

  	

  )

  	

  1,422

  	

   

  	

  (10,717

  	

  )

  
	

  Taxes (0%)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  
	

  Net Income

  	

   

  	

  (6,249

  	

  )

  	

  (4,516

  	

  )

  	

  (1,373

  	

  )

  	

  1,422

  	

   

  	

  (10,717

  	

  )

  
	

  EPS

  	

   

  	

  (0.09

  	

  ) 

  	

  (0.06

  	

  )

  	

  (0.02

  	

  )

  	

  (0.02

  	

  )

  	

  (0.15

  	

  )

  
	

  Shares

  	

   

  	

  70,000

  	

   

  	

  70,000

  	

   

  	

  70,000

  	

   

  	

  70,000

  	

   

  	

  70,000

  	

   

  
	

  EBITDA

  	

   

  	

  (2,269

  	

  )

  	

  505

  	

   

  	

  4,082

  	

   

  	

  7,670

  	

   

  	

  9,987

  	

   

  
	

  EBITDA RECONCILIATION

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Deferred Comp

  	

   

  	

  2,555

  	

   

  	

  2,555

  	

   

  	

  2,468

  	

   

  	

  1,320

  	

   

  	

  8,898

  	

   

  
	

  Amortization

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  138

  	

   

  	

  552

  	

   

  
	

  Depreciation

  	

   

  	

  1,562

  	

   

  	

  2,603

  	

   

  	

  3,124

  	

   

  	

  4,165

  	

   

  	

  11,454

  	

   

  
	

   

  	

   

  	

  4,255

  	

   

  	

  5,296

  	

   

  	

  5,730

  	

   

  	

  5,623

  	

   

  	

  20,904

  	

   

  

 

 

 

 

SureBeam Corporation

2002 Adjusted AOP

 

 

	

   

  	

   

  	

  FY 2002

  	

   

  
	

   

  	

   

  	

  FY02 Q1

  Forecast

  	

   

  	

  FY02 Q2

  Forecast

  	

   

  	

  FY02 Q3

  Forecast

  	

   

  	

  FY02 Q4

  Forecast

  	

   

  	

  FY02 Total

  Forecast

  	

   

  
	

  Revenue

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total

  	

   

  	

  6,000

  	

   

  	

  3,950

  	

   

  	

  3,400

  	

   

  	

  3,500

  	

   

  	

  16,850

  	

   

  
	

  COS

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total

  	

   

  	

  4,800

  	

   

  	

  3,606

  	

   

  	

  3,160

  	

   

  	

  3,410

  	

   

  	

  14,976

  	

   

  
	

  Gross Margin

  	

   

  	

  1,200

  	

   

  	

  344

  	

   

  	

  240

  	

   

  	

  90

  	

   

  	

  1,874

  	

   

  
	

   

  	

   

  	

  20

  	

  %

  	

  9

  	

  %

  	

  7

  	

  %

  	

  3

  	

  %

  	

  11

  	

  %

  
	

  Operating Expenses

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Sales and Marketing

  	

   

  	

  3,150

  	

   

  	

  1,810

  	

   

  	

  1,900

  	

   

  	

  1,340

  	

   

  	

  8,200

  	

   

  
	

  Administration

  	

   

  	

  3,000

  	

   

  	

  2,000

  	

   

  	

  1,275

  	

   

  	

  1,297

  	

   

  	

  7,572

  	

   

  
	

  Total SG&A

  	

   

  	

  6,150

  	

   

  	

  3,810

  	

   

  	

  3,175

  	

   

  	

  2,637

  	

   

  	

  15,772

  	

   

  
	

  R&D

  	

   

  	

  1,000

  	

   

  	

  500

  	

   

  	

  500

  	

   

  	

  400

  	

   

  	

  2,400

  	

   

  
	

  Corp Allocation

  	

   

  	

  478

  	

   

  	

  478

  	

   

  	

  200

  	

   

  	

  200

  	

   

  	

  1,356

  	

   

  
	

  Amortization

  	

   

  	

  772

  	

   

  	

  353

  	

   

  	

  123

  	

   

  	

  123

  	

   

  	

  1,371

  	

   

  
	

  Deferred Comp.

  	

   

  	

  3,800

  	

   

  	

  3,800

  	

   

  	

  3,300

  	

   

  	

  3,300

  	

   

  	

  14,200

  	

   

  
	

  Total Operating Exp

  	

   

  	

  12,200

  	

   

  	

  8,941

  	

   

  	

  7,298

  	

   

  	

  6,660

  	

   

  	

  35,099

  	

   

  
	

  Operating Income

  	

   

  	

  (11,000

  	

  )

  	

  (8,597

  	

  )

  	

  (7,058

  	

  )

  	

  (6,570

  	

  )

  	

  (33,225

  	

  )

  
	

  Other Income

  	

   

  	

  (1,000

  	

  )

  	

  (1,000

  	

  )

  	

  (1,000

  	

  )

  	

  (1,000

  	

  )

  	

  (4,000

  	

  )

  
	

  Interest Net

  	

   

  	

  1,800

  	

   

  	

  200

  	

   

  	

  400

  	

   

  	

  600

  	

   

  	

  3,000

  	

   

  
	

  Income Before Taxes

  	

   

  	

  (11,800

  	

  )

  	

  (7,797

  	

  )

  	

  (6,458

  	

  )

  	

  (6,170

  	

  )

  	

  (32,225

  	

  )

  
	

  Taxes (0%)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  —

  	

   

  
	

  Net Income

  	

   

  	

  (11,800

  	

  )

  	

  (7,797

  	

  )

  	

  (6,458

  	

  )

  	

  (6,170

  	

  )

  	

  (32,225

  	

  )

  
	

  EPS

  	

   

  	

  (0.19

  	

  )

  	

  (0.12

  	

  )

  	

  (0.10

  	

  )

  	

  (0.09

  	

  )

  	

  (0.49

  	

  )

  
	

  Shares

  	

   

  	

  61,400

  	

   

  	

  67,000

  	

   

  	

  67,500

  	

   

  	

  71,500

  	

   

  	

  65,900

  	

   

  
	

  EBITDA

  	

   

  	

  (6,128

  	

  )

  	

  (3,844

  	

  )

  	

  (2,635

  	

  )

  	

  (2,247

  	

  )

  	

  (14,854

  	

  )

  
	

  EBITDA RECONCILIATION

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Deferred Comp

  	

   

  	

  3,800

  	

   

  	

  3,800

  	

   

  	

  3,300

  	

   

  	

  3,300

  	

   

  	

  14,200

  	

   

  
	

  Amortization

  	

   

  	

  772

  	

   

  	

  353

  	

   

  	

  123

  	

   

  	

  123

  	

   

  	

  1,371

  	

   

  
	

  Depreciation

  	

   

  	

  300

  	

   

  	

  600

  	

   

  	

  1,000

  	

   

  	

  900

  	

   

  	

  2,800

  	

   

  
	

   

  	

   

  	

  4,872

  	

   

  	

  4,753

  	

   

  	

  4,423

  	

   

  	

  4,323

  	

   

  	

  18,371

  	

   

  

 

 

 

 

EXHIBIT B

BORROWER PLEDGE AGREEMENT

 

This PLEDGE AGREEMENT (as

amended, restated, supplemented, or otherwise modified from time to time, this

“Pledge Agreement”), dated as of August 2, 2002, is made by SUREBEAM

CORPORATION, a Delaware corporation (the “Pledgor”), in favor of THE

TITAN CORPORATION, a Delaware corporation (the “Pledgee”).

 

W  I  T  N  E  S

S  E  T  H:

WHEREAS, pursuant to a

Senior Secured Credit Agreement, dated as of 

August 2, 2002 (as amended, restated, supplemented, or otherwise

modified from time to time, the “Credit Agreement”), between the Pledgor

and Pledgee, the Pledgee has agreed to make Credit Extensions to the Borrower;

WHEREAS, as a condition

precedent to the making of the Credit Extensions (including the initial Credit

Extension) under the Credit Agreement, the Pledgor is required to execute and

deliver this Pledge Agreement;

WHEREAS, the Pledgor has

duly authorized the execution, delivery and performance of this Pledge Agreement;

and

NOW THEREFORE, for good

and valuable consideration the receipt and sufficiency of which is hereby

acknowledged, and in order to induce the Pledgee to make Credit Extensions

(including the initial Credit Extension) to the Pledgor pursuant to the Credit

Agreement, the Pledgor agrees as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1             Certain Terms.  Capitalized terms used but not otherwise

defined herein shall have the meanings given them in the Credit Agreement.  The following terms (whether or not underscored)

when used in this Pledge Agreement, including its preamble and recitals, shall

have the following meanings (such definitions to be equally applicable to the

singular and plural forms thereof):

“Act” is defined

in Section 6.2.

“Certificated

Interests” means, collectively, all Pledged Shares evidenced by

certificates.

“Collateral” is

defined in Section 2.1.

“Credit Agreement”

is defined in the first recital.

 

1

 

“Distributions”

means all stock dividends, liquidating dividends, shares of stock resulting

from (or in connection with the exercise of) stock splits, reclassifications,

warrants, options, non-cash dividends, mergers, consolidations, and all other

distributions (whether similar or dissimilar to the foregoing) on or with

respect to any Pledged Interests or other shares of Capital Stock constituting

Collateral, but shall not include Dividends.

“Dividends” means

cash dividends and cash distributions with respect to any Pledged Interests

made in the ordinary course of business and not as a liquidating dividend.

“Interest Rate Hedging

Agreements” means interest rate swap agreements, interest rate cap

agreements and interest rate collar agreements, and all other agreements or

arrangements designed to protect against fluctuations in interest rates,

entered into for the purpose of hedging interest rate risk with respect to the

Obligations.

“Interest Rate Hedging

Obligations” means all liabilities of the Pledgor under Interest Rate

Hedging Agreements.

“LLC” means each

limited liability company listed from time to time as a Pledged Interest Issuer

on Attachment 1 hereto.

“LLC Interest”

means the entire ownership interest of the Pledgor in each Pledged Interest

Issuer that is an LLC listed on Attachment 1 hereto, including such

Pledgor’s capital account, its gain, loss, deduction and credit of such Pledged

Interest Issuer, the Pledgor’s interest in all distributions made or to be made

by such Pledged Interest Issuer to the Pledgor and all of the other rights, titles

and interests of the Pledgor as an owner or a member of such Pledged Interest

Issuer, whether set forth in the operating or membership agreement of such

Pledged Interest Issuer, by separate agreement or otherwise.

“Partnership”

means each general partnership or limited partnership listed from time to time

as a Pledged Interest Issuer on Attachment 1 hereto.

“Partnership Interest”

means the entire ownership interest of the Pledgor in each Pledged Interest

Issuer that is a Partnership listed on Attachment 1 hereto, including

the Pledgor’s capital account, its gain, loss, deduction and credit of such

Pledged Interest Issuer, the Pledgor’s interest in all distributions made or to

be made by such Pledged Interest Issuer to the Pledgor and all of the other rights,

titles and interests of the Pledgor as an owner, a general partner or a limited

partner of such Pledged Interest Issuer, whether set forth in the partnership

agreement of such Pledged Interest Issuer, by separate agreement or otherwise.

“Pledge Agreement”

is defined in the preamble.

“Pledged Interest

Issuers” means each Person identified in Attachment 1 hereto as the

issuer of the Pledged Interests (including the maker of each Pledged Note)

identified opposite the name of such Person and each Person whose ownership,

equity or other similar interests, including shares of Capital Stock,

Partnership Interests and LLC Interests, are, or are required to be, pledged

hereunder and under the Credit Agreement from time to time.

“Pledged Interests”

means (i) all Pledged Shares and (ii) all Pledged Notes.

 

2

 

“Pledged Notes”

means all promissory notes of any Pledged Interest Issuer identified on Attachment

1 hereto, and any promissory notes issued to Pledgor in the future, as such

promissory notes are amended, restated, supplemented or otherwise modified from

time to time, in accordance with Section 4.1.6, together with any

promissory note of any Pledged Interest Issuer taken in extension or renewal

thereof or substitution therefor.

“Pledged Shares”

means (a) all ownership, equity or other similar interests, including shares of

Capital Stock, Partnership Interests and LLC Interests, of any Pledged Interest

Issuer listed on Attachment 1 hereto and any shares of Capital Stock,

Partnership Interests and LLC Interests of any Pledged Interest Issuer obtained

in the future by the Pledgor, (b) the certificates representing all such

ownership, equity or similar interests and (c) all securities convertible into,

and all warrants, options or other rights to acquire, such ownership, equity or

similar interests; but excluding all shares of voting stock of each class of

any Foreign Subsidiary in excess of sixty five percent (65%) of the total

issued and outstanding shares of the voting stock of each such class.

“Pledgee” is

defined in the preamble.

“Pledgor” is

defined in the preamble.

“Secured Obligations”

is defined in Section 2.2.

“Termination Date”

means the date on which all Obligations have been indefeasibly paid in full in

cash, all Commitments have been fully terminated and all Letters of Credit have

been canceled or otherwise terminated.

“U.C.C.” means the

Uniform Commercial Code, as in effect from time to time in the State of

California; provided, however, in the event that, by reason of

mandatory provisions of law, any or all of the attachment, perfection or

priority of Pledgee’s security interest in any Collateral is governed by the

Uniform Commercial Code (including Articles thereof) as in effect in a

jurisdiction other than the State of California, “U.C.C.” shall mean the

Uniform Commercial Code as in effect at such time in such other jurisdiction

for purposes of the provisions hereof relating to such attachment, perfection

or priority and for purposes of definitions related to such provisions.

SECTION 1.2             Credit Agreement Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Pledge Agreement, including its

preamble and recitals, have the meanings provided in the Credit Agreement.

SECTION 1.3             U.C.C. Definitions.  Unless otherwise defined herein or in the

Credit Agreement or the context otherwise requires, terms for which meanings

are provided in the U.C.C. are used in this Pledge Agreement, including its

preamble and recitals, with such meanings.

 

3

 

ARTICLE II

PLEDGE

SECTION 2.1             Grant of Security Interest.  The Pledgor hereby pledges, hypothecates,

assigns, charges, mortgages, delivers and transfers to the Pledgee, and the

Pledgor hereby grants to the Pledgee, to secure the Secured Obligations, a

continuing security interest in, all of the following property (the “Collateral”):

(a)           all Pledged Interests;

(b)           all right, title and interest of the

Pledgor, whether now existing or hereafter arising or acquired, in, to and

under any partnership agreement, limited liability company agreement or similar

agreement which governs the rights and obligations of the holder of ownership,

equity or similar interests in a Pledged Interest Issuer;

(c)           all voting trust certificates held by

Pledgor evidencing the right to vote any Pledged Shares subject to any voting

trust;

(d)           all Dividends, Distributions,

interest and without duplication, other payments and rights with respect to any

Pledged Interest; and

(e)           all Proceeds of any of the foregoing.

SECTION 2.2           Security for Obligations.  This Pledge Agreement secures the payment in

full of all Obligations of the Pledgor now or hereafter existing under the

Credit Agreement, each other Loan Document and each Interest Rate Hedging

Agreement, whether for principal, interest, costs, fees, indemnities, expenses,

Interest Rate Hedging Obligations or otherwise (including all Obligations of

the Pledgor now or hereafter existing under this Pledge Agreement and each other

Loan Document to which such Pledgor is or may become a party), with all such

Obligations being referred to as the “Secured Obligations”.

SECTION 2.3             Pledge and Transfer of Pledged

Interests.  Any Certificated

Interests representing or evidencing any Collateral shall be delivered to and

held by or on behalf of the Pledgee pursuant hereto, shall be in suitable form

for transfer by delivery, and shall be accompanied by all necessary instruments

or documents of transfer or assignment, duly executed in blank by the Pledgor

or, if any Collateral is in the form of uncertificated securities, confirmation

and evidence satisfactory to the Pledgee that the Pledgor has taken all actions

requested by the Pledgee to provide for the transfer to and perfection by the Pledgee

of the security interests in such uncertificated securities in accordance with

the U.C.C. and any other applicable law.

SECTION 2.4             Dividends on Pledged Interests.

(a)           In the event that any Dividend or

other payment is to be paid on any Pledged Interests (including any payment of

any principal or interest on any Pledged Note) at a time when no Default has

occurred and is continuing or would result therefrom, such Dividend or payment

may be paid directly to the Pledgor; and

 

4

 

(b)           If any such Default or Event of

Default has occurred and is continuing, then any such Dividend or payment shall

be paid directly to the Pledgee.

SECTION 2.5             Continuing Security Interest.  This Pledge Agreement shall create a continuing

security interest in the Collateral and shall:

(a)           remain in full force and effect until

the Termination Date;

(b)           be binding upon the Pledgor and its

successors, transferees and assigns; and

(c)           inure to the benefit of and be

enforceable by the Pledgee.

Without limiting clause

(c), the Pledgee may assign or otherwise transfer (in whole or in part) the

Revolving Note or any Credit Extension or Commitment held by it to any other

Person, and such other Person shall thereupon become vested with all the rights

and benefits in respect thereof granted to the Pledgee under any Loan Document

(including this Pledge Agreement) or otherwise, in each case as provided in

Section 10.10 of the Credit Agreement.

Upon (i) the sale,

transfer or other disposition of Collateral in accordance with the Credit

Agreement or (ii) the occurrence of the Termination Date, the security

interests granted herein shall automatically terminate with respect to (x) such

Collateral (in the case of clause (i)) or (y) all Collateral (in the case of

clause (ii)), and at such time the Pledgee will, at the Pledgor’s sole expense,

deliver to the applicable Pledgor, without any representations, warranties or

recourse of any kind whatsoever, all certificates and instruments previously

delivered to the Pledgee representing or evidencing all Pledged Interests,

together with all other Collateral held by the Pledgee hereunder, and execute

and deliver to the Pledgor such documents as the Pledgor shall reasonably

request to evidence such termination.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1             Representations and Warranties,

etc.  In order to induce the Pledgee

to enter into the Credit Agreement and to make Credit Extensions thereunder,

the Pledgor represents and warrants to the Pledgee as set forth in this Article

III.

SECTION 3.1.1              Ownership, No Liens, etc.  The Pledgor is the legal and beneficial

owner of, and has good and marketable title to (and has full right and

authority to pledge and assign) its Collateral, free and clear of all Liens,

options and other charges, except any Lien granted pursuant hereto in favor of

the Pledgee.

SECTION 3.1.2              Valid Security Interest.  With respect to U.S. entities, the execution

and delivery of this Pledge Agreement, together with (a)(i) in the case of Collateral

in the form of a Certificated Interest, the delivery of such Collateral to the

Pledgee together with undated stock powers executed in blank by the Pledgor,

(ii) in the case of Collateral in the form of an uncertificated security, the

registration in the name of the Secured Party as owner with the Pledged

Interest Issuer of such uncertificated security, or (iii) in the case of

Collateral in the form 

 

5

 

of Pledged Notes,

delivery of such Collateral and an allonge to such Collateral to the Pledgee, or (b) in the

case of other than Certificated Interests, the filing of U.C.C. financing

statements in the filing offices listed on Attachment 2 hereto, is

effective to create a valid, perfected, first priority security interest in

such Collateral and all Proceeds thereof, securing the Secured

Obligations.  Upon the performance of

the actions set forth in the first sentence of this Section 3.1.2,

no further action is necessary to perfect or protect such security interest in

the Collateral and the Proceeds thereof. 

The Pledgor agrees that it shall take all necessary actions reasonably

requested by the Pledgee to create a valid, perfected security interest in

non-U.S. entities.

SECTION 3.1.3              As to Pledged Interests.  In the case of

(a)           any Pledged Interests (other than

Pledged Notes) constituting Collateral,

(i)            all of such Pledged Interests are

duly authorized, and validly issued, fully paid, and non-assessable, and

constitute that percentage of the issued and outstanding shares of Capital

Stock, Partnership Interests, LLC Interests and other ownership interests of

each Pledged Interest Issuer set forth on Attachment 1 hereto; and

(ii)           the Pledgor has delivered to the

Pledgee true and complete copies of the partnership, membership, operating or

ownership agreements, as applicable, for each Pledged Interest Issuer that is

an LLC or a Partnership, which agreements are currently in full force and

effect and have not been amended or modified except as disclosed to the Pledgee

in writing; and

(b)           each Pledged Note, all of such

Pledged Notes have been duly authorized, executed, endorsed, issued and

delivered, and are the legal, valid and binding obligation of the issuers

thereof, and no default or event of default has occurred and is continuing

thereunder.

SECTION 3.1.4              Location of Pledgor.  The jurisdictions in which the Pledgor is

located for purposes of Section 9307 of the U.C.C. are set forth in Attachment

1 hereto.

SECTION 3.1.5              Nature of Pledged Interests.  No LLC Interests or Partnership Interests

are Certificated Interests.

ARTICLE IV

COVENANTS

SECTION 4.1             Covenants.  The Pledgor covenants and agrees that, at

all times prior to the Termination Date, it will perform, comply with and be

bound by the obligations set forth in this Article IV.

SECTION 4.1.1              Protect Collateral; Further

Assurances, etc.  The Pledgor

covenants and agrees that it will not sell, assign, transfer, pledge, or

encumber in any other manner the Collateral except in favor of the Pledgee

hereunder or as permitted in the Credit Agreement). The Pledgor will warrant

and defend the right and title herein granted unto the 

 

6

 

Pledgee in and to the

Collateral (and all right, title, and interest represented by the Collateral)

against the claims and demands of all Persons. 

The Pledgor agrees that from time to time, at the expense of the

Pledgor, it will promptly execute and deliver all further instruments, and take

all further action, that may be necessary or desirable, or that the Pledgee may

reasonably request, in order to perfect and protect any security interest

granted or purported to be granted hereby or to enable the Pledgee to exercise

and enforce its rights and remedies hereunder with respect to any

Collateral.  The Pledgor will not,

without thirty (30) days’ prior written notice to the Pledgee, (i) change its

name or structure so as to make any financing or other statement filed pursuant

to this Pledge Agreement become seriously misleading or (ii) change the

jurisdiction in which it is located to other than those specified in Section

3.1.4 hereof.  The Pledgor further

covenants and agrees as follows:

(a)     If the Pledgor shall become entitled to

receive or shall receive any stock or other certificate (including any

certificate representing a Dividend or a Distribution in connection with any

reclassification, increase or reduction of capital or any certificate issued in

connection with any reorganization), option or rights, whether in addition to,

in substitution of, as a conversion of, or in exchange for any portion of the

Collateral (or otherwise in respect thereof), the Pledgor shall accept the same

as the agent of the Pledgee, hold the same in trust for the Pledgee and deliver

the same forthwith to the Pledgee in the exact form received, duly endorsed (in

blank) by the Pledgor to the Pledgee, if required, together with an undated

stock power or other necessary instrument of transfer covering such certificate

duly executed in blank by the Pledgor, to be held by the Pledgee, subject to

the terms of this Pledge Agreement, as additional security for the Secured

Obligations.  In addition, any sums paid

upon or in respect of the Collateral upon the liquidation or dissolution of any

Pledged Interest Issuer shall be held by the Pledgee as additional security for

the Secured Obligations.  If any sums of

money or property so paid or distributed in respect of any Collateral shall be

received by the Pledgor, then the Pledgor shall, until such money or property

is paid or delivered to the Pledgee, hold such money or property in trust for

the Pledgee, segregated from other funds of the Pledgor, as additional

collateral securing the Secured Obligations.

(b)     Except as otherwise expressly permitted by

the Credit Agreement, without the prior written consent of the Pledgee, the

Pledgor will not (i) consent to any material modification, extension or

alteration of the terms of any partnership, membership or operating agreement

of the LLCs or the Partnerships or (ii) accept a surrender of any partnership,

membership or operating agreement of any of the LLCs or the Partnerships, as

applicable, or waive any breach of or default under any such agreement by any

other party thereto.

(c)     The Pledgor will advise the Pledgee

promptly, in reasonable detail (i) of any Lien or claim made or asserted

against any part of the Collateral, (ii) of any material change in the

composition of the Collateral, and (iii) of the occurrence of any other event

relating specifically to the Pledgor or its assets which could reasonably be

expected to have a material adverse effect on the aggregate value of the

Collateral or on the security interests created hereunder.

SECTION 4.1.2              Registration of Pledged

Interests, etc.  The Pledgor shall

execute and deliver to the applicable Pledged Interest Issuer instructions to

register, substantially in the form of Exhibit A hereto, and cause each

Pledged Interest Issuer to execute and deliver to 

 

7

 

the Pledgee the Transaction

Statement, substantially in the form of Exhibit B hereto, confirming

that each Pledged Interest Issuer (in which the Pledgor owns a Pledged Interest

(other than in the case of a Certificated Interest or a Pledged Note)) has

registered the pledge by the Pledgor effected by this Pledge Agreement on its

books.  In addition, the Pledgor agrees

that it shall cause each issuer of Certificated Interests to execute and

deliver to the Pledgee an acknowledgment in a form satisfactory to the Pledgee.

SECTION 4.1.3              Stock Powers, etc.  The Pledgor agrees that all Certificated

Interests constituting Collateral delivered by the Pledgor pursuant to this

Pledge Agreement will be accompanied by duly executed undated blank stock

powers, or other equivalent instruments or documents of transfer acceptable to

the Pledgee, as are necessary under all applicable laws to perfect the Lien in

favor of the Pledgee on such Collateral. 

The Pledgor will, from time to time upon the request of the Pledgee,

promptly deliver to the Pledgee such stock powers, instruments, and similar

documents, satisfactory in form and substance to the Pledgee, with respect to

the Collateral as the Pledgee may reasonably request and will, from time to

time upon the request of the Pledgee after the occurrence, and during the

continuance, of any Event of Default, promptly transfer any Pledged Interests

or other shares of Capital Stock or other ownership interests constituting

Collateral into the name of any nominee designated by the Pledgee.

SECTION 4.1.4              Continuous Pledge.  The Pledgor will, at all times, keep pledged

to the Pledgee pursuant hereto all Pledged Interests and all other shares of

Capital Stock or other ownership interests constituting Collateral, all

Dividends and Distributions with respect thereto (provided that if no Event of

Default shall have occurred or be continuing, such Dividends and Distributions

may be used for working capital or other purposes), all Pledged Notes, all

interest, principal and other proceeds received by the Pledgee with respect to

the Pledged Notes, and all other Collateral and other securities, instruments,

proceeds, and rights from time to time received by or distributable to the

Pledgor in respect of any Collateral, and will not permit any Pledged Interest

Issuer to issue any Capital Stock or other ownership interests or any options,

warrants or other rights to subscribe for or purchase Capital Stock (other than

as permitted by the Credit Agreement) which shall not have been immediately

duly pledged hereunder on a first priority perfected basis.

SECTION 4.1.5              Voting Rights; Dividends, etc.  The Pledgor agrees:

(a)     after any Event of Default shall have

occurred and be continuing, promptly upon receipt of notice thereof by the

Pledgor and without any request therefor by the Pledgee, such Pledgor will

deliver (properly endorsed where required hereby or requested by the Pledgee)

to the Pledgee all Dividends, Distributions, all other cash payments, and all

Proceeds of the Collateral, all of which shall be held by the Pledgee as

additional Collateral for use in accordance with Section 6.4 hereof; and

(b)     after any Event of Default shall have

occurred and be continuing and the 

Pledgee has notified the Pledgor of the Pledgee’s intention to exercise

its voting power under this Section 4.1.5:

(i)      the Pledgee may exercise (to the exclusion

of the Pledgor) the voting power and all other incidental rights of ownership

with respect to any Pledged Interests or 

 

8

 

other shares of Capital

Stock or other ownership interests constituting Collateral and the Pledgor

hereby grants the Pledgee an irrevocable proxy, exercisable under such

circumstances, to vote the Pledged Interests and such other Collateral; and

(ii)     to promptly deliver to the Pledgee such

additional proxies and other documents requested by the Pledgee as may be

necessary to allow the Pledgee to exercise such voting power.

All Dividends,

Distributions, cash payments and Proceeds which may at any time and from time

to time be held by the Pledgor but which the Pledgor is then obligated to

deliver to the Pledgee, shall, until delivery to the Pledgee, be held by the

Pledgor separate and apart from its other property in trust for the

Pledgee.  The Pledgee agrees that unless

an Event of Default shall have occurred and be continuing and the Pledgee shall

have given the notice referred to in clause (b), the Pledgor shall

have the exclusive voting power with respect to any shares of Capital Stock or

other ownership interests (including any of the Pledged Interests) constituting

Collateral and the Pledgee shall, upon the written request of the Pledgor,

promptly deliver such proxies and other documents, if any, as shall be

reasonably requested by the Pledgor which are necessary to allow the Pledgor to

exercise voting power with respect to any such share of Capital Stock or other

ownership interests (including any of the Pledged Interests) constituting

Collateral; provided, however, that no vote shall be cast, or

consent, waiver, or ratification given, or action taken by the Pledgor that

would impair any Collateral or be inconsistent with or violate any provision of

the Credit Agreement, any other Loan Document or any Interest Rate Hedging

Agreement.

SECTION 4.1.6              Additional Undertakings.  The Pledgor will not, without the prior

written consent of the Pledgee, take or omit to take any action the taking or

the omission of which could with reasonable likelihood result in any impairment

or alteration of any Instrument constituting Collateral.  In furtherance of the foregoing, the Pledgor

agrees that it will not, without the prior written consent of the Pledgee,

which consent shall not be unreasonably withheld:

(a)     enter into any agreement amending,

supplementing, or waiving any provision of any Pledged Note (including any

underlying Instrument pursuant to which such Pledged Note is issued) or

compromising or releasing or extending the time for payment of any obligation

of the maker thereof; or

(b)     take or omit to take any action the taking

or the omission of which would result in any impairment or alteration of any

obligation of the maker of any Pledged Note or other Instrument constituting

Collateral.

SECTION 4.1.7              Pledgor Remains Liable.  Anything herein to the contrary

notwithstanding:

(a)     the Pledgor shall remain liable to perform

all of its duties and obligations as an owner of the Pledged Interests, to the

same extent as if this Pledge Agreement had not been executed;

 

9

 

(b)     the exercise by the Pledgee of any of its

rights hereunder shall not release the Pledgor from any of its duties or

obligations as owner of the Pledged Interests; and

(c)     the Pledgee shall not have any obligation

or liability as an owner of any Pledged Interest as applicable, by reason of

this Pledge Agreement.

ARTICLE V

ATTORNEY IN FACT

SECTION 5.1             Pledgee Appointed

Attorney-in-Fact.  The Pledgor

hereby irrevocably appoints the Pledgee as the Pledgor’s attorney-in-fact, with

full authority in the place and stead of the Pledgor and in the name of the

Pledgor or otherwise, from time to time in the Pledgee’s discretion, after the

occurrence and during the continuance of an Event of Default, to take any

action and to execute any instrument or document which the Pledgee may deem

necessary or advisable to accomplish the purposes of this Pledge Agreement,

including without limitation:

(a)     to ask, demand, collect, sue for, recover,

compromise, receive and give acquittance and receipts for moneys due and to

become due under or in respect of any of the Collateral;

(b)     to receive, endorse, and collect any drafts

or other instruments, documents and chattel paper, in connection with clause

(a); and

(c)     to file any claims or take any action or

institute any proceedings which the Pledgee may deem necessary or desirable for

the collection of any of the Collateral or otherwise to enforce the rights of

the Pledgee with respect to any of the Collateral.

The Pledgor hereby

acknowledges, consents and agrees that the power of attorney granted pursuant

to this Section 5.1 is irrevocable and coupled with an interest.

SECTION 5.2             Pledgee May Perform.  If the Pledgor fails to perform any

agreement contained herein, the Pledgee may perform, or cause performance of,

such agreement, and the reasonable expenses of the Pledgee incurred in

connection therewith shall be payable by the Pledgor pursuant to Section 6.5

hereof.

SECTION 5.3             Pledgee Has No Duty.  The powers conferred on the Pledgee

hereunder are solely to protect its interests in the Collateral and shall not

impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral in its possession

and the accounting for moneys actually received by it hereunder, the Pledgee

shall have no duty as to any Collateral or responsibility for:

(a)     ascertaining or taking action with respect

to calls, conversions, exchanges, maturities, tenders or other matters relative

to any Pledged Interests, whether or not the Pledgee has or is deemed to have

knowledge of such matters; or

(b)     taking any necessary steps to preserve

rights against prior parties or any other rights pertaining to any Collateral.

 

10

 

SECTION 5.4             Reasonable Care.  Other than the exercise of reasonable care

in the custody and preservation of the Collateral in its possession, the

Pledgee shall have no duty with respect thereto.  The Pledgee shall be deemed to have exercised reasonable care in

the custody and preservation of the Collateral in its possession if the

Collateral is accorded treatment substantially equal to that which the Pledgee

accords its own property.  The Pledgee

shall not be liable or responsible for any loss or damage to any of the

Collateral, or for any diminution in the value thereof, by reason of the act or

omission of any agent or bailee selected by the Pledgee in good faith.

ARTICLE VI

REMEDIES

SECTION 6.1             Certain Remedies.  If any Event of Default shall have occurred

and be continuing:

(a)     The Pledgee may exercise in respect of the

Collateral, in addition to all other rights and remedies provided for herein or

otherwise available to it, all the rights and remedies of a secured party under

the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and

also may, without notice except as specified below, sell the Collateral or any

part thereof in one or more parcels at public or private sale, at  the Pledgee’s offices or elsewhere, for

cash, on credit or for future delivery, and upon such other terms as the

Pledgee may deem commercially reasonable. 

The Pledgor agrees that, to the extent notice of sale shall be required

by law, at least ten (10) days’ prior notice to the Pledgor of the time and

place of any public sale or the time after which any private sale is to be made

shall constitute reasonable notification. 

The Pledgee shall not be obligated to make any sale of Collateral

regardless of notice of sale having been given.  The Pledgee may adjourn any public or private sale from time to

time by announcement at the time and place fixed therefor, and such sale may,

without further notice, be made at the time and place to which it was so

adjourned.

(b)     The Pledgee may:

(i)    transfer all or any part of the Collateral

into the name of the Pledgee or its nominee, with or without disclosing that

such Collateral is subject to the Lien hereunder;

(ii)   notify the parties obligated on any of the

Collateral to make payment to the Pledgee of any amount due or to become due

thereunder;

(iii)          enforce collection of any of the

Collateral by suit or otherwise, and surrender, release or exchange all or any

part thereof, or compromise or extend or renew for any period (whether or not

longer than the original period) any obligations of any nature of any party

with respect thereto;

(iv)    endorse any checks, drafts, or other writings

in the Pledgor’s name to allow collection of the Collateral;

(v)   take control of any Proceeds of the

Collateral;

 

11

 

(vi)    execute (in the name, place and stead of the

Pledgor) endorsements, assignments, stock powers and other instruments or other

documents of conveyance or transfer with respect to all or any of the

Collateral;

(vii)   accelerate any Pledged Note which may be

accelerated in accordance with its terms and take any other action to collect

upon any Pledged Note (including, without limitation, making any demand for

payment thereon); and

(viii)    to vote all or any part of the Pledged

Interests (whether or not transferred into the name of the Pledgee) and give

all consents, waivers and ratifications in respect of the Collateral

(including, without limitation, under all operating agreements, partnership

agreements or other agreements relating to the Collateral) and otherwise act

with respect thereto as if the Pledgee were the outright owner thereof.

SECTION 6.2                 Securities Laws.  If the Pledgee shall determine to exercise

its right to sell all or any of the Collateral pursuant to Section 6.1

hereof, the Pledgor agrees that, upon request of the Pledgee, the Pledgor will,

at the Pledgor’s own expense:

(a)     execute and deliver, and cause each issuer

of the Collateral contemplated to be sold and cause the directors and officers

thereof to execute and deliver, all such instruments and documents, and do or

cause to be done all such other acts and things, as may be necessary or, in the

opinion of the Pledgee, advisable to register such Collateral under the

provisions of the Securities Act of 1933, as from time to time amended (the

“Act”) and comparable legislation in other jurisdictions, and to cause the

registration statement relating thereto to become effective and to remain

effective for such period as prospectuses are required by law to be furnished,

and to make all amendments and supplements thereto and to the related

prospectus which, in the opinion of the Pledgee, are necessary or advisable,

all in conformity with the requirements of the Act and the rules and

regulations of the Securities and Exchange Commission applicable thereto and

comparable legislation, rules and regulations in other jurisdictions;

(b)           use its best efforts to qualify the

Collateral under the applicable state securities or “Blue Sky” laws and to

obtain all necessary governmental approvals for the sale of the Collateral, as

requested by the Pledgee;

(c)           cause each such Pledged Interest Issuer

to make available to its security holders, as soon as practicable, an earnings

statement that will satisfy the provisions of Section 11(a) of the Act and

comparable legislation in other jurisdictions; and

(d)           do or cause to be done all such other

acts and things as may be necessary to make such sale of the Collateral or any

part thereof valid and binding and in compliance with applicable law.

The Pledgor further

acknowledges the impossibility of ascertaining the amount of damages that would

be suffered by the Pledgee by reason of the failure by the Pledgor to perform

any of the covenants contained in this Section 6.2 and, consequently,

agrees that, if the Pledgor shall fail to perform any of such covenants, the

Pledgor shall pay, as liquidated damages and not as a penalty, an amount equal

to the value (as determined by the Pledgee) of the Collateral on the 

 

12

 

date the Pledgee

shall demand compliance with this Section 6.2.  Notwithstanding the provisions of this Section 6.2, the

Pledgee shall not be obligated to register any of the Collateral under the Act

in connection with the exercise of remedies hereunder and may elect, in its

sole discretion, to sell the Collateral or any part thereof by private sale in

such manner and under such circumstances as the Pledgee may deem necessary or

advisable in order that such sale be effected without such registration.

SECTION 6.3         Compliance with Restrictions.  The Pledgor agrees that in any sale of any

of the Collateral whenever an Event of Default shall have occurred and be

continuing, the Pledgee is hereby authorized to comply with any limitation or

restriction in connection with such sale as it may be advised by counsel is

necessary in order to avoid any violation of applicable law (including

compliance with such procedures as may restrict the number of prospective

bidders and purchasers, require that such prospective bidders and purchasers

have certain qualifications, and restrict such prospective bidders and purchasers

to Persons who will represent and agree that they are purchasing for their own

account for investment and not with a view to the distribution or resale of

such Collateral), or in order to obtain any required approval of the sale or of

the purchaser by any governmental regulatory authority or official, and the

Pledgor further agrees that such compliance shall not result in such sale being

considered or deemed not to have been made in a commercially reasonable manner,

nor shall the Pledgee be liable or accountable to the Pledgor for any discount

allowed by the reason of the fact that such Collateral is sold in compliance

with any such limitation or restriction.

SECTION 6.4             Application of Proceeds.  All cash proceeds received by the Pledgee in

respect of any sale of, collection from, or other realization upon, all or any

part of the Collateral may, in the discretion of the Pledgee, be held by the

Pledgee as additional collateral security for, or then or at any time

thereafter be applied in whole or in part by the Pledgee against all or any

part of the Secured Obligations as follows:

(i)      first, to the payment of all Obligations

owing to the Pledgee pursuant to Section 10.3 of the Credit Agreement and Section

6.5 hereof;

(ii)           second, after payment in full of the

amounts specified in clause (i), to the payment of all other Obligations

owing to the Pledgee, with such amounts applied first to fees and expenses,

then to accrued and unpaid interest, then to the outstanding principal amount

of the Revolving Loan, and then to Letter of Credit Outstandings and then to

Interest Rate Hedging Obligations, if any; and

(iii)      third, payment in full of the amounts

specified in clauses (i) and (ii), and following the Termination Date, to the

Pledgor or any other Person lawfully entitled to receive such surplus.

SECTION 6.5                 Indemnity and Expenses.  The Pledgor hereby agrees to indemnify and

hold harmless the Pledgee from and against any and all claims, losses, and

liabilities arising out of or resulting from this Pledge Agreement (including

enforcement of this Pledge Agreement), except claims, losses, or liabilities

resulting from the Pledgee’s gross negligence or willful misconduct.  Upon demand, the Pledgor agrees that it will

pay to the Pledgee the amount of any 

 

13

 

and all reasonable

expenses, including the reasonable fees and disbursements of its counsel and of

any experts, which the Pledgee may incur in connection with:

(a)           the administration of this Pledge

Agreement, the Credit Agreement and any other Loan Document;

(b)           the custody, preservation, use, or

operation of, or the sale of, collection from, or other realization upon, any

of the Collateral;

(c)           the exercise or enforcement of any of

the rights of the Pledgee hereunder; or

(d)           the failure by the Pledgor to perform

or observe any of the provisions hereof.

The provisions of this Section

6.5 shall survive the Termination Date.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1                 Loan Document.  This Pledge Agreement is a Loan Document

executed pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions thereof, including Article X thereof.

SECTION 7.2                 Protection of Collateral.  The Pledgee may from time to time, at its

option, perform any act which the Pledgor agrees hereunder to perform and which

the Pledgor shall fail to perform after being requested in writing so to

perform (it being understood that no such request need be given after the

occurrence and during the continuance of an Event of Default) and the Pledgee

may from time to time take any other action which the Pledgee reasonably deems

necessary for the maintenance, preservation or protection of any of the Collateral

or of its security interest therein.

SECTION 7.3                 Binding on Successors,

Transferees and Assigns; Assignment. 

This Pledge Agreement shall be binding upon the Pledgor and its

successors, transferees and assigns and shall inure to the benefit of and be

enforceable by Pledgee and its successors, transferees and assigns; provided,

however, that the Pledgor may not assign any of its obligations

hereunder without the prior written consent of the Pledgee.

SECTION 7.4                 Amendments, etc.  No amendment to or waiver of any provision

of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,

shall in any event be effective unless the same shall be in writing and signed

by the Pledgee and then such waiver or consent shall be effective only in the

specific instance and for the specific purpose for which given.

SECTION 7.5                 Notices.  All notices and other communications

provided for hereunder shall be given in accordance with Section 10.2 of the

Credit Agreement.

 

14

 

SECTION 7.6                 No Waiver; Remedies.  No failure on the part of the Pledgee to

exercise, and no delay in exercising, any right hereunder shall operate as a

waiver thereof; nor shall any single or partial exercise of any right hereunder

preclude any other or further exercise thereof or the exercise of any other

right.  The remedies herein provided are

cumulative and not exclusive of any remedies provided by law.

SECTION 7.7                 Captions.  Section captions used in this Pledge

Agreement are for convenience of reference only, and shall not affect the

construction of this Pledge Agreement.

SECTION 7.8                 Severability.  Wherever possible, each provision of this

Pledge Agreement shall be interpreted in such manner as to be effective and

valid under applicable law, but if any provision of this Pledge Agreement shall

be prohibited by or invalid under such law, such provision shall be ineffective

to the extent of such prohibition or invalidity, without invalidating the

remainder of such provision or the remaining provisions of this Pledge

Agreement.

SECTION 7.9                 Counterparts.  This Pledge Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

SECTION 7.10               Governing Law, Entire

Agreement, etc.  THIS PLEDGE

AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS

OF THE STATE OF CALIFORNIA.  THIS PLEDGE

AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING

BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND

SUPERCEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

[Remainder

Of Page Left Blank Intentionally.]

 

15

 

IN WITNESS WHEREOF, the

Pledgor has caused this Borrower Pledge Agreement to be duly executed and

delivered by its officer thereunto duly authorized as of the date first above

written.

	

   

  	

   

  	

  SUREBEAM CORPORATION, 

  as Pledgor

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ DAVID

  A. RANE

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  David

  A. Rane 

  Senior Vice President, 

  Chief Financial Officer

  

 

ACKNOWLEDGED AND ACCEPTED:

 

	

  THE

  TITAN CORPORATION,  

  as Pledgee

  
	

   

  	

  By:

  	

  /s/ MARK

  W. SOPP

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Mark

  W. Sopp 

  Senior Vice President, 

  Chief Financial Officer

  	

   

  

 

 

1

 

 

EXHIBIT A

INSTRUCTION TO

REGISTER PLEDGE

__________ __,

____

[                        ]

Attention:

________________

Ladies and

Gentlemen:

The undersigned, a

[member] [partner] [shareholder] of ___________, [a ___________ limited

liability company] [a __________ corporation] [a ___________ partnership] (the

“Company”), hereby instructs the Company to register on the books of the

Company the pledge of the undersigned’s [membership] [partnership] interest in

favor of The Titan Corporation, a Delaware corporation (the “Pledgee”),

pursuant to the Borrower Pledge Agreement, dated as of August 2, 2002, made by

the undersigned in favor of the Pledgee.

Very truly yours,

SUREBEAM CORPORATION

 

	

  By:

  	

   

  
	

  Name:

  	

   

  
	

  Title:

  	

   

  

 

cc:  The Titan Corporation

 

1

 

EXHIBIT B

TRANSACTION

STATEMENT

___________ __,

____

To:          The Titan Corporation

Attention:

This statement is to

advise you that a pledge of the following uncertificated securities has been

registered in the name of The Titan Corporation (the “Pledgee”), as follows:

1.             Uncertificated

Securities:

The entire [limited liability company] [partnership] interests of

SUREBEAM CORPORATION in the undersigned [limited liability company] [_____

partnership] [corporation].

2.             Registered Owner:

SUREBEAM CORPORATION

3.             Pledged in favor

of:

The Titan Corporation,

   as the Pledgee

4.             There are no liens

or restrictions of the undersigned [limited liability company] [_______

partnership] [corporation] and no adverse claims to which the uncertificated

securities are or may be subject known to the undersigned [limited liability

company] [______ partnership] [corporation], other than in favor of The Titan

Corporation, in its capacity as the Pledgee.

5.             The pledge was

registered on _______ __, ____.

6.             No transfer of the

uncertificated securities shall be made without the prior written consent of

the Pledgee.

 

1

 

THIS STATEMENT IS

MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE TIME OF ITS

ISSUANCE.  DELIVERY OF THIS STATEMENT,

OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. 

THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.

Very truly yours,

[NAME OF PLEDGED INTEREST ISSUER]

 

	

  By:

  	

   

  
	

  Name:

  	

   

  
	

  Title:

  	

   

  

 

2

 

ATTACHMENT 1

Pledged Interests

 

	

  Issuer

  	

   

  	

  Class

  	

   

  	

  Certificate Numbers, if

  applicable

  	

   

  	

  Number of Shares or percentage

  ownership interest

  
	

  SB

  OperatingCo, LLC

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  100%

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

Pledged Notes

 

Location of

Pledgor (Section

3.1.4)

SureBeam Corporation — Delaware

9276 Scranton Road, Suite 600

San Diego, California 

92121

 

 

1

 

 

Exhibit C

BORROWER

SECURITY AGREEMENT

 

This

BORROWER SECURITY AGREEMENT (as amended, restated, supplemented or otherwise

modified from time to time, this “Security Agreement”), dated as of

August 2, 2002, is made by SUREBEAM CORPORATION, a Delaware corporation (the “Grantor”)

in favor of THE TITAN CORPORATION, a Delaware corporation (the “Secured

Party”).

 

W I T N E S S E T H :

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between the Grantor and the Secured Party, the Secured Party

has agreed to make Credit Extensions to the Grantor;

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, the Grantor is required

to execute and deliver this Security Agreement; and

WHEREAS,

the Grantor has duly authorized the execution, delivery and performance of this

Security Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt and sufficiency of

which is hereby acknowledged, and in order to induce the Secured Party to make

Credit Extensions (including the initial Credit Extension) to the Grantor

pursuant to the Credit Agreement, the Grantor agrees as follows:

 

ARTICLE I

DEFINITIONS

SECTION 1.1             Certain Terms.  The following terms (whether or not

underscored) when used in this Security Agreement, including its preamble and

recitals, shall have the following meanings (such definitions to be equally

applicable to the singular and plural forms thereof):

“Chattel

Paper” has the meaning provided in the U.C.C.

“Collateral”

is defined in Section 2.1.

“Collateral

Account” is defined in Section 4.1.2(b).

“Commercial

Tort Claims” means any claim arising in tort now or hereafter owned, 

 

 

acquired,

or received by Grantor in which Grantor now holds or hereafter acquires any

right or interest.

“Computer

Hardware and Software Collateral” means:

(a)           all computer and other electronic

data processing hardware, integrated computer systems, central processing

units, memory units, display terminals, printers, features, computer elements,

card readers, tape drives, hard and soft disk drives, cables, electrical supply

hardware, generators, power equalizers, accessories and all peripheral devices

and other related computer hardware;

(b)           all software programs (including both

source code, object code and all related applications and data files), whether

now owned, licensed or leased or hereafter acquired by the Grantor, designed

for use on the computers and electronic data processing hardware described in clause

(a) above;

(c)           all firmware associated therewith;

(d)           all documentation (including flow

charts, logic diagrams, manuals, guides and specifications) with respect to

such hardware, software and firmware described in the preceding clauses (a)

through (c); and

(e)           all rights with respect to all of the

foregoing, including any and all copyrights, licenses, options, warranties,

service contracts, program services, test rights, maintenance rights, support

rights, improvement rights, renewal rights and indemnifications and any

substitutions, replacements, additions or model conversions of any of the

foregoing.

“Contracts”

means all agreements between the Grantor and one or more additional parties.

“Contract

Rights” means all rights of the Grantor (including, without limitation, all

rights to payment) under each Contract.

“Copyright

Collateral” means all copyrights (including all copyrights for

semi-conductor chip product mask works) of the Grantor, whether statutory or

common law, registered or unregistered, now or hereafter in force throughout

the world including all of the Grantor’s right, title and interest in and to

all copyrights registered in the United States Copyright Office or anywhere

else in the world and also including the copyrights referred to in Item A

of Schedule IV attached hereto, and all applications for registration

thereof, whether pending or in preparation, all copyright licenses, including

each copyright license referred to in Item B of Schedule IV

attached hereto, the right to sue for past, present and future infringements of

any thereof, all rights corresponding thereto throughout the world, all

extensions and renewals of any thereof and all Proceeds of the foregoing,

including licenses, royalties, income, payments, claims, damages and Proceeds

of suit.

 

2

 

“Credit

Agreement” is defined in the first recital.

“Deposit

Accounts” has the meaning provided in the U.C.C. and, in any event,

includes, without limitation, any demand, time, savings, passbook or like

account maintained with a depositary institution, including those Deposit

Accounts set forth in Item G of Schedule I hereto.

“Documents”

has the meaning provided in the U.C.C.

“Equipment”

has the meaning provided in the U.C.C. and, in any event, includes, without

limitation, all equipment in all of its forms of the Grantor, wherever located,

including all parts thereof and all accessions, additions, attachments,

improvements, substitutions and replacements thereto and therefor and all

accessories related thereto.

“Fixtures”

has the meaning provided in the U.C.C., and in any event, includes, without

limitation, with respect to the Grantor, regardless of where located, any of

the fixtures, systems, machinery, apparatus, equipment or fittings of any kind

or nature whatsoever, and all appurtenances and additions thereto and

substitutions or replacements thereof, now or hereafter attached or affixed to

or constituting a part of, or located in or upon, real property wherever located,

including sign, escalator, elevator, any heating, electrical, mechanical,

lighting, lifting, plumbing, ventilating, air-conditioning or air cooling,

refrigerating, food preparation, incinerating or power, loading or unloading,

boilers, communication, switchboard, tank, pump, filter, sprinkler or other

fire prevention or extinguishing fixture, system, machinery, apparatus or

equipment, and any engine, motor, dynamo, machinery, pipe, pump, tank, conduit

or duct constituting a part of any of the foregoing, together with all

extensions, improvements, betterments, renewals, substitutes, and replacements

of, and all additions and appurtenances to any of the foregoing property, and

all conversions of the security constituted thereby, immediately upon any acquisition

or release thereof or any such conversion, as the case may be.

“General

Intangibles” has the meaning provided in the U.C.C. and, in any event,

includes, without limitation, with respect to the Grantor, all Contracts,

agreements, Instruments and indentures in any form, and portions thereof, to

which the Grantor is a party or under which the Grantor has any right, title or

interest or to which the Grantor or any property of the Grantor is subject, as

the same may from time to time be amended, supplemented or otherwise modified,

including, without limitation, (i) all rights of the Grantor to receive moneys

due and to become due to it thereunder or in connection therewith, (ii) all

rights of the Grantor to damages arising thereunder and (iii) all rights of the

Grantor to perform and to exercise all remedies thereunder.

“Goods”

has the meaning provided in the U.C.C.

“Grantor”

is defined in the preamble.

“Instrument”

has the meaning provided in the U.C.C.

“Intellectual

Property Collateral” means, collectively, the Computer Hardware and 

 

3

 

Software

Collateral, the Copyright Collateral, the Patent Collateral, the Trademark

Collateral and the Trade Secrets Collateral.

“Interest

Rate Hedging Agreements” means interest rate swap agreements, interest rate

cap agreements and interest rate collar agreements, and all other agreements or

arrangements designed to protect the Grantor against fluctuations in interest

rates, entered into for the purpose of hedging interest rate risk.

“Interest

Rate Hedging Obligations” means all liabilities of the Grantor under

Interest Rate Hedging Agreements.

“Inventory”

has the meaning provided in the U.C.C. and, in any event, includes, without

limitation, all inventory in all of its forms of the Grantor, wherever located,

including

(i)            all raw materials and work in

process therefor, finished goods thereof, and materials used or consumed in the

manufacture or production thereof,

(ii)           all goods in which the Grantor has an

interest in mass or a joint or other interest or right of any kind (including

goods in which the Grantor has an interest or right as consignee), and

(iii)          all goods which are returned to or

repossessed by the Grantor,

and all accessions thereto,

products thereof and documents therefor.

“Investment

Property” has the meaning provided in the U.C.C.

“Letter

of Credit Right” means any right of the Grantor to payment or performance

under a letter of credit (as such term in defined in Article 5 of the U.C.C.),

whether or not the beneficiary has demanded or is at the time entitled to

demand payment or performance.

“Patent

Collateral” means:

(a)   all letters patent and applications for

letters patent throughout the world, including all patent applications in

preparation for filing anywhere in the world and including each patent and

patent application referred to in Item A of Schedule II attached hereto;

(b)           all reissues, divisions,

continuations, continuations-in-part, extensions, renewals and reexaminations

of any of the items described in clause (a);

(c)           all patent licenses, including each

patent license referred to in Item B of Schedule II attached hereto; and

 

4

 

(d)           all Proceeds of, and rights

associated with, the foregoing (including license royalties and  Proceeds of infringement suits), the right

to sue third parties for past, present or future infringements of any patent or

patent application, including any patent or patent application referred to in Item

A of Schedule II attached hereto, and for breach or enforcement of

any patent license, including any patent license referred to in Item B of

Schedule II attached hereto, and all rights corresponding thereto throughout

the world.

“Payment

Intangibles” has the meaning provided in the U.C.C.

“Promissory

Notes” has the meaning provided in the U.C.C.

“Proceeds”

has the meaning provided in the U.C.C., and shall include, in any event, with

respect to the Grantor, any and all currently owned or after-acquired (a)

Receivables, Chattel Paper, Instruments, Investment Property, cash or other

forms of money, currency or funds or other property of any nature, type or land

whatsoever payable to or renewable by the Grantor from time to time in respect

of the Collateral, including upon the sale, lease, license, exchange or other

disposition of any Collateral, (b) proceeds of any insurance, indemnity,

warranty or guaranty payable to the Grantor from time to time with respect to

any of the Collateral, including by reason of the loss, nonconformity or

interference with the use of, defects or infringement of rights in, or damage

to, any of the Collateral, (c) payments (in any form whatsoever) made or due

and payable to the Grantor from time to time in connection with any

requisition, confiscation, condemnation, seizure or forfeiture of all or any

part of the Collateral by any governmental authority (or any person acting

under color of governmental authority), (d) claims of the Grantor against third

parties arising out of the loss, nonconformity, interference with the use of,

defects or infringements of rights in, or damage to, any of the Collateral,

including any claim (i) for past, present or future infringement of any patent

or patent license, copyright or copyright license or (ii) for past, present or future

infringement or dilution of any Trademark or Trademark license or for injury to

the goodwill associated with any Trademark, Trademark registration or Trademark

licensed under any Trademark license, (e) certificates, dividends, cash,

Instruments or other forms of money, currency or funds and other Property

received or distributed in respect of or in exchange for any Investment

Property, (f) cash or other forms of money, currency or funds and other

proceeds received under and in respect of any letter of credit or other support

obligation, (g) rights arising out of any of the Collateral, and (h) other

property of any nature, type or kind whatsoever from time to time paid or

payable under or in connection with, collected on, or distributed on account of,

any of the Collateral.

“Receivables”

means “accounts” (as such term is defined in the U.C.C.), including but

not limited to rights to payments for goods sold or leased or services

rendered, whether now existing or hereafter arising, including, without limitation,

rights evidenced by an account, note, Contract, security agreement, Chattel

Paper, or other evidence of indebtedness or security, together with (a) all

security pledged, assigned, hypothecated or granted to or held by the Grantor

to secure the foregoing, (b) all of the Grantor’s right, title and interest in

and to any goods, the sale of which gave rise thereto, (c) all guarantees,

endorsements and indemnifications on, or of, any of the 

 

5

 

foregoing,

(d) all powers of attorney for the execution of any evidence of indebtedness or

security or other writing in connection therewith, (e) all books, records,

ledger cards, and invoices relating thereto, (f) all evidences of the filing of

financing statements and other statements and the registration of other

Instruments in connection therewith and amendments thereto, notices to other

creditors or secured parties, and certificates from filing or other

registration officers, (g) all credit information, reports and memoranda

relating thereto and (h) all other writings related in any way to the

foregoing.

“Secured

Obligations” is defined in Section 2.2.

“Secured

Party” is defined in the preamble.

“Securities

Account” has the meaning provided in the U.C.C., including without

limitation those Securities Accounts listed in Item H of Schedule I

hereto.

“Security

Agreement” is defined in the preamble.

“Supporting

Obligations” has the meaning provided in the U.C.C.

“Termination

Date” means the date on which all Obligations have indefeasibly been paid

in full in cash, all Commitments have been fully terminated and all Letters of

Credit and Lender Guaranties have been canceled or otherwise terminated.

“Trademark

Collateral” means:

(a)   all trademarks, trade names, corporate names,

company names, business names, fictitious business names, trade styles, service

marks, certification marks, collective marks, logos, other source of business

identifiers, prints and labels on which any of the foregoing have appeared or

appear, designs and General Intangibles of a like nature (all of the foregoing

items in this clause (a) being collectively called a “Trademark”),

now existing anywhere in the world or hereafter adopted or acquired, whether

currently in use or not, all registrations and recordings thereof and all

applications in connection therewith, whether pending or in preparation for

filing, including registrations, recordings and applications in the United

States Patent and Trademark Office or in any office or agency of the United States

of America or any State thereof or any foreign country, including those

referred to in Item A of Schedule III attached hereto;

(b)           all Trademark licenses, including

each Trademark license referred to in Item B of Schedule III

attached hereto;

(c)           all reissues, extensions or renewals

of any of the items described in clauses (a) and (b);

 

6

 

(d)           all of the goodwill of the business

connected with the use of, and symbolized by the items described in, clauses

(a) and (b); and

(e)           all Proceeds of, and rights

associated with, the foregoing, including any claim by the Grantor against

third parties for past, present or future infringement or dilution of any

Trademark, Trademark registration or Trademark license, including any

Trademark, Trademark registration or Trademark license referred to in Item A

and Item B of Schedule III attached hereto, or for any injury to

the goodwill associated with the use of any such Trademark or for breach or

enforcement of any Trademark license.

“Trade

Secrets Collateral” means all common law and statutory trade secrets and

all other confidential or proprietary or useful information and all know-how

obtained by or used in or contemplated at any time for use in the business of

the Grantor (all of the foregoing being collectively called a “Trade Secret”),

whether or not such Trade Secret has been reduced to a writing or other

tangible form, including all documents and things embodying, incorporating or

referring in any way to such Trade Secret, all Trade Secret licenses, including

each Trade Secret license referred to in Schedule V attached hereto, and

including the right to sue for and to enjoin and to collect damages for the

actual or threatened misappropriation of any Trade Secret and for the breach or

enforcement of any such Trade Secret license.

“U.C.C.”

means the Uniform Commercial Code, as in effect from time to time in the State

of California; provided, however, in the event that, by reason of

mandatory provisions of law, any or all of the attachment, perfection or

priority of Secured Party’s security interest in any Collateral is governed by

the Uniform Commercial Code as in effect in a jurisdiction other than the State

of California, the term “U.C.C.” shall mean the Uniform Commercial Code

(including the Articles thereof) as in effect at such time in such other

jurisdiction for purposes of the provisions hereof relating to such attachment,

perfection or priority and for purposes of definitions related to such

provisions.

SECTION 1.2             Credit Agreement Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Security Agreement, including

its preamble and recitals, have the meanings provided in the Credit Agreement.

SECTION 1.3             U.C.C. Definitions.  Unless otherwise defined herein or in the

Credit Agreement or the context otherwise requires, terms for which meanings

are provided in the U.C.C. are used in this Security Agreement, including its

preamble and recitals, with such meanings.

ARTICLE II

SECURITY INTEREST

 

7

 

SECTION 2.1             Grant of Security.  The Grantor hereby assigns and pledges to

the Secured Party, and hereby grants to the Secured Party, to secure the

Secured Obligations, a security interest in all of the following, whether now

or hereafter existing or acquired by the Grantor (the “Collateral”):

(a)           the Collateral Account;

(b)           all Commercial Tort Claims;

(c)           all Computer Hardware and Software

Collateral;

(d)           all Contracts, together with any

Contract Rights arising thereunder;

(e)           all Deposit Accounts;

(f)            all Equipment;

(g)           all Fixtures;

(h)           all Intellectual Property Collateral;

(i)            all Inventory;

(j)            all Investment Property;

(k)           all Letter of Credit Rights;

(l)            all Receivables;

(m)          all Securities Accounts;

(n)           all Supporting Obligations;

(o)     all other Goods, Chattel Paper, Documents,

Instruments (including, without limitation, Promissory Notes), and General

Intangibles (including, without limitation, Payment Intangibles and tax

refunds) of the Grantor now or hereafter existing;

(p)           all books, records, writings, data

bases, information and other property relating to, used or useful in connection

with, evidencing, embodying, incorporating or referring to, any of the

foregoing in this Section 2.1;

(q)           all of the Grantor’s other personal

property and rights of every kind and description and interests therein; and

 

8

 

(r)            all products and Proceeds of and

from any and all of the foregoing Collateral (including Proceeds which

constitute property of the types described in clauses (a) through (q)

and, to the extent not otherwise included, all payments under insurance which

the Grantor is entitled to receive (whether or not the Secured Party is the

loss payee thereof), or any indemnity, warranty or guaranty, payable by reason

of loss or damage to or otherwise with respect to any of the foregoing

Collateral.

Notwithstanding

anything herein to the contrary, in no event shall the Collateral include, and

the Grantor shall not be deemed to have granted a security interest in, any of

the Grantor’s rights or interests in any license, contract or agreement to

which the Grantor is a party or any of its rights or interests thereunder to

the extent, but only to the extent, that such a grant would, under the express

terms of such license, contract or agreement or otherwise, result in a breach

of the terms of, or constitute a default under such license, contract or

agreement (other than to the extent that any such term would be rendered

ineffective pursuant to Sections 9407(a) or 9408(a) of the U.C.C. or any other

applicable law (including the Bankruptcy Code) or principles of equity);

provided, that immediately upon the ineffectiveness, waiver, lapse or

termination of any such provision, the Collateral shall include, and the

Grantor shall have granted a security interest in, all such rights and

interests as if such provision had never been in effect.

SECTION 2.2             Security for Obligations.  This Security Agreement secures the payment

of all Obligations of the Grantor now or hereafter existing under the Credit

Agreement and each other Loan Document, whether for principal, interest, costs,

fees, expenses, Interest Rate Hedging Obligations or otherwise, with all such

obligations being collectively referred to as the “Secured Obligations”.

SECTION 2.3             Continuing Security Interest;

Transfer of Notes.  This Security

Agreement shall create a continuing security interest in the Collateral and

shall:

(a)           remain in full force and effect until

the Termination Date;

(b)           be binding upon the Grantor and its

successors, transferees and assigns; and

(c)           inure to the benefit of the Secured

Party.

The

Secured Party may assign or otherwise transfer (in whole or in part) the

Revolving Note or any Credit Extension held by it to any other Person or

entity, and such other Person or entity shall thereupon become vested with all

the rights and benefits in respect thereof granted to the Secured Party under

any Loan Document (including this Security Agreement) or otherwise, subject,

however, to the provisions of Section 10.10 of the Credit Agreement.

SECTION 2.4             Grantor Remains Liable.  Anything herein to the contrary

notwithstanding:

 

9

 

(a)           the Grantor shall remain liable under

the Contracts and agreements included in the Collateral to the extent set forth

therein, and shall perform all of its duties and obligations under such

Contracts and agreements to the same extent as if this Security Agreement had not

been executed;

(b)           the exercise by the Secured Party of

any of its rights hereunder shall not release the Grantor from any of its

duties or obligations under any such Contracts or agreements included in the

Collateral; and

(c)           the Secured Party shall not have any

obligation or liability under any such Contracts or agreements included in the

Collateral by reason of this Security Agreement, nor shall the Secured Party be

obligated to perform any of the obligations or duties of the Grantor thereunder

or to take any action to collect or enforce any claim for payment assigned

hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1     Representations and Warranties.  The Grantor represents and warrants to the

Secured Party as set forth in this Section.

SECTION 3.1.1              Location of Collateral, etc.  All of the Equipment and Inventory of the

Grantor is located at the places specified in Item A and Item B,

respectively, of Schedule I hereto, except for such property in transit

in the ordinary course.  None of the

Equipment and Inventory has, within the four (4) months preceding the date of

this Security Agreement, been located at any place other than the places

specified in Item A and Item B, respectively, of Schedule I

hereto except as set forth in the footnote thereto.  The place(s) of business and chief executive office of the

Grantor and the office(s) where the Grantor keeps its records concerning the

Receivables, and all originals of all Chattel Paper  which evidence Receivables, are located at the address set forth

in Item D of Schedule I hereto. 

The Grantor has no trade names other than those set forth in Item E

of Schedule I hereto.  During the

four (4) months preceding the date hereof, the Grantor has not been known by

any legal name different from the one set forth on the signature page hereto,

nor has the Grantor been the subject of any merger or other corporate

reorganization, except as set forth in Item F of Schedule I

hereto.  All Receivables, if such

receivables are in excess of Two Hundred Fifty Thousand Dollars ($250,000), and

otherwise at the request of Secured Party, evidenced by a promissory note or

other Instrument, negotiable Document or Chattel Paper have been duly endorsed

and accompanied by duly executed instruments of transfer or assignment, all in

form and substance satisfactory to the Secured Party and delivered and pledged

to the Secured Party pursuant to Section 4.1.7 hereof.

SECTION 3.1.2              Ownership, No Liens, etc.  The Grantor and/or its Subsidiaries (with

respect to Collateral shown on Schedules II through V hereto) owns its

Collateral free and clear of any Lien, security interest, charge or encumbrance

except for the security interest created by this 

 

10

 

Security Agreement and

except as permitted by the Credit Agreement. 

No effective financing statement or other instrument similar in effect

covering all or any part of the Collateral is on file in any recording office,

except such as may have been filed in favor of the Secured Party relating to

this Security Agreement or as have been filed in connection with Liens

permitted pursuant to Section 8.3 of the Credit Agreement.

SECTION 3.1.3              Possession and Control.  The Grantor has exclusive possession and

control of its Equipment and Inventory, except for such property in transit in

the ordinary course.

SECTION 3.1.4              Negotiable Documents,

Instruments and Chattel Paper.  The

Grantor has, contemporaneously herewith, delivered to the Secured Party

possession of all originals of all negotiable Documents, Instruments and

Chattel Paper currently owned or held by the Grantor (duly endorsed in blank,

if requested by the Secured Party).

SECTION 3.1.5              Intellectual Property

Collateral.  With respect to any

Intellectual Property Collateral the loss, impairment or infringement of which

is reasonably likely to have a Material Adverse Effect:

(a)           such Intellectual Property Collateral

is subsisting and has not been adjudged invalid or unenforceable, in whole or

in part;

(b)           such Intellectual Property Collateral

is valid and enforceable;

(c)           the Grantor (and/or its Subsidiaries)

has made all necessary filings and recordations to protect its interest in such

Intellectual Property Collateral, including recordations of all of its

interests in the Patent Collateral and Trademark Collateral in the United

States Patent and Trademark Office and in corresponding offices throughout the

world and its claims to the Copyright Collateral in the United States Copyright

Office and in corresponding offices throughout the world, in each case where it

is commercially reasonable to do so;

(d)           other than as previously disclosed in

writing to the Secured Party, the Grantor (and/or its Subsidiaries) is the

exclusive owner of the entire and unencumbered right, title and interest in and

to such Intellectual Property Collateral and no claim has been made that the

use of such Intellectual Property Collateral does or may violate the asserted

rights of any third party; and

(e)           the Grantor has performed and will

continue to perform and cause all acts and has paid and will continue to pay

all required fees and taxes to maintain each and every item of Intellectual

Property Collateral in full force and effect throughout the world, as

applicable, unless the Grantor (i) has reasonably and in good faith determined

that any of the Intellectual Property Collateral is of negligible economic

value to the Grantor, or (ii) has a reasonable and valid business purpose to do

otherwise.

 

11

 

The

Grantor owns directly or is entitled to use by license or otherwise, all

patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,

technology, know-how, processes and rights with respect to any of the foregoing

necessary to the conduct of the Grantor’s business as presently conducted.

SECTION 3.1.6              Validity, Priority, etc.  Assuming the proper filing of one or more

financing statements identifying the Collateral with the proper local, state

and/or federal authorities, the security interests in the Collateral granted to

the Secured Party hereunder constitute valid and continuing first priority

perfected security interests in the Collateral (subject to Liens permitted

under the Credit Agreement), securing payment of the Secured Obligations, to

the extent such security interests may be perfected by the filing of financing

statements or other filings with the United States Patent and Trademark Office

or United States Copyright Office.

SECTION 3.1.7              Authorization, Approval, etc.  Except as have been obtained or made and are

in full force and effect, no authorization, approval or other action by, and no

notice to or filing with, any governmental authority or regulatory body is

required under U.S. law, except for necessary filings in connection with the

U.C.C., either:

(a)           for the grant by the Grantor of the

security interest granted hereby or for the execution, delivery and performance

of this Security Agreement by the Grantor; or

(b)           for the perfection of or the exercise

by the Secured Party of its rights and remedies hereunder.

SECTION 3.1.8              Compliance with Laws.  The Grantor is in compliance in all material

respects with the requirements of all applicable laws (including the provisions

of the Fair Labor Standards Act), rules, regulations and orders of every

governmental authority, the non-compliance with which is reasonably likely to

have a Material Adverse Effect or which is reasonably likely to materially

adversely affect the value of the Collateral or the worth of the Collateral as

collateral security.

ARTICLE IV

COVENANTS

SECTION 4.1             Certain Covenants.  The Grantor covenants and agrees that until

the Revolving Loan Commitment and Letter of Credit Commitment have expired or

terminated, and all Secured Obligations have been paid and performed in full,

the Grantor will perform, comply with and be bound by the obligations set forth

in this Article.

SECTION 4.1.1              As to Equipment and Inventory.  The Grantor hereby agrees that it shall:

 

12

 

(a)           keep all the Equipment and Inventory

(other than Inventory sold or certain Equipment in transit and is permitted

under the Credit Agreement in the ordinary course of business, or except as

otherwise provided in the Credit Agreement or any of the other Loan Documents)

at the places therefor specified in Section 3.1.1 hereof or, upon thirty

(30) days’ prior written notice to the Secured Party, at such other places in a

jurisdiction within the United States where all representations and warranties

set forth in Article III shall be true and correct, and all action

required pursuant to the first sentence of Section 4.1.7 hereof

shall have been taken with respect to the Equipment and Inventory

(collectively, “Specified Locations”);

(b)           cause the Equipment to be maintained

and preserved in the same condition, repair and working order as when new,

ordinary wear and tear excepted, and in accordance with any manufacturer’s

manual or good business practice; and forthwith, or in the case of any loss or

damage to any of the Equipment, as quickly as practicable after the occurrence

thereof, make or cause to be made all repairs, replacements, and other

improvements in connection therewith which are necessary or desirable to such

end; and promptly furnish to the Secured Party a statement respecting any material

loss or damage to any of the Equipment; and

(c)           pay promptly when due all property

and other taxes, assessments and governmental charges or levies imposed upon,

and all claims (including claims for labor, materials and supplies) against,

the Equipment and Inventory, except to the extent the validity thereof is being

contested in good faith by appropriate proceedings and for which adequate

reserves in accordance with GAAP have been set aside.

SECTION 4.1.2              As to Receivables and Contracts.

(a)           The Grantor shall keep its place(s)

of business and chief executive office and the office(s) where it keeps its

records concerning the Receivables, and all originals of all Chattel Paper

which evidences Receivables, located at the address(es) set forth in Item D

of Schedule I hereto, or, upon thirty (30) days’ prior written notice to

the Secured Party, at such other locations in a jurisdiction within the United

States where all actions required by the first sentence of Section 4.1.7

hereof shall have been taken with respect to the Receivables; not change its

name except upon thirty (30) days’ prior written notice to the Secured Party;

hold and preserve such records and Chattel Paper; and permit representatives of

the Secured Party at any time during normal business hours to inspect (upon

reasonable prior written notice so long as no Event of Default shall have

occurred and be continuing) and make abstracts from such records and Chattel

Paper.  In addition, the Grantor shall

give the Secured Party a supplement to Schedule I hereto on each date a

Compliance Certificate is required to be delivered to the Secured Party under

the Credit Agreement, which shall set forth any changes to the information set

forth in Section 3.1.1 hereof.

 

13

 

(b)           Upon written notice by the Secured

Party to the Grantor pursuant to this clause, all Proceeds of Collateral

received by the Grantor shall be delivered in kind to the Secured Party for

deposit to a deposit account (the “Collateral Account”) of the Grantor

maintained with Comerica Bank-California and the Grantor shall not commingle

any such Proceeds, and shall hold separate and apart from all other property,

all such Proceeds in express trust for the benefit of the Secured Party until

delivery thereof is made to the Secured Party. 

The Secured Party will not give the notice referred to in the preceding

sentence unless there shall have occurred and be continuing an Event of

Default.

(c)           The Secured Party shall have the

right to apply any amount in the Collateral Account to the payment of any

Secured Obligations which are due and payable or payable upon demand, or to the

payment of any Secured Obligations at any time that an Event of Default shall

exist.

(d)           The Grantor shall not enter into any

government contract which prohibits assignment to the Secured Party of any

payments due or to become due thereunder, other than contracts for which the

government has determined that a prohibition on assignment of claims is in the

government’s interest.

(e)           Without the Lender’s prior written

consent, which consent shall not be unreasonably withheld, the Grantor shall

not cause the aggregate value of Receivables or Contracts or Contract Rights

and the value of similar Receivables and Contracts as to which a Lien in favor

of the Secured Party cannot be granted hereunder pursuant to the final

paragraph of Section 2.1 hereof, or pursuant to any Subsidiary Security

Agreement, to exceed $500,000 at any time.

SECTION 4.1.3              As to Collateral.

(a)           Until the occurrence and continuance

of an Event of Default, the Grantor (i) may, in the ordinary course of its

business, at its own expense, sell, lease or furnish under the contracts of

service any of the Inventory normally held by the Grantor for such purpose, and

use and consume, in the ordinary course of its business, any raw materials,

work in process or materials normally held by the Grantor for such purpose,

(ii) will, at its own expense, endeavor to collect, as and when due, all

amounts due with respect to any of the Collateral, including the taking of such

action with respect to such collection as the Secured Party may reasonably

request following the occurrence of an Event of Default or, in the absence of

such request, as the Grantor may reasonably deem advisable, and (iii) may

grant, in the ordinary course of business, to any party obligated on any of the

Collateral, any rebate, refund or allowance to which such party may be lawfully

entitled, and may accept, in connection therewith, the return of goods, the

sale or lease of which shall have given rise to such Collateral.  The Secured Party may, at any time following

an 

 

14

 

Event of Default, whether

before or after any revocation of such power and authority or the maturity of

any of the Secured Obligations, notify any parties obligated on any of the

Collateral to make payment to the Secured Party of any amounts due or to become

due thereunder and enforce collection of any of the Collateral by suit or

otherwise and surrender, release, or exchange all or any part thereof, or

compromise or extend or renew for any period (whether or not longer than the

original period) any indebtedness thereunder or evidenced thereby.  Upon request of the Secured Party following

an Event of Default, the Grantor will, at its own expense, notify any parties

obligated on any of the Collateral to make payment to the Secured Party of any

amounts due or to become due thereunder.

(b)           After an Event of Default, the

Secured Party is authorized to endorse, in the name of the Grantor, any item,

howsoever received by the Secured Party, representing any payment on or other

Proceeds of any of the Collateral.

SECTION 4.1.4              As to Intellectual Property

Collateral.  The Grantor covenants

and agrees to comply with the following provisions as such provisions relate to

any Intellectual Property Collateral of the Grantor:

(a)           The Grantor shall not do any act, or

omit to do any act, whereby any of the Patent Collateral may lapse or become

abandoned or dedicated to the public or unenforceable, unless the Grantor shall

either (i) reasonably and in good faith determine that any of the Patent

Collateral is of negligible economic value to the Grantor, or (ii) has a

reasonable and valid business purpose to do otherwise.

(b)           The Grantor shall not, and the

Grantor shall not permit any of its licensees to:

(i)      fail to continue to use any of the

Trademark Collateral in order to maintain all of the Trademark Collateral in

full force free from any claim of abandonment for non-use,

(ii)           fail to maintain as in the past the

quality of products and services offered under all of the Trademark Collateral,

(iii)          fail to employ all of the Trademark

Collateral registered with any Federal or state or foreign authority with an

appropriate notice of such registration,

(iv)          adopt or use any other Trademark which

is confusingly similar or a colorable imitation of any of the Trademark

Collateral,

(v)           use any of the Trademark Collateral

registered with any Federal or state or foreign authority except for the uses

for which registration or 

 

15

 

application for

registration of all of the Trademark Collateral has been made, and

(vi)          do or permit any act or knowingly omit

to do any act whereby any of the Trademark Collateral may lapse or become

invalid or unenforceable,

unless

the Grantor shall either (x) reasonably and in good faith determine that any of

the Trademark Collateral is of negligible economic value to the Grantor, or (y)

have a reasonable and valid business purpose to do otherwise.

(c)           The Grantor shall not do or permit

any act or knowingly omit to do any act whereby any of the Copyright Collateral

or any of the Trade Secrets Collateral may lapse or become invalid or

unenforceable or be placed in the public domain except upon expiration of the

end of an unrenewable term of a registration thereof, unless the Grantor shall

either (i) reasonably and in good faith determine that any of the Copyright

Collateral or any of the Trade Secrets Collateral is of negligible economic

value to the Grantor, or (ii) have a reasonable and valid business purpose to

do otherwise.

(d)           The Grantor shall notify the Secured

Party immediately if it knows, or has reason to know, that any application or

registration relating to any material item of the Intellectual Property

Collateral may become abandoned or dedicated to the public or be placed in the

public domain or become invalid or unenforceable, or of any adverse

determination or development (including the institution of, or any such

determination or development in, any proceeding in the United States Patent and

Trademark Office, the United States Copyright Office or any foreign counterpart

thereof or any court) regarding the Grantor’s ownership of any of the Intellectual

Property Collateral, its right to register the same or to keep and maintain and

enforce the same.

(e)           In no event shall the Grantor or any

of its agents, employees, designees or licensees file an application for the

registration of any Intellectual Property Collateral with the United States

Patent and Trademark Office, the United States Copyright Office or any similar

office or agency in any other country or any political subdivision thereof,

unless it promptly upon such filing informs the Secured Party, and upon request

of the Secured Party, executes and delivers any and all agreements,

instruments, documents and papers as the Secured Party may reasonably request

to evidence the Secured Party’s security interest in such Intellectual Property

Collateral and the goodwill and general intangibles of the Grantor relating

thereto or represented thereby.

 

16

 

 

(f)            The Grantor shall take all necessary

steps, including in any proceeding before the United States Patent and

Trademark Office, the United States Copyright Office or any similar office or

agency in any other country or any political subdivision thereof, to maintain

and pursue any application (and to obtain the relevant registration) filed with

respect to, and to maintain any registration of, the Intellectual Property

Collateral, including the filing of applications for renewal, affidavits of

use, affidavits of incontestability and opposition, interference and

cancellation proceedings and the payment of fees and taxes (except to the

extent that dedication, abandonment or invalidation is permitted under the

foregoing clauses (a), (b) and (c)).

(g)           The Grantor shall, contemporaneously

herewith, execute and deliver to the Secured Party a Patent Security Agreement,

a Trademark Security Agreement and a Copyright Security Agreement in the forms

of Exhibit A, Exhibit B and Exhibit C hereto,

respectively, and shall execute and deliver to the Secured Party any other

document required to acknowledge or register or perfect the Secured Party’s

interest in any part of the Intellectual Property Collateral.

SECTION 4.1.5              Insurance.  The Grantor will maintain or cause to be

maintained with financially sound and reputable insurance companies insurance

with respect to its business and properties (including the Equipment and

Inventory) against such casualties and contingencies and of such types and in

such amounts as is required pursuant to the Credit Agreement and will, upon the

request of the Secured Party, furnish a certificate of a reputable insurance

broker setting forth the nature and extent of all insurance maintained by the

Grantor in accordance with this Section. 

Without limiting the foregoing, the Grantor further agrees as follows:

(a)           Each policy for property insurance

shall show the Secured Party as loss payee.

(b)           Each policy for liability insurance

shall show the Secured Party as an additional insured.

(c)           Each insurance policy shall provide

that at least thirty (30) days’ prior written notice of cancellation or of lapse

shall be given to the Secured Party by the insured (or at least ten (10) days’

prior written notice of cancellation shall be given with respect to failure to

pay the premium).

(d)           The Grantor shall, if so requested by

the Secured Party, deliver to the Secured Party a copy of each insurance

policy.

SECTION 4.1.6              Transfers and Other Liens.  The Grantor shall not:

(a)           sell, assign (by operation of law or

otherwise) or otherwise dispose of any of the Collateral, except as may be

permitted by the Credit Agreement; or

 

17

 

(b)           create or suffer to exist any Lien or

other charge or encumbrance upon or with respect to any of the Collateral,

except for the security interest created by this Security Agreement and except

as permitted by the Credit Agreement, including the cure periods set forth

therein.

SECTION 4.1.7              Further Assurances, etc.  The Grantor agrees that, from time to time

at its own expense, it will promptly execute and deliver all further

instruments and documents, and take all further action, that may be necessary

or desirable (provided that it is reasonable), or that the Secured Party may

reasonably request, in order to perfect, preserve and protect any security

interest granted or purported to be granted hereby or to enable the Secured

Party to exercise and enforce its rights and remedies hereunder with respect to

any Collateral.  Without limiting the

generality of the foregoing, the Grantor will:

(a)           mark conspicuously each Document

(evidencing title) included in the Inventory, each Chattel Paper included in

the Receivables, and at the request of the Secured Party, upon the occurrence

and during the continuance of an Event of Default each of its records

pertaining to the Collateral with a legend, in form and substance satisfactory

to the Secured Party, indicating that such Document, Chattel Paper, or

Collateral is subject to the security interest granted hereby;

(b)           if any Receivable shall be evidenced

by a Promissory Note or other Instrument, negotiable Document or Chattel Paper,

deliver and pledge to the Secured Party hereunder such Promissory Note,

Instrument, negotiable Document or Chattel Paper duly endorsed and accompanied

by duly executed Instruments of transfer or assignment, all in form and substance

satisfactory to the Secured Party; provided, however, if such evidences amounts

less than Two Hundred Fifty Thousand Dollars ($250,000) such delivery and

pledge shall be at Secured Party’s request;

(c)           execute and file such financing or

continuation statements, or amendments thereto, and such other Instruments or

notices as may be necessary or desirable, or as the Secured Party may

reasonably request, in order to perfect and preserve the security interests and

other rights granted or purported to be granted to the Secured Party hereby;

(d)           promptly execute and file any notice

or other required form under or pursuant to the federal assignment of claims

statute, 31 U.S.C. § 3727, any successor or amended version thereof or any

regulation promulgated under or pursuant to any version thereof, as the Secured

Party may reasonably request; and

(e)           furnish to the Secured Party, from

time to time at the Secured Party’s request, statements and schedules further

identifying and describing the Collateral and such other reports in connection

with the Collateral as the Secured Party may reasonably request, all in

reasonable detail.

 

18

 

With

respect to the foregoing and the grant of the security interest hereunder, the Grantor

hereby authorizes the Secured Party to file one or more financing or

continuation statements, and amendments thereto, relative to all or any part of

the Collateral without the signature of the Grantor.  A carbon, photographic or other reproduction of this Security

Agreement or any financing statement covering the Collateral or any part

thereof shall be sufficient as a financing statement where permitted by law.

ARTICLE V

ATTORNEY IN FACT

SECTION 5.1             Secured

Party Appointed Attorney-in-Fact. 

The Grantor hereby irrevocably appoints the Secured Party the Grantor’s

attorney-in-fact, with full authority in the place and stead of the Grantor and

in the name of the Grantor or otherwise, from time to time in the Secured

Party’s discretion, following the occurrence and continuation of an Event of

Default, to take any action and to execute any instrument which the Secured

Party may deem necessary or advisable to accomplish the purposes of this

Security Agreement, including:

(a)           to ask, demand, collect, sue for,

recover, compromise, receive and give acquittance and receipts for moneys due

and to become due under or in respect of any of the Collateral;

(b)           to receive, endorse, and collect any

drafts or other Instruments, Documents and Chattel Paper, in connection with clause

(a) above;

(c)           to file any claims or take any action

or institute any proceedings which the Secured Party may deem necessary or

desirable for the collection of any of the Collateral or otherwise to enforce

the rights of the Secured Party with respect to any of the Collateral; and

(d)           to perform the affirmative

obligations of the Grantor hereunder (including all obligations of the Grantor

pursuant to Section 4.1.7 hereof).

The

Grantor hereby acknowledges, consents and agrees that the power of attorney

granted pursuant to this Section is irrevocable until the Obligations are

satisfied and coupled with an interest.

SECTION 5.2             Secured Party May Perform.  If any Grantor fails to perform any

agreement contained herein, the Secured Party may itself perform, or cause

performance of, such agreement, and the expenses of the Secured Party incurred

in connection therewith shall be payable by the Grantor pursuant to Section

6.2 hereof.

SECTION 5.3             Secured Party Has No Duty.  In addition to, and not in limitation of, Section

2.4(c) hereof, the powers conferred on the Secured Party hereunder are

solely to protect its interest in the Collateral and shall not impose any duty

on it to exercise any such powers. 

Except for reasonable 

 

19

 

care of any Collateral in

its possession and the accounting for moneys actually received by it hereunder,

the Secured Party shall have no duty as to any Collateral or as to the taking

of any necessary steps to preserve rights against prior parties or any other

rights pertaining to any Collateral.

SECTION 5.4             Reasonable Care.  Other than the exercise of reasonable care

in the custody and preservation of the Collateral, the Secured Party shall have

no duty with respect thereto.  The Secured

Party shall be deemed to have exercised reasonable care in the custody and

preservation of the Collateral in its possession if the Collateral is accorded

treatment substantially equal to that which the Secured Party accords its own

property.  The Secured Party shall not

be liable or responsible for any loss or damage to any of the Collateral, or

for any diminution in the value thereof, by reason of the act or omission of

any agent or bailee selected by the Secured Party in good faith.

ARTICLE VI

REMEDIES

SECTION 6.1             Certain Remedies.  If any Event of Default shall have occurred

and be continuing:

(a)           The Secured Party may exercise in

respect of the Collateral, in addition to other rights and remedies provided

for herein or otherwise available to it, all the rights and remedies of a

secured party under the U.C.C. (whether or not the U.C.C. applies to the

affected Collateral) and also may:

(i)            require the Grantor to, and the

Grantor hereby agrees that it will, at its expense and upon the request of the Secured

Party forthwith, assemble all or part of the Collateral as directed by the

Secured Party and make it available to the Secured Party at a place to be

designated by the Secured Party which is reasonably convenient to both parties;

(ii)           reclaim, take possession, recover,

store, maintain, finish, repair, prepare for sale or lease, shop, or advertise

for sale or lease the Collateral;

(iii)          without notice except as specified

below, sell the Collateral or any part thereof in one or more parcels at public

or private sale, at any of the Secured Party’s offices or elsewhere, for cash,

on credit or for future delivery, and upon such other terms as the Secured

Party may deem commercially reasonable. 

The Grantor agrees that, to the extent notice of sale shall be required

by law, at least ten (10) days’ prior notice to the Grantor of the time and

place of any public sale or the time after which any private sale is to be made

shall constitute reasonable notification. 

The Secured Party shall not be obligated to make any sale of Collateral

regardless of notice of sale having been given.  The Secured Party may adjourn any public or private sale from 

 

20

 

time to time by

announcement at the time and place fixed therefor, and such sale may, without

further notice, be made at the time and place to which it was so adjourned;

(iv)          withdraw all monies, securities and

Instruments in the Collateral Account for application to the Obligations; and

(v)           license or sublicense, whether on an

exclusive or nonexclusive basis, any Trademark Collateral, Patent Collateral or

Copyright Collateral included in the Intellectual Property Collateral for such

term and on such conditions and in such manner as the Secured Party shall in

its sole judgment determine.

(b)           All cash proceeds received by the

Secured Party in respect of any sale of, collection from, or other realization

upon all or any part of the Collateral may, in the discretion of the Secured

Party, be held by the Secured Party as collateral for, and/or then or at any

time thereafter applied (after payment of any amounts payable to the Secured

Party pursuant to Section 6.2) in whole or in part by the Secured Party

against, all or any part of the Secured Obligations in such order as the Secured

Party shall elect.  The Grantor shall

remain liable for any deficiency if the proceeds of any sale or other

disposition of the Collateral are insufficient to pay all amounts to which the

Secured Party is entitled from the Grantor. 

Any surplus of such cash or cash proceeds held by the Secured Party and

remaining after payment in full in cash of all the Secured Obligations shall be

paid over to the applicable Grantor or to whomsoever may be lawfully entitled

to receive such surplus.

(c)           To the extent the Grantor has the

right to do so, the Grantor authorizes the Secured Party to take possession of

the Collateral, or any part of it, and to pay, purchase, contract, or

compromise any encumbrance, charge, or Lien which, in the opinion of the

Secured Party, appears to be prior or superior to its security interest.

(d)           The Secured Party shall have the

right upon any such public sale or sales, and, to the extent permitted by law,

upon any such private sale or sales, to purchase the whole or any part of said

Collateral so sold, free of any right or equity of redemption, which equity of

redemption the Grantor hereby releases.

(e)           To the maximum extent permitted by

law, the Grantor waives all claims, damages, and demands against the Secured

Party arising out of the repossession, retention, or sale of the Collateral.

(f)            As to any Collateral constituting

certificated securities or uncertificated securities, if, at any time when the

Secured Party shall determine to exercise its right to sell the whole or any

part of such Collateral hereunder, such Collateral or the part thereof to be

sold shall not, for any reason whatsoever, be effectively registered under 

 

21

 

Securities Act of 1933,

as amended (as so amended the “Act”), the Secured Party may, in its

discretion (subject only to applicable requirements of law), sell such

Collateral or part thereof by private sale in such manner and under such

circumstances as the Secured Party may deem necessary or advisable, but subject

to the other requirements of this Section 6.1(f), and shall not be

required to effect such registration or cause the same to be effected.  Without limiting the generality of the

foregoing, in any such event the Secured Party may, in its sole discretion, (i)

in accordance with applicable securities laws, proceed to make such private

sale notwithstanding that a registration statement for the purpose of

registering such Collateral or part thereof could be or shall have been filed

under the Act; (ii) approach and negotiate with a single possible purchaser to

effect such sale; and (iii) restrict such sale to a purchaser who will

represent and agree that such purchaser is purchasing for its own account, for

investment, and not with a view to the distribution or sale of such Collateral

or part thereof.  In addition to a

private sale as provided above in this Section 6.1(f), if any of such

Collateral shall not be freely distributable to the public without registration

under the Act at the time of any proposed sale hereunder, then the Secured

Party shall not be required to effect such registration or cause the same to be

effected but may, in its sole discretion (subject only to applicable

requirements of law), require that any sale hereunder (including a sale at auction)

be conducted subject to such restrictions as the Secured Party may, in its sole

discretion, deem necessary or appropriate in order that such sale

(notwithstanding any failure so to register) may be effected in compliance with

the Bankruptcy Code and other laws affecting the enforcement of creditors’

rights and the Act and all applicable state securities laws.

(g)           The Grantor agrees that in any sale

of any of such Collateral, whether at a foreclosure sale or otherwise, the

Secured Party is hereby authorized to comply with any limitation or restriction

in connection with such sale as it may be advised by counsel is necessary in

order to avoid any violation of applicable law (including compliance with such

procedures as may restrict the number of prospective bidders and purchasers,

require that such prospective bidders and purchasers have certain

qualifications and restrict such prospective bidders and purchasers to persons

who will represent and agree that they are purchasing for their own account for

investment and not with a view to the distribution or resale of such

Collateral), or in order to obtain any required approval of the sale or of the

purchaser by any governmental authority, and the Grantor further agrees that

such compliance shall not result in such sale being considered or deemed not to

have been made in a commercially reasonable manner, nor shall the Secured Party

be liable nor accountable to the Grantor for any discount allowed by the reason

of the fact that such Collateral is sold in compliance with any such limitation

or restriction.

SECTION 6.2             Indemnity and Expenses.

 

22

 

(a)           The Grantor agrees to indemnify the

Secured Party and its officers, employees, and agents from and against any and

all claims, losses and liabilities arising out of or resulting from this

Security Agreement (including enforcement of this Security Agreement), except

claims, losses or liabilities resulting from the gross negligence or willful

misconduct of the Secured Party.

(b)           The Grantor will upon demand pay to

the Secured Party the amount of any and all reasonable expenses, including the

reasonable fees and disbursements of its counsel and of any experts and agents,

which the Secured Party may incur in connection with:

(i)            the administration of this Security

Agreement;

(ii)           the custody, preservation, use or

operation of, or the sale of, collection from, or other realization upon, any

of the Collateral;

(iii)          the exercise or enforcement of any of

the rights of the Secured Party hereunder; or

(iv)          the failure by Grantor to perform or

observe any of the provisions hereof.

The

provisions of this Section 6.2 shall survive the Termination Date.

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1             Loan Document.  This Security Agreement is a Loan Document

executed pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions thereof.

SECTION 7.2             Amendments; etc.  No amendment to or waiver of any provision

of this Security Agreement nor consent to any departure by the Grantor here

from, shall in any event be effective unless the same shall be in writing and

signed by the Secured Party, and then such waiver or consent shall be effective

only in the specific instance and for the specific purpose for which given.

SECTION 7.3             Notices.  All notices and other communications

provided for hereunder shall be given in accordance with Section 10.2 of the

Credit Agreement.

SECTION 7.4             Captions.  Section captions used in this Security

Agreement are for convenience of reference only, and shall not affect the

construction of this Security Agreement.

 

23

 

SECTION 7.5             Severability.  Wherever possible each provision of this

Security Agreement shall be interpreted in such manner as to be effective and

valid under applicable law, but if any provision of this Security Agreement

shall be prohibited by or invalid under such law, such provision shall be ineffective

to the extent of such prohibition or invalidity, without invalidating the

remainder of such provision or the remaining provisions of this Security

Agreement.

SECTION 7.6             Counterparts.  This Security Agreement may be executed by

the parties hereto in several counterparts, each of which shall be deemed an

original and all of which shall constitute together but one and the same

agreement.

SECTION 7.7             Governing Law, Entire Agreement,

etc.  THIS SECURITY AGREEMENT SHALL BE DEEMED

TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF

CALIFORNIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE

SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY

PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE

STATE OF CALIFORNIA.  THIS SECURITY

AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING

BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND

SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

[Remainder of page left blank intentionally.]

 

24

 

IN

WITNESS WHEREOF, the Grantor has caused this Borrower Security Agreement to be

duly executed and delivered by its officer thereunto duly authorized as of the

date first above written.

 

 

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

	

   

  	

   

  	

  SUREBEAM CORPORATION, 

  as Grantor

  
	

   

  	

   

  	

  By:

  	

  /s/ DAVID

  A. RANE

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  David

  A. Rane 

  Senior Vice President, 

  Chief Financial Officer

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  THE TITAN CORPORATION,  

  as Secured Party

  
	

   

  	

   

  	

  By:

  	

  /s/ MARK

  W. SOPP

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Mark W. Sopp 

  Senior Vice President, 

  Chief Financial Officer

  

 

 

 

25

 

SCHEDULE I

Item

A.  Location of Equipment

	

  Location

  	

   

  	

  Description

  
	

  9276

  Scranton Road, Suite 600

  	

   

  	

  Leasehold

  improvements, furniture

  
	

  San

  Diego, CA 92121

  	

   

  	

  and

  computer equipment

  
	

   

  	

   

  	

   

  
	

  6780

  Sierra Court, Suite A

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Dublin,

  CA 94568

  	

   

  	

  machinery

  and computer equipment.

  
	

   

  	

   

  	

   

  
	

  9040

  Activity Road, Suite A

  	

   

  	

  Leasehold

  improvements, furniture

  
	

  San

  Diego, CA

  	

   

  	

  and

  computer equipment

  
	

   

  	

   

  	

   

  
	

  2640

  Murray Street

  	

   

  	

  Furniture,

  computer equipment and machinery

  
	

  Sioux

  City, IA 51111

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  9300

  Underwood Avenue Suite 150

  	

   

  	

  Leasehold

  improvements, furniture and

  
	

  Omaha,

  NE 68114-2684

  	

   

  	

  computer

  equipment

  
	

   

  	

   

  	

   

  
	

  3285

  East Vernon Avenue

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Vernon,

  CA 90058

  	

   

  	

  computer

  equipment and machinery

  
	

   

  	

   

  	

   

  
	

  300

  Regency Drive

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Glendale

  Heights, IL60139

  	

   

  	

  computer

  equipment and machinery

  
	

   

  	

   

  	

   

  
	

  400

  Discovery Drive

  	

   

  	

  Machinery

  and equipment

  
	

  College

  Station, TX 77845

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Avenida

  Brasil 19001

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  (Proximo

  Ao lado Pavilhao 100

  	

   

  	

  computer

  equipment and machinery

  
	

  CEASA)

  Rio de Janeiro, RJ

  	

   

  	

   

  
	

  Brazil

  21-531-140

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Abbraj

  Att’awuneya BLDG

  	

   

  	

  Leasehold

  improvements, furniture and

  
	

  8th

  floor North

  	

   

  	

  computer

  equipment

  
	

  King

  Fahad Road

  	

   

  	

   

  
	

  Riyadh 11533

  	

   

  	

   

  
	

  Kingdom of Saudi Arabia

  	

   

  	

   

  

 

26

 

Item

B.  Location of Inventory

	

  Location

  	

   

  	

  Description

  
	

  9276

  Scranton Road, Suite 600

  	

   

  	

  Inventory

  
	

  San

  Diego, CA 92121

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  6780

  Sierra Court, Suite A

  	

   

  	

  Inventory

  
	

  Dublin,

  CA 94568

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  9040

  Activity Road, Suite A

  	

   

  	

  Inventory

  
	

  San

  Diego, CA

  	

   

  	

   

  

 

*Item C. 

Location of Lock Boxes

	

   

  	

   

  	

   

  	

   

  	

  Contact

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  
	

  Comerica Bank California

  	

   

  	

  1891382754

  	

   

  	

   

  
	

  600 B Street

  	

   

  	

  1891505008

  	

   

  	

   

  
	

  San Diego, CA  92101

  	

   

  	

   

  	

   

  	

   

  

 

 

Item

D.  Place(s) of Business and Chief

Executive Office

	

  Current:

  	

   

  	

  9276 Scranton Road, Suite

  600

  
	

   

  	

   

  	

  San Diego, CA  92121

  
	

   

  	

   

  	

   

  
	

  Former:

  	

   

  	

  3033 Science Park Road

  
	

   

  	

   

  	

  San Diego, CA  92121

  

 

 

Item

E.  Trade Names

SB OperatingCo, LLC (8/1/02)

SB OperatingCo, Inc. (8/3/00)

SureBeam Corporation (4/17/00)

Titan Scan Corp. (8/25/98)

Titan Purification Inc. (12/8/97)

SureBeam Brasil

LTDA

 

* Accounts are SB OperatingCo, LLC and/or Borrower

accounts.

 

27

 

Item

F.  Merger or Other Corporate

Reorganization

 

*Item

G.  Location of Deposit Accounts

	

   

  	

   

  	

   

  	

   

  	

  Contact

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  
	

  Comerica Bank California

  	

   

  	

  1891507129

  	

   

  	

   

  
	

  600 B Street

  	

   

  	

  1891428169

  	

   

  	

   

  
	

  San Diego, CA  92101

  	

   

  	

  1891427583

  	

   

  	

   

  
	

   

  	

   

  	

  1891382747

  	

   

  	

   

  
	

   

  	

   

  	

  1891427591

  	

   

  	

   

  
	

   

  	

   

  	

  1891507970

  	

   

  	

   

  
	

   

  	

   

  	

  2176994453

  	

   

  	

   

  
	

   

  	

   

  	

  1891504993

  	

   

  	

   

  

 

Item

H.  Location of Securities Accounts

	

   

  	

   

  	

   

  	

   

  	

  Contact

  	

   

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  	

   

  

                None.

 

 

28

 

SCHEDULE

II

Item

A.  Patents

	

  Country

  	

   

  	

  Patent No.

  	

   

  	

  Issue Date

  	

   

  	

  Title

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  U.S.

  	

   

  	

  5,590,602

  	

   

  	

  1/7/1997

  	

   

  	

  Conveyor System Utilizing

  Articles Carriers

  
	

  PCT

  	

   

  	

  5,994,706

  	

   

  	

  11/30/1999

  	

   

  	

  Article Irradiation System

  ________ Intermediate Wall of ________ Shielding Material Within Loop of

  Conveyor System That Transports the Articles

  
	

  U.S. 

  PCT 

  EPO 

  JAP 

  CA

  	

   

  	

  5,994,706

  	

   

  	

  11/30/1999

  	

   

  	

  Article Irradiation System

  in Which Articles Transporting Conveyor is Closely Encompassed by Shielding

  Material

  
	

  U.S. 

  AUS 

  DAN 

  CAN 

  EPO 

  JAP 

  KR 

  MA

  	

   

  	

  5,396,074

  	

   

  	

  3/7/1995

  	

   

  	

  Irradiation System

  Utilizing Conveyor Transported Article Carriers

  
	

  U.S.

  	

   

  	

  6,127,687

  	

   

  	

  10/3/2000

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  
	

  U.S.

  	

   

  	

  6,236,055

  	

   

  	

  5/22/2001

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  
	

  U.S.

  	

   

  	

  6,285,030

  	

   

  	

  9/4/2001

  	

   

  	

  Article Irradiation System

  in Which Article Transporting Conveyor is Closely Encompassed by Shielding

  
	

  U.S.

  	

   

  	

  6,294,791

  	

   

  	

  9/24/2001

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  

 

 

29

 

 

Pending Patent Applications

	

  Country

  	

   

  	

  Serial

  No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Title

  
	

  U.S

  	

   

  	

  09/710,730

  	

   

  	

  11/10/2000

  	

   

  	

  System For and Method of Irradiating

  an Object with an Optimal Amount of Radiation

  
	

  U.S.

  	

   

  	

  09/872131

  	

   

  	

  6/1/2001

  	

   

  	

  System For, and Method of

  Irradiating Article with Multiple Irradiations

  
	

  U.S.

  	

   

  	

  09/872,441

  	

   

  	

  6/1/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles

  
	

  U.S.

  	

   

  	

  09/456,061

  	

   

  	

  12/7/1999

  	

   

  	

  System For and Methods Of,

  Irradiating Articles to Sterilize The Articles

  
	

  U.S.

  	

   

  	

  9/753,287

  	

   

  	

  12/29/2000

  	

   

  	

  System For, And Method Of,

  Irradiating Articles With X-Ray Beam

  
	

  U.S.

  	

   

  	

  09/881,257

  	

   

  	

  6/13/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles With X-Ray Beam

  
	

  U.S.

  	

   

  	

  09/710,730

  	

   

  	

  11/10/2000

  	

   

  	

  System For, And Methods Of, Irradiating Opposite Sides Of

  Articles With Optimal amounts of Cumulative Irradiation

  
	

  U.S.

  	

   

  	

  09/569,402

  	

   

  	

  5/12/2000

  	

   

  	

  System For, and Method of Providing Frequency Hopping

  
	

  PCT  

  WO

  	

   

  	

  09/458,051

  	

   

  	

  12/7/1999

  	

   

  	

  Apparatus For, And Methods for Sterilizing Products,

  Primarily Food Products

  
	

  U.S.

  	

   

  	

  60/141,781

  	

   

  	

  6/30/1999

  	

   

  	

  Apparatus For, And Methods

  for Sterilizing Products, Primarily Food Products

  
	

  U.S.

  	

   

  	

  09/912,576

  	

   

  	

  7/24/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles

  
	

  U.S.

  	

   

  	

  09/971,986

  	

   

  	

  10/4/2001

  	

   

  	

  Compact Self-Shielded

  Irradiation System and Method

  
	

  U.S.

  	

   

  	

  10/167,544

  	

   

  	

  6/10/2002

  	

   

  	

  System For, and Method Of,

  Irradiating Articles To Sterilize Articles

  
	

  U.S.

  	

   

  	

  09/964,785

  	

   

  	

  9/26/2001

  	

   

  	

  System For, And Methods

  Of, Irradiating Opposite Sides Of Articles With Optimal amounts of Cumulative

  Irradiation

  

*              List items related

to the United States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

30

 

 

Patent Applications in Preparation

	

  Expected*Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Inventor(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Patent Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

31

 

SCHEDULE III

Item

A.  Trademarks

Registered Trademarks

	

  Country

  	

   

  	

  Trademark

  	

   

  	

  Registration No.

  	

   

  	

  Status

  
	

  United States

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (RN) 1,855,367

  	

   

  	

  Registered

  
	

  Lebanon

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (RN) 88045

  	

   

  	

  Registered

  

 

Pending Trademark Applications

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Status

  
	

  United States

  	

   

  	

  GOOD FOOD. MADE BETTER. in class 40

  	

   

  	

  (SN) 76/326,832

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SAFER FRESHER BETTER in class 40

  	

   

  	

  (SN) 76/326,461

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SERVE WITH CONFIDENCE in class 40

  	

   

  	

  (SN) 76/264,588

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SERVED WITH CONFIDENCE in class 40

  	

   

  	

  (SN) 76/264,589

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 76/260,478

  	

   

  	

  Published

  
	

  United States

  	

   

  	

  SUREBEAM & Design in class 40

  	

   

  	

  (SN) 76/326,834

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SUREMAIL in class 40

  	

   

  	

  (SN) 76/335,335

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  YOUR FAVORITE FOODS MADE BETTER in class 40

  	

   

  	

  (SN) 76/264,590

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  Be SureBeam Safe

  	

   

  	

  78/145,494

  	

   

  	

  Pending

  
	

  Australia

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 894010

  	

   

  	

  Pending

  
	

  Australia

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 865938

  	

   

  	

  Allowed for Registration

  
	

  Brazil

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 822,218,100

  	

   

  	

  Published

  
	

  Brazil

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 822,218,119

  	

   

  	

  Published

  
	

  Canada

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 1068730

  	

   

  	

  Pending

  
	

  China

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001165531

  	

   

  	

  Pending

  
	

  China

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001179227

  	

   

  	

  Pending

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

32

 

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Status

  
	

  Egypt

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 144891

  	

   

  	

  Pending

  
	

  Egypt

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 144892

  	

   

  	

  Pending

  
	

  Guatemala

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 07579

  	

   

  	

  Pending

  
	

  Guatemala

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 07580

  	

   

  	

  Pending

  
	

  Indonesia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 16501-16604

  	

   

  	

  Pending

  
	

  Indonesia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 16502-16605

  	

   

  	

  Published

  
	

  India

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 1012183

  	

   

  	

  Pending

  
	

  Japan

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 2000-097384

  	

   

  	

  Published

  
	

  Kuwait

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 52208

  	

   

  	

  Pending

  
	

  Mexico

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 496290

  	

   

  	

  Pending

  
	

  Mexico

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 496291

  	

   

  	

  Pending

  
	

  New Zealand

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 647625

  	

   

  	

  Pending

  
	

  Oman

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 25945

  	

   

  	

  Pending

  
	

  Oman

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 25946

  	

   

  	

  Pending

  
	

  Panama

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 117604

  	

   

  	

  Pending

  
	

  Panama

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 115892

  	

   

  	

  Pending

  
	

  Philippines

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 4-2001005137

  	

   

  	

  Pending

  
	

  Pakistan

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 172685

  	

   

  	

  Pending

  
	

  Pakistan

  	

   

  	

  SUREBEAM in class 16

  	

   

  	

  (SN) 173569

  	

   

  	

  Pending

  
	

  Qatar

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 25783

  	

   

  	

  Pending

  
	

  Qatar

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 25784

  	

   

  	

  Pending

  
	

  Russia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001721891

  	

   

  	

  Pending

  
	

  Russia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001721845

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 73859

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 71887

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 71888

  	

   

  	

  Pending

  
	

  South Africa

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001/12160

  	

   

  	

  Pending

  
	

  South Africa

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001/12161

  	

   

  	

  Pending

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 7

  	

   

  	

  (SN) 40200051220

  	

   

  	

  Published

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 40200041625

  	

   

  	

  Published

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 41200023540

  	

   

  	

  Pending

  
	

  Spain

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2351499

  	

   

  	

  Published

  
	

  Spain

  	

   

  	

  SUREBEAM in class 37

  	

   

  	

  (SN) 2414906

  	

   

  	

  Published

  
	

  Spain

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2346640

  	

   

  	

  Published

  
	

  Thailand

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 472133

  	

   

  	

  Pending

  
	

  Thailand

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 472134

  	

   

  	

  Pending

  
	

  Turkey

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 2001-22756

  	

   

  	

  Pending

  
	

  United Arab Emirates

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 44556

  	

   

  	

  Pending

  
	

  United Arab Emirates

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 44557

  	

   

  	

  Pending

  
	

  Argentina

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

33

 

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Status

  
	

  Brazil

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Guatemala

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Jordan

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Jordan

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Japan

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Mexico

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Philippines

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Turkey

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Yemen

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  

 

Trademark Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

  Products/

  	

   

  
	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Services

  	

   

  

 

Item

B.  Trademark Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  
	

  Territory

  	

   

  	

  Trademark

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

34

 

SCHEDULE IV

Item

A.  Copyrights/Mask Works

Registered Copyrights/Mask Works

	

  *Country

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Pending Registration Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Registration Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Copyright/Mask Work Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

35

 

SCHEDULE V

Trade Secret or Know-How Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

36

 

EXHIBIT

A

 

BORROWER PATENT SECURITY AGREEMENT

This BORROWER PATENT SECURITY AGREEMENT (this “Agreement”),

dated as of August 2, 2002, is made between SUREBEAM CORPORATION, a Delaware

corporation (the “Grantor”), and THE TITAN CORPORATION, a Delaware

corporation (the “Secured Party”);

 

W I T N E S S E T H :

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between the Grantor and the Secured Party, the Secured Party

has agreed to make Credit Extensions to the Grantor;

WHEREAS,

in connection with the Credit Agreement, the Grantor has executed and delivered

to the Secured Party a Borrower Security Agreement, dated as of August 2, 2002

(as amended, restated, supplemented or otherwise modified from time to time,

the “Security Agreement”);

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, the Grantor is required

to execute and deliver this Agreement; and

WHEREAS,

the Grantor has duly authorized the execution, delivery and performance of this

Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt of which is hereby

acknowledged, and in order to induce the Secured Party to make Credit

Extensions (including the initial Credit Extension) to the Grantor pursuant to

the Credit Agreement, the Grantor agrees as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of

Security Interest.  For good and

valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, to secure all of the Secured Obligations, the Grantor does hereby

mortgage, pledge and hypothecate to the Secured Party, and grant to the Secured

Party a security interest in all of the following property (the “Patent

Collateral”), whether now owned or hereafter acquired or existing by it:

 

 

(a)           all letters patent

and applications for letters patent throughout the world, including all patent

applications in preparation for filing anywhere in the world and including each

patent and patent application referred to in Item A of Attachment 1 attached

hereto;

(b)           all reissues,

divisions, continuations, continuations-in-part, extensions, renewals and

reexaminations of any of the items described in clause (a);

(c)           all patent licenses,

including each patent license referred to in Item B of Attachment 1 attached

hereto; and

(d)           all Proceeds of, and

rights associated with, the foregoing (including license royalties and Proceeds

of infringement suits), the right to sue third parties for past, present or

future infringements of any patent or patent application, including any patent

or patent application referred to in Item A of Attachment 1 attached hereto,

and for breach or enforcement of any patent license, including any patent

license referred to in Item B of Attachment 1 attached hereto, and all rights

corresponding thereto throughout the world.

SECTION 3.           Security

Agreement.  This Agreement has been

executed and delivered by the Grantor for the purpose of registering the

security interest of the Secured Party in the Patent Collateral with the United

States Patent and Trademark Office and corresponding offices in other countries

of the world.  The security interest

granted hereby has been granted as a supplement to, and not in limitation of,

the security interest granted to the Secured Party under the Security

Agreement.  The Security Agreement (and

all rights and remedies of the Secured Party thereunder) shall remain in full

force and effect in accordance with its terms.

SECTION 4.           Release of

Security Interest.  Upon the

Termination Date, the Secured Party shall, at the Grantor’s expense, execute

and deliver to the Grantor all Instruments and other Documents as may be

necessary or proper to release the lien on and security interest in the Patent

Collateral which has been granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Patent Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

SECTION 6.           Loan

Document, etc.  This Agreement is a

Loan Document executed pursuant to the Credit Agreement and shall (unless

otherwise expressly indicated herein) be construed, administered and applied in

accordance with the terms and provisions of the Credit Agreement.

SECTION 7.           Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

 

2

 

IN WITNESS

WHEREOF, the parties hereto have caused this Borrower Patent Security Agreement

to be duly executed and delivered by their respective officers thereunto duly

authorized as of the day and year first above written.

SUREBEAM

CORPORATION,

                as Grantor

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

THE

TITAN CORPORATION,

                as Secured Party

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

3

 

ATTACHMENT 1

Item

A.  Patents

Issued Patents

	

  *Country

  	

   

  	

  Patent No.

  	

   

  	

  Issue Date

  	

   

  	

  Inventor(s)

  	

   

  	

  Title

  	

   

  

 

 

Pending Patent Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Inventor(s)

  	

   

  	

  Title

  	

   

  

 

 

Patent Applications in Preparation

	

  Expected*Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Inventor(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Patent Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

4

 

EXHIBIT B

BORROWER TRADEMARK SECURITY AGREEMENT

This

BORROWER TRADEMARK SECURITY AGREEMENT (this “Agreement”), dated as of

August 2, 2002, is made between SUREBEAM CORPORATION, a Delaware corporation

(the “Grantor”), and THE TITAN CORPORATION, a Delaware corporation (the

“Secured Party”);

W I T N E S S E T H :

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between the Grantor and the Secured Party, the Secured Party

has agreed to make Credit Extensions to the Grantor;

WHEREAS,

in connection with the Credit Agreement, the Grantor has executed and delivered

to the Secured Party a Borrower Security Agreement, dated as of August 2, 2002

(as amended, restated, supplemented or otherwise modified from time to time,

the “Security Agreement”);

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, the Grantor is required

to execute and deliver this Agreement; and

WHEREAS,

the Grantor has duly authorized the execution, delivery and performance of this

Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt of which is hereby

acknowledged, and in order to induce the Secured Party to make Credit

Extensions (including the initial Credit Extension) to the Grantor pursuant to

the Credit Agreement, the Grantor agrees as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of

Security Interest.  For good and

valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, to secure all of the Secured Obligations, the Grantor does hereby

mortgage, pledge and hypothecate to the Secured Party, and grant to the Secured

Party a security interest in, all of the following property (the “Trademark

Collateral”), whether now owned or hereafter acquired or existing by it:

(a)           all trademarks,

trade names, corporate names, company names, business names, fictitious

business names, trade styles, service marks, certification marks, collective 

 

 

marks, logos,

other source of business identifiers, prints and labels on which any of the

foregoing have appeared or appear, designs and general intangibles of a like

nature (all of the foregoing items in this clause (a) being collectively called

a “Trademark”), now existing anywhere in the world or hereafter adopted or

acquired, whether currently in use or not, all registrations and recordings

thereof and all applications in connection therewith, whether pending or in

preparation for filing, including registrations, recordings and applications in

the United States Patent and Trademark Office or in any office or agency of the

United States of America or any State thereof or any foreign country, including

those referred to in Item A of Attachment 1 attached hereto;

(b)           all Trademark

licenses, including each Trademark license referred to in Item B of Attachment

1 attached hereto;

(c)           all reissues,

extensions or renewals of any of the items described in clauses (a) and (b);

(d)           all of the goodwill

of the business connected with the use of, and symbolized by the items

described in, clauses (a) and (b); and

(e)           all Proceeds of, and

rights associated with, the foregoing, including any claim by the Grantor

against third parties for past, present or future infringement or dilution of

any Trademark, Trademark registration or Trademark license, including any

Trademark, Trademark registration or Trademark license referred to in Item A

and Item B of Attachment 1 attached hereto, or for any injury to the goodwill

associated with the use of any such Trademark or for breach or enforcement of

any Trademark license.

SECTION 3.           Security

Agreement.  This Agreement has been

executed and delivered by the Grantor for the purpose of registering the

security interest of the Secured Party in the Trademark Collateral with the

United States Patent and Trademark Office and corresponding offices in other

countries of the world.  The security

interest granted hereby has been granted as a supplement to, and not in

limitation of, the security interest granted to the Secured Party under the

Security Agreement.  The Security

Agreement (and all rights and remedies of the Secured Party thereunder) shall

remain in full force and effect in accordance with its terms.

SECTION 4.           Release of

Security Interest.  Upon the

Termination Date, the Secured Party shall, at the Grantor’s expense, execute

and deliver to the Grantor all Instruments and other Documents as may be

necessary or proper to release the lien on and security interest in the

Trademark Collateral which has been granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Trademark Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

 

2

 

SECTION 6.           Loan

Document, etc.  This Agreement is a

Loan Document executed pursuant to the Credit Agreement and shall (unless

otherwise expressly indicated herein) be construed, administered and applied in

accordance with the terms and provisions of the Credit Agreement.

SECTION 7.           Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

IN

WITNESS WHEREOF, the parties hereto have caused this Borrower Trademark

Security Agreement to be duly executed and delivered by their respective

officers thereunto duly authorized as of the day and year first above written.

SUREBEAM

CORPORATION,

                as Grantor

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

THE

TITAN CORPORATION,

                as Secured Party

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

3

 

ATTACHMENT 1

Item

A.  Trademarks

Registered Trademarks

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  

 

 

Pending Trademark Applications

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  

 

 

Trademark Applications in Preparation

	

  Expected

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Products/

  	

   

  
	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Filing

  Date

  	

   

  	

  Services

  	

   

  

 

 

Item

B.  Trademark Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

4

 

EXHIBIT

C

 

BORROWER COPYRIGHT SECURITY

AGREEMENT

This

BORROWER COPYRIGHT SECURITY AGREEMENT (this “Agreement”), dated as of

August 2, 2002, is made between SUREBEAM CORPORATION, a Delaware corporation

(the “Grantor”), and THE TITAN CORPORATION, a Delaware corporation (the “Secured

Party”);

 

W I T N E S S E T H :

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between the Grantor and the Secured Party, the Secured Party

has agreed to make Credit Extensions to the Grantor;

WHEREAS,

in connection with the Credit Agreement, the Grantor has executed and delivered

to the Secured Party a Borrower Security Agreement, dated as of August 2, 2002

(as amended, restated, supplemented or otherwise modified from time to time,

the “Security Agreement”);

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, the Grantor is required

to execute and deliver this Agreement; and

WHEREAS,

the Grantor has duly authorized the execution, delivery and performance of this

Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt of which is hereby

acknowledged, and in order to induce the Secured Party to make Credit

Extensions (including the initial Credit Extension) to the Grantor pursuant to

the Credit Agreement, the Grantor agrees as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of

Security Interest.  For good and

valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, to secure all of the Secured Obligations, the Grantor does hereby

mortgage, pledge and hypothecate to the Secured Party, and grant to the Secured

Party a security interest in all of the following property (the “Copyright

Collateral”), whether now owned or hereafter acquired or existing by it, being

all copyrights (including all copyrights for semi-conductor chip product mask

works) of the Grantor, whether statutory or common law, registered or

unregistered, now or hereafter in force throughout the world including all of

the Grantor’s right, title 

 

 

and interest in

and to all copyrights registered in the United States Copyright Office or

anywhere else in the world and also including the copyrights referred to in

Item A of Attachment 1 attached hereto, and all applications for registration

thereof, whether pending or in preparation, all copyright licenses, including

each copyright license referred to in Item B of Attachment 1 attached hereto,

the right to sue for past, present and future infringements of any thereof, all

rights corresponding thereto throughout the world, all extensions and renewals

of any thereof and all Proceeds of the foregoing, including licenses,

royalties, income, payments, claims, damages and Proceeds of suit.

SECTION 3.           Security

Agreement.  This Agreement has been

executed and delivered by the Grantor for the purpose of registering the

security interest of the Secured Party in the Copyright Collateral with the

United States Copyright Office and corresponding offices in other countries of

the world.  The security interest

granted hereby has been granted as a supplement to, and not in limitation of,

the security interest granted to the Secured Party under the Security

Agreement.  The Security Agreement (and

all rights and remedies of the Secured Party thereunder) shall remain in full

force and effect in accordance with its terms.

SECTION 4.           Release of

Security Interest.  Upon the Termination

Date, the Secured Party shall, at the Grantor’s expense, execute and deliver to

the Grantor all Instruments and other Documents as may be necessary or proper

to release the lien on and security interest in the Copyright Collateral which

has been granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Copyright Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

SECTION 6.           Loan

Document, etc.  This Agreement is a

Loan Document executed pursuant to the Credit Agreement and shall (unless

otherwise expressly indicated herein) be construed, administered and applied in

accordance with the terms and provisions of the Credit Agreement.

SECTION 7.           Counterparts.  This Agreement may be executed by the parties

hereto in several counterparts, each of which shall be deemed to be an original

and all of which shall constitute together but one and the same agreement.

 

2

 

IN

WITNESS WHEREOF, the parties hereto have caused this Borrower Copyright

Security Agreement to be duly executed and delivered by their respective

officers thereunto duly authorized as of the day and year first above written.

SUREBEAM

CORPORATION,

                as Grantor

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

 

THE

TITAN CORPORATION,

                as Secured Party

 

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

3

 

ATTACHMENT 1

Item

A.  Copyrights/Mask Works

Registered Copyrights/Mask Works

	

  *Country

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Copyright/Mask Work Pending Registration Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Registration Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Copyright/Mask Work Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

4

 

Exhibit D

                                                                                  BORROWING

REQUEST

 

The Titan Corporation

3033 Science Park Road

San Diego, CA  92121

Attention:                        

 

Re:  SUREBEAM CORPORATION

 

Gentlemen and Ladies:

 

                This Borrowing

Request is delivered to you pursuant to Section 2.4 of the Senior Secured

Credit Agreement, dated as of August 2, 2002 (as amended, restated,

supplemented or otherwise modified from time to time, the “Credit Agreement”),

between SureBeam Corporation (the “Borrower”), and The Titan Corporation

(the “Lender”).  Unless otherwise

defined herein or the context otherwise requires, terms used herein have the

meanings provided in the Credit Agreement.

 

                The Borrower hereby

requests that (i) a Revolving Loan in the aggregate principal amount of

$15,000,000 and (ii) a Revolving Loan in the aggregate principal amount of

$153,759.72 be made on August 2, 2002.

 

                The Borrower

hereby acknowledges that, pursuant to Section 5.2(b) of the Credit Agreement,

each of the delivery of this Borrowing Request and the acceptance by the

Borrower of the proceeds of the Revolving Loan requested hereby constitute a

representation and warranty by the Borrower that, on the date of such Revolving

Loan, and immediately before and after giving effect thereto and to the

application of the proceeds therefrom, the statements set forth in Section

5.2(a) of the Credit Agreement are true and correct in all material respects.

 

                The Borrower

agrees that if prior to the time of the Borrowings requested hereby any matter

certified to herein by it will not be true and correct in all material respects

at such time as if then made, it will immediately so notify the Lender.  Except to the extent, if any, that prior to

the time of the disbursement of funds or the issuance of the Letter of Credit

for the Borrowings requested hereby, the Lender shall receive written notice to

the contrary from the Borrower, each matter certified to herein shall be deemed

once again to be certified as true and correct in all material respects at the

date of such disbursement or issuance as if then made.

 

                The proceeds of

this Borrowing Request shall be used to refinance the principal and accrued

interest of that certain Promissory Note dated May 24, 2002, in the original

principal amount of $5,000,000, that certain Promissory Note dated June 14,

2002, in the original principal amount of $5,000,000 and that certain

Promissory Note dated July 26, 2002, in the original principal amount of

$5,000,000, each executed by the Borrower in favor of the Lender. 

 

 

                IN WITNESS

WHEREOF, the Borrower has caused this Borrowing Request to be executed and

delivered, and the certification and representations and warranties contained

herein to be made, by its duly Authorized Officer this 2nd day of August, 2002.

 

	

   

  	

  ,

  	

  SUREBEAM CORPORATION

  
	

   

  	

   

  	

  By:

  	

  /s/ DAVID

  A. RANE

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Senior

  Vice President, 

  Chief Financial Officer

  

 

 

2

 

Exhibit E

 

[EXECUTION COPY]

 

 

 

CONSENT AND AGREEMENT

OF LICENSOR TO COLLATERAL

ASSIGNMENT

 

THIS CONSENT AND AGREEMENT OF

LICENSOR TO COLLATERAL ASSIGNMENT (this “Consent”),

made and entered this 23rd day of May, 2002 by SB OPERATINGCO, INC. (the “Licensor”);

THE TITAN CORPORATION, a Delaware corporation (the “Borrower”); and

WACHOVIA BANK, NATIONAL ASSOCIATION (hereinafter “Bank”), as

administrative agent (the “Agent”) for the lenders from time to time

party to the Credit Agreement referred to below (individually a “Lender”

and collectively the “Lenders”);

 

WITNESSETH:

 

WHEREAS, the Licensor and

the Borrower are parties to a certain License Agreement, dated as of October

17, 2001 (such License Agreement, as amended, modified, supplemented or

restated from time to time, being herein called the “License Agreement”),

a copy of which is attached hereto as Exhibit A, pursuant to which

the Licensor has granted to the Borrower certain rights with regard to Patent

Rights, Improvements, Other Intellectual Property and Licensed Software (as

those terms are defined in the License Agreement), all in the territory and

upon the terms and subject to the conditions described therein (collectively,

the “SureBeam Technology”);

 

WHEREAS, the Borrower, the

Agent and the Lenders have entered into a certain Senior Secured Credit

Agreement dated as of May 23, 2002 (such Senior Secured Credit Agreement, as

amended, modified, supplemented or restated from time to time, being herein

called the “Credit Agreement”), pursuant to which, and upon the terms

and subject to the conditions contained therein, the Lenders have agreed to

make loans and extend credit and other financial accommodations to the

Borrower;

 

WHEREAS, pursuant to the

Credit Agreement, the Borrower has executed in favor of the Agent a Security

Agreement dated as of May 23, 2002 (such Security Agreement, as amended,

modified, supplemented or restated from time to time, being herein called the “Assignment”),

by which the Borrower has collaterally assigned to the Agent for the benefit of

itself and the Lenders, as security for all of the Obligations (as such term is

defined in the Credit Agreement), all of the Borrower’s right, title and

interest in, to and under the License Agreement;

 

WHEREAS, pursuant to

Section 11.4 of the License Agreement, the Borrower is prohibited from

assigning any of its rights, interests or obligations under the License

Agreement without, the prior written consent of the Licensor, which the

Licensor agrees not to unreasonably withhold;

 

WHEREAS, as a condition

precedent to the making of the loans and the extending of the credit to the

Borrowers contemplated by the Credit Agreement, the Agent and the Lenders

require the execution of this Consent by the Licensor, pursuant to which the

Licensor shall grant its consent to the Assignment and shall grant certain

assurances to the Agent and the Lenders with respect to the License Agreement:

and

 

 

 

WHEREAS, in order to induce

the Agent and the Lenders to enter into the Credit Agreement and to make the

loans and extend the credit to the Borrowers contemplated thereby, the Licensor

has agreed to make and execute this Consent;

 

NOW, THEREFORE, for good and

valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereto, intending to be legally bound, hereby agree

as follows:

 

1.             Estoppel. 

The Licensor hereby represents and warrants to the Agent and the Lenders

that:

 

(a)           The Licensor is the licensor under

the License Agreement;

 

(b)           A true, accurate and complete copy of

the License Agreement, and all supplements, amendments and modifications

thereto, is attached to this Consent as Exhibit A;

 

(c)           As of the date hereof, the License

Agreement is valid and in full force and effect without modification or

amendment;

 

(d)           The License Agreement embodies the

entire agreement between the Licensor and Lessee with respect to the use and

license by the Borrower of the SureBeam Technology.  There are no other agreements or understandings between the

Licensor and the Borrower with regard to the use or license of the SureBeam

Technology, and there are no other agreements, understandings or side letters

whatsoever between the Licensor and the Borrower pertaining in any way to the

SureBeam Technology; and

 

(e)           To the best knowledge of the

Licensor, there have been and are no defaults under the terms and conditions of

the License Agreement by either the Licensor or the Borrower and there are no

events which have occurred which, with the giving of notice or the passage of

time, or both, would constitute a default by either the Licensor or the

Borrower thereunder.  No controversy

presently exists between the Licensor and the Borrower, including litigation or

arbitration, with regard to the License Agreement or the performance thereof.

 

2.             Consent to Assignment.  The Licensor hereby consents to the collateral assignment by the

Borrower to the Agent for the benefit of itself and the Lenders of the

Borrower’s rights in, to and under the License Agreement pursuant to the

Assignment and agrees that the Assignment is permitted under the License

Agreement and will not constitute a default or event of default on the part of

the Borrower thereunder.

 

3.             Agreements of the Licensor.  The Licensor agrees with the Agent and the

Lenders that:

 

(a)           The Licensor shall provide the Agent

with a copy of any notice of default, notice of cure of default, termination or

similar kind of notice given to the Borrower under the License Agreement,

contemporaneously with the giving of such notice to the Borrower.  No default or event of default or

termination of the License Agreement 

 

2

 

predicated on the giving of

any notice to the Borrower shall be complete unless like notice in writing

shall have been given to the Agent and the Agent has been given the same cure

period as is given to the Borrower under the License Agreement, or a period of

thirty (30) days, whichever period is longer;

 

(b)           In the event the Borrower defaults in

the performance of any of its obligations under the License Agreement,

regardless of whether such default consists of a failure to make a payment when

due or a failure to do any other thing which the Borrower is required to do

under the License Agreement, the Agent, without prejudice to any of its rights

against the Borrower, shall have the right (but not the obligation) to make

good such default within the period set forth in Section 3(a) above, and

the Licensor shall accept such performance on the part of the Agent as though

the same had been performed by the Borrower; and

 

(c)           If the Borrower is in default under

the Obligations secured by the Assignment and the Agent elects to exercise its

rights and remedies with the License Agreement as granted under the Assignment,

the License Agreement may be assigned by the Agent to a third party assignee or

to any purchaser pursuant to a private or public foreclosure sale, in each case

to a third party assignee or other purchaser approved by the Licensor, which

approval shall not be unreasonably withheld, but otherwise subject to all of

the other covenants, conditions and restrictions set forth in the License

Agreement, and the requirement that all amounts then due and owing to the

Licensor under the License Agreement be paid concurrently with the granting of

any such approval by the Licensor. 

Nothing herein, however, shall give the Agent, any third party assignee

or any purchaser any greater rights than those granted under the License

Agreement.

 

4.             Notices. 

All notices, requests and demands to or upon a party hereto, to be

effective, shall be in writing and shall be sent by certified or registered

mail, return receipt requested, by personal delivery against receipt, by

overnight courier or by facsimile transmission and, unless expressly provided

herein, shall be deemed to have been validly served, given or delivered

immediately when delivered against receipt, three (3) business days after

deposit in the mail, postage prepaid, or, in the case of facsimile

transmission, when received (if on a business day and, if not received on a

business day, then on the next business day after receipt), addressed as

follows:

 

	

  (i)

  	

  If

  to the Agent, at:

  	

   

  	

  Wachovia

  Bank, National Association

  
	

   

  	

   

  	

   

  	

  One

  Wachovia Center

  
	

   

  	

   

  	

   

  	

  301

  South College Street, 5th Floor

  
	

   

  	

   

  	

   

  	

  Charlotte,

  NC 28288-0760

  
	

   

  	

   

  	

   

  	

  Attention:  Scott Santa Cruz

  
	

   

  	

   

  	

   

  	

  Facsimile

  No.:  704-374-4793

  
	

   

  	

   

  	

   

  	

   

  
	

  (ii)

  	

  If

  to the Borrower, at:

  	

   

  	

  The

  Titan Corporation

  
	

   

  	

   

  	

   

  	

  3033

  Science Park Road

  
	

   

  	

   

  	

   

  	

  San

  Diego, CA 92121

  
	

   

  	

   

  	

   

  	

  Attention:  Mark Sopp

  
	

   

  	

   

  	

   

  	

  Facsimile

  No.:  858-552-9802

  
	

   

  	

   

  	

   

  	

   

  

 

3

 

	

  (iii)

  	

  If

  to the Licensor, at:

  	

   

  	

  SB

  OperatingCo, Inc.

  
	

   

  	

   

  	

   

  	

  3033

  Science Park Rd.

  
	

   

  	

   

  	

   

  	

  San

  Diego, CA  92121

  
	

   

  	

   

  	

   

  	

  Attention:

  David Rane

  
	

   

  	

   

  	

   

  	

  Facsimile

  No.:  858-552-9973

  

 

or to such other address as each party may

designate for itself by notice given in accordance with this

Section 4.  Any written notice or

demand that is not sent in conformity, with the provisions hereof shall

nevertheless be effective on the date that such notice is actually received by

the noticed party.

 

5.             Term of Agreement.  This Consent, and the agreement of the parties set forth herein,

shall continue to be effective until all Obligations owed by the Borrower to

the Agent and the Lenders shall have been paid and discharged in full and the

Credit Agreement shall be terminated in writing, provided, however, that

nothing herein shall be deemed to extend the term of the License Agreement

beyond the term specified therein.

 

6.             Execution in Counterparts.  This Consent may be executed in any number

of counterparts and by different parties hereto in separate counterparts, each

of which when so executed and delivered shall be deemed to be an original and

all of which counterparts taken together shall constitute but one and the same

instrument.

 

7.             Miscellaneous. 

The provisions of this Consent may not be modified or terminated orally

and shall be binding upon and inure to the benefit of the parties hereto and

their respective successors and assigns. 

The Section titles contained in this Consent are and shall be

without substantive meaning or content of any kind whatsoever and are not part

of the agreement among the parties hereto.

 

[remainder

of page intentionally left blank]

 

 

4

 

IN WITNESS WHEREOF, the

parties hereto have caused this Consent to be duly executed by their duly

authorized corporate offices on the day and year first above written.

 

	

  SB OPERATINGCO, INC.

  
	

   

  	

   

  
	

  By:

  	

  /s/  David Rane

  
	

  Name:

  	

  David Rane

  
	

  Title:

  	

  SVP, CFO

  
	

   

  	

   

  
	

  THE TITAN CORPORATION

  
	

   

  	

   

  
	

  By:

  	

  /s/ Ray H. Guillaume

  
	

  Name:

  	

  Ray H. Guillaume

  
	

  Title:

  	

  Director of Corporate

  Treasury

  
	

   

  	

   

  
	

  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Agent

  
	

   

  	

   

  
	

  By:

  	

  /s/ Gerald P. Hullinger

  
	

  Name:

  	

  Gerald P. Hullinger

  
	

  Title:

  	

  Vice President

  

 

 

5

 

 

EXHIBIT

F

COMPLIANCE CERTIFICATE

 

The Titan Corporation

3033 Science Park Road

San Diego, California 92121

 

Attention:

 

SUREBEAM CORPORATION

 

Ladies and Gentlemen:

 

This Compliance Certificate

is delivered to you pursuant to Section 5.1(k) of the Senior Secured Credit

Agreement, dated as of August 2, 2002 (as amended, restated, supplemented or

otherwise modified from time to time, the “Credit Agreement”), between

SureBeam Corporation, a Delaware corporation (the “Borrower”), and The

Titan Corporation, a Delaware corporation (the “Lender”).  Unless otherwise defined in this Compliance

Certificate, terms used herein (including the Attachments hereto) have the

meanings provided in the Credit Agreement. 

Each reference to a Section is to the relevant Section in the Credit

Agreement.

 

The Borrower hereby certifies and warrants that as of June 30, 2002

(the “Computation Date”):

 

1.             Borrower’s Revenue for the current

Fiscal Quarter* is $10,785,000.  The

quarterly revenue target for the current Fiscal Quarter, as set forth in

Borrower’s Annual Operating Plan is $11,000,000.

 

                Borrower’s Revenue for the

current Fiscal Quarter is greater than 85% of the quarterly revenue target set

forth in the Annual Operating Plan.

 

The Capital Expenditures for

the current Fiscal Quarter of the Borrower are $6,102,000.

 

                The maximum

Capital Expenditures permitted pursuant to clause (a) of Section 8.4 of the

Credit Agreement is $9,625,000 in the aggregate during Fiscal Year 2002 and,

accordingly, the Capital Expenditures covenant has been satisfied.

 

2.             Borrower’s Revenue for the current

Fiscal Quarter is $10,785,000.  The

quarterly revenue target for the current Fiscal Quarter, as set forth in

Borrower’s Annual Operating Plan is $11,000,000.

 

                Borrower’s Revenue for the

current Fiscal Quarter is greater than 85% of the quarterly revenue target set

forth in the Annual Operating Plan.

 

 

 

The Operating Expenses for

the current Fiscal Quarter of the Borrower are $9,844,000.

 

                The maximum Operating Expenses

permitted pursuant to clause (b) of Section 8.4 of the Credit Agreement is

$9,844,000 in the aggregate during Fiscal Year 2002 and, accordingly, the

Operating Expenses covenant has been satisfied.

 

3.             Borrower’s EBITDA for the Fiscal

Quarter is $(1,254,000), as computed on Attachment 1 hereto.

 

4.             Indebtedness of the

Borrower and the Guarantors as set forth in clause (f) of Section 8.2 of the

Credit Agreement was, in the aggregate, $0. 

Indebtedness pursuant to clause (f) of Section 8.2 of the Credit

Agreement is not allowed to exceed, in an aggregate amount at any time,

$5,000,000, and accordingly, such Indebtedness was permitted.

 

5.             Other Investments

(other than any acquisition of any Person) of the Borrower or any of its

Subsidiaries as set forth in clause (j) of Section 8.5 of the Credit Agreement,

was $0.  Such other Investments pursuant

to clause (j) of Section 8.5 of the Credit Agreement are not permitted to

exceed $500,000 in the aggregate over the term of the Credit Agreement, and

accordingly, to date, such Investments were permitted.

 

6.             The aggregate

amount of acquisitions (whether pursuant to an acquisition of stock, assets

constituting a business unit of any Person, or substantially all of the assets

of any Person or Persons or otherwise and including any assumed debt) by the

Borrower or any Guarantor of any Person or Persons or the assets of any Person

or Persons was $0.  Such acquisitions

pursuant to clause (j)(iii) of Section 8.5 of the Credit Agreement are not

permitted to exceed $2,000,000 in the aggregate over the term of the Credit

Agreement, and accordingly, to date, such acquisitions were permitted.

 

7.             The aggregate value

of Capital Stock redemptions for the Borrower and its Subsidiaries under clause

(c) of Section 8.6 of the Credit Agreement was $0.  The aggregate value of such redemptions pursuant to clause (c) of

Section 8.6 of the Credit Agreement are not permitted to exceed $1,000,000, and

accordingly, such redemptions were permitted.

 

8.             The amount of sale

proceeds from sale-leasebacks of the Borrower and its Subsidiaries under

Section 8.14 of the Credit Agreement was $0 in the aggregate.  Such proceeds from sale-leasebacks pursuant

to such Section 8.14 of the Credit Agreement are not allowed exceed $2,500,000

in the aggregate, and accordingly, such sale-leasebacks were permitted.

 

9.             No Default has

occurred or is continuing.

 

*  As used herein, the term “current Fiscal Quarter” shall mean the

Fiscal Quarter for which calculations are being provided.

 

2

 

 

IN WITNESS WHEREOF, the

Borrower has caused this Compliance Certificate to be duly executed and

delivered by its chief executive, financial or accounting Authorized Officer

this 2nd day of August 2002.

 

 

	

   

  	

  SUREBEAM CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

  By: 

  	

   

  
	

   

  	

  Name:  

  	

  David A. Rane

  
	

   

  	

  Title:

  	

  Senior Vice President and

  
	

   

  	

   

  	

  Chief Financial Officer

  

 

 

3

 

SCHEDULE

1

 

(Compliance

Certificate as of June 30, 2002)

 

DEFAULTS

 

Describe details of Default and actions that the Borrower has taken or

proposes to take with respect thereto.

 

None.

 

4

 

ATTACHMENT 1

 

EBITDA

 

for the preceding Fiscal Quarter

ending on June 30, 2002 (the “Computation Date”)

(the “Computation Period”)

 

1.             EBITDA:

	

  (a)   Net Income

  	

   

  	

  $

  	

  (5,102,000

  	

  )

  
	

  (b)   the amount deducted by the Borrower and its

  Subsidiaries, in determining Net Income, representing amortization, as

  determined in accordance with GAAP

  	

   

  	

  $

  	

  4,157,000

  	

   

  
	

  (c)   the amount deducted, in determining Net

  Income, of all federal, state and local income taxes (whether paid in cash or

  deferred) of the Borrower and its Subsidiaries,

  	

   

  	

  $

  	

  0

  	

   

  
	

  (d)   the amount deducted, in determining Net

  Income, of Interest Expense of the Borrower and its Subsidiaries

  	

   

  	

  $

  	

  65

  	

   

  
	

  (e)   the amount deducted, in determining Net

  Income, representing depreciation of assets of the Borrower and its

  Subsidiaries, as determined in accordance with GAAP

  	

   

  	

  $

  	

  667

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  (f)            The sum of Items 1(a) through 1(e)

  	

   

  	

  $

  	

  (213

  	

  )

  
	

  (g)   all amounts added by the Borrower and its

  Subsidiaries, in determining Net Income, representing either non-cash or

  non-recurring gains, including as a result of changes in accounting treatment

  under GAAP, and including royalty income recognized by the Borrower and its

  Subsidiaries in accordance with that certain Amended and Restated License

  Agreement dated October 17, 2001 between SB OperatingCo, Inc., now known as

  SB OperatingCo, LLC, and Lender

  	

   

  	

  $

  	

  1,041

  	

   

  
	

  (h)   EBITDA: 

  Item 1(f) minus Item 1(g)

  	

   

  	

  $

  	

  (1,254

  	

  )

  

 

 

 

Exhibit G

BORROWER COPYRIGHT SECURITY AGREEMENT

 

This

BORROWER COPYRIGHT SECURITY AGREEMENT (this “Agreement”), dated as of

August 2, 2002, is made between SUREBEAM CORPORATION, a Delaware corporation

(the “Grantor”), and THE TITAN CORPORATION, a Delaware corporation (the “Secured

Party”);

 

W I T N E S S E T H :

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between the Grantor and the Secured Party, the Secured Party

has agreed to make Credit Extensions to the Grantor;

WHEREAS,

in connection with the Credit Agreement, the Grantor has executed and delivered

to the Secured Party a Borrower Security Agreement, dated as of August 2, 2002

(as amended, restated, supplemented or otherwise modified from time to time,

the “Security Agreement”);

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, the Grantor is required

to execute and deliver this Agreement; and

WHEREAS,

the Grantor has duly authorized the execution, delivery and performance of this

Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt of which is hereby

acknowledged, and in order to induce the Secured Party to make Credit

Extensions (including the initial Credit Extension) to the Grantor pursuant to

the Credit Agreement, the Grantor agrees as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of Security Interest.  For good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, to secure all of the

Secured Obligations, the Grantor does hereby mortgage, pledge and hypothecate

to the Secured Party, and grant to the Secured Party a security interest in all

of the following property (the “Copyright Collateral”), whether now

owned or hereafter acquired or existing by it, being all copyrights (including

all copyrights for semi-conductor chip product mask works) of the Grantor,

whether statutory or common law, registered or unregistered, now or hereafter

in force throughout the world including all of the Grantor’s right, title and

interest in and to all copyrights registered in 

 

 

the United States

Copyright Office or anywhere else in the world and also including the copyrights

referred to in Item A of Attachment 1 attached hereto, and all

applications for registration thereof, whether pending or in preparation, all

copyright licenses, including each copyright license referred to in Item B

of Attachment 1 attached hereto, the right to sue for past, present and

future infringements of any thereof, all rights corresponding thereto

throughout the world, all extensions and renewals of any thereof and all

Proceeds of the foregoing, including licenses, royalties, income, payments,

claims, damages and Proceeds of suit.

Notwithstanding anything herein to the

contrary, in no event shall the Collateral include, and the Grantor shall not

be deemed to have granted a security interest in, any of the Grantor’s rights

or interests in any license, contract or agreement to which the Grantor is a

party or any of its rights or interests thereunder to the extent, but only to

the extent, that such a grant would, under the express terms of such license,

contract or agreement or otherwise, result in a breach of the terms of, or

constitute a default under such license, contract or agreement (other than to

the extent that any such term would be rendered ineffective pursuant to

Sections 9407(a) or 9408(a) of the U.C.C. or any other applicable law (including

the Bankruptcy Code) or principles of equity); provided, that immediately upon

the ineffectiveness, waiver, lapse or termination of any such provision, the

Collateral shall include, and the Grantor shall have granted a security

interest in, all such rights and interests as if such provision had never been

in effect.

 

SECTION 3.           Security Agreement.  This Agreement has been executed and

delivered by the Grantor for the purpose of registering the security interest

of the Secured Party in the Copyright Collateral with the United States

Copyright Office and corresponding offices in other countries of the

world.  The security interest granted

hereby has been granted as a supplement to, and not in limitation of, the security

interest granted to the Secured Party under the Security Agreement.  The Security Agreement (and all rights and

remedies of the Secured Party thereunder) shall remain in full force and effect

in accordance with its terms.

SECTION 4.           Release of Security Interest.  Upon the Termination Date, the Secured Party

shall, at the Grantor’s expense, execute and deliver to the Grantor all

Instruments and other Documents as may be necessary or proper to release the

lien on and security interest in the Copyright Collateral which has been

granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Copyright Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

SECTION 6.           Loan Document, etc.  This Agreement is a Loan Document executed

pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions of the Credit Agreement.

 

2

 

SECTION 7.           Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

 

3

 

IN

WITNESS WHEREOF, the parties hereto have caused this Borrower Copyright

Security Agreement to be duly executed and delivered by their respective

officers thereunto duly authorized as of the day and year first above written.

	

   

  	

   

  	

  SUREBEAM CORPORATION, 

  as Grantor

  
	

   

  	

   

  	

  By:

  	

  /s/ DAVID

  A. RANE

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  David

  A. Rane 

  Senior Vice President, 

  Chief Financial Officer

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  THE TITAN

  CORPORATION,  

  as Secured Party

  
	

   

  	

   

  	

  By:

  	

  /s/ MARK

  W. SOPP

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Mark W. Sopp Senior 

  Vice President, 

  Chief Financial Officer

  

 

 

4

 

ATTACHMENT 1

Item

A.  Copyrights/Mask Works

Registered Copyrights/Mask Works

	

  *Country

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Copyright/Mask Work Pending Registration Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Registration Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Copyright/Mask Work Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

5

 

 

Exhibit H

 

[BORROWING]

[ISSUANCE] REQUEST

 

The Titan Corporation

[ADDRESS]

Attention:

 

Re:  SUREBEAM CORPORATION

 

Gentlemen and Ladies:

 

                This Borrowing

Request is delivered to you pursuant to [Section 2.4] [Section 2.6] of the

Senior Secured Credit Agreement, dated as of August    , 2002

(as amended, restated, supplemented or otherwise modified from time to time,

the “Credit Agreement”), between SureBeam Corporation (the “Borrower”),

and The Titan Corporation (the “Lender”).  Unless otherwise defined herein or the context otherwise

requires, terms used herein have the meanings provided in the Credit Agreement.

 

                [The Borrower

hereby requests that a Revolving Loan be made in the aggregate principal amount

of $                    

on

                              ,

20   .]

 

                [The Borrower

requests that Lender issue or cause to be issued a Letter of Credit in the

amount of

$                    

on                               ,

20   .]

 

                The Borrower

hereby acknowledges that, pursuant to Section 5.2(b) of the Credit Agreement,

each of the delivery of this [Borrowing Request] [Issuance Request] and the

acceptance by the Borrower of the [proceeds of the Revolving Loan] [Letter of

Credit] requested hereby constitute a representation and warranty by the

Borrower that, on the date of such [Revolving Loan] [Letter of Credit], and

immediately before and after giving effect thereto and to the application of

the proceeds therefrom, the statements set forth in Section 5.2(a) of the

Credit Agreement are true and correct in all material respects.

 

                The Borrower

hereby certifies that, pursuant to Section 2.1(c) of the Credit Agreement,

Borrower’s EBITDA for the immediately preceding Fiscal Quarter (or for the

second preceding Fiscal Quarter in accordance with Section 2.5 of the Credit

Agreement) is

                                             .

 

                [If amount in blank space above is less that 25% of the

EBITDA AOP Target for such preceding Fiscal Quarter, include the following:  Borrower hereby covenants that it shall

restrict its Operating Expenses during the current Fiscal Quarter to an amount

not to exceed Five Million Dollars ($5,000,000), not taking into account

amounts allowed to be carried forward as provided in Section 8.4(b) of the

Credit Agreement.]

 

 

                The Borrower

agrees that if prior to the time of the Borrowing requested hereby any matter

certified to herein by it will not be true and correct in all material respects

at such time as if then made, it will immediately so notify the Lender.  Except to the extent, if any, that prior to

the time of the disbursement of funds or the issuance of the Letter of Credit

for the Borrowing requested hereby, the Lender shall receive written notice to

the contrary from the Borrower, each matter certified to herein shall be deemed

once again to be certified as true and correct in all material respects at the

date of such disbursement or issuance as if then made.

 

                [Please wire

transfer the proceeds of the Borrowing to the accounts of the following persons

at the financial institutions indicated respectively:]

 

	

  Amount to

  be

  Transferred

  	

   

  	

  Person to be Paid

  	

   

  	

  Name, Account No.,

  Address, etc.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Attention:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Attention:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Balance of such proceeds

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Attention:

  	

   

  

 

                [Please cause to be issued a

Letter of Credit in the name of the following persons in the following

amounts:]

 

	

  Amount of

  Letter of

  Credit

  	

   

  	

  Issued in the Name of

  	

   

  	

  Name, Address, etc.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  $

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

2

 

                IN

WITNESS WHEREOF, the Borrower has caused this [Borrowing Request] [Issuance

Request] to be executed and delivered, and the certification and

representations and warranties contained herein to be made, by its duly

Authorized Officer this        day of

                      ,         .

 

 

	

  SUREBEAM CORPORATION

  
	

   

  
	

  By

  	

   

  
	

  Name:

  
	

  Title:

  

 

 

3

 

Exhibit I

                                                                                       REVOLVING

NOTE

 

$50,000,000                                                                                                                                                           August

2, 2002

San

Diego, California

 

                FOR

VALUE RECEIVED, the undersigned, SUREBEAM CORPORATION, a Delaware corporation

(the “Borrower”), promises to pay to the order of THE TITAN CORPORATION,

a Delaware corporation, and its assigns (the “Lender”) on the Revolving

Loan Maturity Date, the principal sum of FIFITY MILLION DOLLARS ($50,000,000)

or, if less, the aggregate unpaid principal amount of all Revolving Loans made

by the Lender pursuant to that certain Senior Secured Credit Agreement, dated

as of August 2, 2002 by and between the Borrower and the Lender (as amended,

restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”).  Unless otherwise

defined, terms used herein have the meanings provided in the Credit Agreement.

 

                The

Borrower also promises to pay interest on the unpaid principal amount hereof

from time to time outstanding from the date hereof until maturity (whether by

acceleration or otherwise) and, after maturity, until paid, at the rates per

annum and on the dates specified in the Credit Agreement.  Payments of both principal and interest are

to be made in lawful money of the United States of America in same day or

immediately available funds at the place or places designated by the Lender

pursuant to the Credit Agreement.

 

                This

Revolving Note is the Revolving Note referred to in, and evidences Obligations

incurred under, the Credit Agreement, to which reference is made for a

description of the security for this Revolving Note and for a statement of the

terms and conditions on which the Borrower is permitted and required to make

prepayments and repayments of principal of the Obligations evidenced by this

Revolving Note and on which such Obligations may be declared to be immediately

due and payable.

 

                The

Borrower hereby irrevocably authorizes the Lender to make (or cause to be made)

appropriate notations on the grid attached hereto (or on any continuation of

such grid), which notations, if made, shall evidence, inter alia, the date of and

the outstanding principal of, the Revolving Loans evidenced hereby.  Such notations shall be rebuttable

presumptive evidence of the accuracy of the information so set forth; provided,

however, that the failure of the Lender to make any such notations

shall not limit or otherwise affect any Obligations of the Borrower.

 

                All

parties hereto, whether as makers, endorsers, or otherwise, severally waive

presentment for payment, demand, protest and notice of dishonor.

 

	

   

  	

   

  	

  SUREBEAM CORPORATION

  
	

   

  	

   

  	

  By:

  	

  /s/ L. A. OBERKFELL

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  L.

  A. Oberkfeff 

  President and Chief Executive Officer

  

 

 

 

The

following subtractions and additions of portions of the principal amount of

this Revolving Note have been made:

 

 

	

  Date Made

  	

   

  	

  Principal

  Amount Subtracted or Added

  	

   

  	

  Principal

  Amount Following Such Subtraction of Addition

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

2

 

 

Exhibit J

SUBSIDIARY GUARANTY

This

SUBSIDIARY GUARANTY (as amended, restated, supplemented, or otherwise modified

from time to time, this “Guaranty”), dated as of August 2, 2002, is made

by each Subsidiary of SUREBEAM CORPORATION, a Delaware corporation (the

“Borrower”), now or after the date hereof (including pursuant to Section 5.5)

a party to this Guaranty (individually referred to as a “Guarantor” and

collectively referred to as the “Guarantors”) in favor of THE TITAN

CORPORATION, a Delaware corporation (the “Secured Party”).

W I T N E S S E T H:

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented, or otherwise modified from time to time, the “Credit

Agreement”), between the Borrower and the Secured Party, the Secured Party

has agreed to extend Commitments to make Credit Extensions to the Borrower;

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, each Guarantor is

required to execute and deliver this Guaranty;

WHEREAS,

each Guarantor has duly authorized the execution, delivery and performance of

this Guaranty; and

WHEREAS,

it is in the best interests of each Guarantor to execute this Guaranty inasmuch

as such Guarantor will derive substantial direct and indirect benefits from the

Credit Extensions made from time to time to the Borrower by the Secured Party

pursuant to the Credit Agreement;

NOW THEREFORE, for good and

valuable consideration the receipt of which is hereby acknowledged, and in

order to induce the Secured Party to make Credit Extensions (including the

initial Credit Extension) to the Borrower, each Guarantor jointly and severally

agrees, for the benefit of the Secured Party, as follows:

 

ARTICLE I

DEFINITIONS

Section 1.1             Certain Terms.  The following terms (whether or not

underscored) when used in this Guaranty, including its preamble and recitals,

shall have the following meanings (such definitions to be equally applicable to

the singular and plural forms thereof):

“Borrower”

is defined in the preamble.

“Credit

Agreement” is defined in the first recital.

“Guarantor”

and “Guarantors” is defined in the preamble.

 

 

“Guaranty”

is defined in the preamble.

“Termination

Date” means the date on which all Obligations have indefeasibly been paid

in full in cash, all Commitments have been fully terminated and all Letters of

Credit and Lender Guaranties have been canceled or otherwise terminated.

Section 1.2             Credit Agreement Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Guaranty, including its preamble

and recitals, have the meanings provided in the Credit Agreement.

ARTICLE II

GUARANTY PROVISIONS

Section 2.1             Guaranty.  Each Guarantor hereby jointly and severally

absolutely, unconditionally and irrevocably:

(a)           guarantees the full and punctual

payment when due, whether at stated maturity, by required prepayment,

declaration, acceleration, demand or otherwise, of all Obligations of the

Borrower and each other Obligor now or hereafter existing, whether for

principal, interest (including interest accruing at the then applicable rate

provided in the Credit Agreement after the occurrence of any Default set forth

in Section 9.1(i) of the Credit Agreement, whether or not a claim for

post-filing or post-petition interest is allowed under applicable law following

the institution of a proceeding under bankruptcy, insolvency or similar laws),

fees, Reimbursement Obligations, Hedging Obligations, expenses or otherwise

(including all such amounts which would become due but for the operation of the

automatic stay under Section 362(a) of the United States Bankruptcy Code, 11

U.S.C. §362(a), and the operation of Sections 502(b) and 506(b) of the United

States Bankruptcy Code, 11 U.S.C. §502(b) and §506(b)) (the “Liabilities”);

and

(b)           indemnifies and holds harmless the

Secured Party for any and all costs and expenses (including reasonable

attorneys’ fees and expenses) incurred by the Secured Party in enforcing any

rights under this Guaranty (together with the Liabilities, the “Guaranty

Obligations”);

provided, however, that each Guarantor shall only be

liable under this Guaranty for the maximum amount, if there is such a maximum

amount, of such liability that can be hereby incurred without rendering this

Guaranty, as it relates to such Guarantor, voidable under applicable law

relating to fraudulent conveyance or fraudulent transfer, and not for any

greater amount.  This Guaranty

constitutes a guaranty of payment when due and not of collection, and each

Guarantor specifically agrees that it shall not be necessary or required that

the Secured Party exercise any right, assert any claim or demand or enforce any

remedy whatsoever against the Borrower, any other Obligor or any other Person

before or as a condition to the obligations of such Guarantor hereunder.

Section 2.2             Reinstatement, etc.  Each Guarantor hereby jointly and severally

agrees that this Guaranty shall continue to be effective or be reinstated, as

the case may be, if at any time any payment (in whole or in part) of any of the

Obligations is invalidated, declared to be 

 

2

 

fraudulent or preferential, set aside, rescinded or

must otherwise be restored by the Secured Party, upon the insolvency,

bankruptcy, reorganization (or similar event) of the Borrower, any other

Obligor or otherwise, all as though such payment had not been made.

Section 2.3             Guaranty Absolute, etc.  This Guaranty shall in all respects be a

continuing, absolute, unconditional and irrevocable guaranty of payment, and

shall remain in full force and effect until the Termination Date has

occurred.  Each Guarantor jointly and

severally guarantees that the Obligations of the Borrower and each other

Obligor will be paid strictly in accordance with the terms of the Credit

Agreement, each other Loan Document and any Interest Rate Hedging Agreement

under which they arise, regardless of any law, regulation or order now or

hereafter in effect in any jurisdiction affecting any of such terms or the

rights of the Secured Party with respect thereto.  The liability of each Guarantor under this Guaranty shall be

joint and several, absolute, unconditional and irrevocable irrespective of:

(a)           any lack of validity, legality or

enforceability of the Credit Agreement or any other Loan Document;

(b)           the failure of the Secured Party

(1)           to assert any claim or demand or to

enforce any right or remedy against the Borrower, any other Obligor or any

other Person (including any other guarantor) under the provisions of the Credit

Agreement, any other Loan Document, any Interest Rate Hedging Agreement or otherwise,

or

(2)           to exercise any right or remedy

against any other guarantor (including each Guarantor) of, or collateral

securing, any Obligations;

any

change in the time, manner or place of payment of, or in any other term of, all

or any part of the Obligations, or any extension, compromise or renewal of any

Obligation;

(c)           any reduction, limitation, impairment

or termination of any Obligations for any reason, including any claim of

waiver, release, surrender, alteration or compromise, and shall not be subject

to (and each Guarantor hereby waives any right to or claim of) any defense or

setoff, counterclaim, recoupment or termination whatsoever by reason of the

invalidity, illegality, nongenuineness, irregularity, compromise,

unenforceability of, or any other event or occurrence affecting, any

Obligations or otherwise;

(d)           any amendment to, rescission, waiver,

or other modification of, or any consent to or departure from, any of the terms

of the Credit Agreement, any other Loan Document or any Interest Rate Hedging

Agreement, including without limitation any increase in the Obligations from

the extension of additional credit to the Borrower or otherwise;

(e)           any addition, exchange, release,

surrender or non-perfection of any collateral, or any amendment to or waiver or

release or addition of, or consent to or departure from, any other guaranty

held by the Secured Party securing any of the Obligations;

(f)            any change, restructuring or

termination of the corporate structure or existence of the Borrower or any

other Obligor; or

 

3

 

(g)           any other circumstance which might

otherwise constitute a defense available to, or a legal or equitable discharge

of, the Borrower, any other Obligor, any surety or any guarantor.

Section 2.4             Setoff.  Each Guarantor hereby irrevocably authorizes

the Secured Party, without the requirement that any notice be given to such

Guarantor (such notice being expressly waived by each Guarantor), upon the

occurrence and during the continuance of any Default described in Section

9.1(i) of the Credit Agreement as it relates to the Borrower or upon the

occurrence and during the continuance of any other Event of Default, to set-off

and appropriate and apply to the payment of the Obligations owing to the Secured

Party (whether or not then due, and whether or not the Secured Party has made

any demand for payment of the Obligations), any and all balances, claims,

credits, deposits (general or special, time or demand, provisional or final),

accounts or money of such Guarantor then or thereafter maintained with the

Secured Party.  The Secured Party agrees

to notify the applicable Guarantor after any such setoff and application made

by the Secured Party; provided, however, that the failure to give

such notice shall not affect the validity of such setoff and application.  The rights of the Secured Party under this

Section are in addition to other rights and remedies (including other rights of

setoff under applicable law or otherwise) which the Secured Party may have.

Section 2.5             Waiver, Etc.  

(a)           Each Guarantor hereby waives

promptness, diligence, notice of acceptance and any other notice with respect

to any of the Obligations and this Guaranty and any requirement that the

Secured Party protect, secure, perfect or insure any Lien, or any property

subject thereto, or exhaust any right or take any action against the Borrower,

any other Obligor or any other Person (including any other guarantor) or entity

or any collateral securing the Obligations, as the case may be.

(b)           Each Guarantor hereby waives any

right to revoke this Guaranty, and acknowledges that this Guaranty is

continuing in nature and applies to all Obligations, whether existing now or in

the future.

(c)           Each Guarantor acknowledges that it

will receive substantial direct and indirect benefits from the financing

arrangements contemplated by the Loan Documents and that the waivers set forth

in this Section 2.4 are knowingly made in contemplation of such

benefits.

(d)           Each Guarantor assumes all

responsibility for being and keeping itself informed of the financial condition

and assets of the Borrower, and of all other circumstances bearing upon the

risk of non-payment of the Obligations and the nature, scope and extent of the

risks the Guarantors assume and incur hereunder, and agrees that the Secured

Party shall have no duty to advise the Guarantors of information known to it

regarding such circumstances or risks.

(e)           Each Guarantor hereby waives all

claims (as such term is defined in the United States Bankruptcy Code) it may at

any time otherwise have against the Borrower arising from any transaction

whatsoever, including, without limitation, its rights to assert or enforce any

such claims, until the Obligations are repaid in full in cash and all

Commitments have been terminated.

 

4

 

(f)            Each Guarantor hereby waives, to the

fullest extent permitted by applicable law, without limiting the generality of

the foregoing or any other provision hereof, all rights and benefits which

might otherwise be available to each Guarantor under Sections 1432, 2809, 2810,

2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 of the California

Civil Code.

(g)           Each Guarantor acknowledges and

affirms that it understands and is aware that if the Secured Party elects to

foreclose on any real property security nonjudicially, any right of subrogation

of such Guarantor against the Borrower may be impaired or extinguished and that

as a result of such impairment or extinguishment or subrogation rights, the

Guarantors might otherwise have a defense to a deficiency judgment arising out

of the operation of Section 580d of the California Code of Civil Procedure and

related principles of estoppel, and waives any defense arising out of any such

election by the Secured Party, including, without limitation, the defense

arising out of the operation of Section 580d of the Code of Civil Procedure and

related principles of estoppel, even though such election operates to impair or

extinguish any right of reimbursement or subrogation or other right or remedy

of the Guarantors against the Borrower or any other party or any security.

Section 2.6             Subrogation.  Each Guarantor agrees that it will not

exercise any rights that it may now have or hereafter acquire against the

Borrower that arise from the existence, payment, performance or enforcement of

such Guarantor’s obligations under this Guaranty or any other Loan Document,

including without limitation any right of subrogation, reimbursement,

exoneration, contribution or indemnification and any right to participate in

any claim or remedy of the Secured Party or any beneficiary against the

Borrower or any collateral, whether or not such claim, remedy or right arises

at equity or under contract, statute or common law, including without

limitation the right to take or receive from the Borrower, directly or

indirectly, in cash or other property or by set-off or in any other manner,

payment or security on account of such claim, remedy or right except as

specifically otherwise provided in the Loan Documents, until the Obligations

are repaid in full in cash and all Commitments have been terminated.  Any amount paid to any Guarantor on account

of any such subrogation rights shall be held in trust for the benefit of the Secured

Party and shall immediately be paid and turned over to the Secured Party in the

exact form received by such Guarantor (duly endorsed in favor of the Secured

Party, if required), to be credited and applied against the Obligations,

whether matured or unmatured, in accordance with Section 2.7 hereof ; provided,

however, that if:

(a)           any Guarantor has made payment to the

Secured Party of all or any part of the Obligations; and

(b)           the Termination Date has occurred;

then

at such Guarantor’s request, the Secured Party will, at the expense of such

Guarantor, execute and deliver to such Guarantor appropriate documents (without

recourse and without representation or warranty) necessary to evidence the

transfer by subrogation to such Guarantor of an interest in the Obligations

resulting from such payment by such Guarantor. 

In furtherance of the foregoing, at all times prior to the Termination

Date, each Guarantor shall refrain from taking any action or commencing any proceeding

against the Borrower or any other Obligor (or 

its or their successors or assigns, whether in connection with a

bankruptcy proceeding or 

 

5

 

otherwise)

to recover any amounts in the respect of payments made under this Guaranty to

the Secured Party.  Notwithstanding the

foregoing, to the extent necessary to toll the statute of limitations, such

Guarantor may take such action required to preserve any rights it has by way of

rights of subrogation as consented to by the Secured Party in its reasonable

discretion.

Section 2.7             Successors, Transferees and

Assigns, etc.  This Guaranty shall:

(a)           be binding upon each Guarantor, and

its successors, transferees and assigns; and

(b)           inure to the benefit of and be

enforceable by the Secured Party.

Without

limiting the generality of clause (b), the Secured Party may assign or

otherwise transfer (in whole or in part) the Revolving Note or any Credit

Extension or Commitment held by it to any other Person and such other Person

shall thereupon become vested with all rights and benefits in respect thereof

granted to the Secured Party under any Loan Document (including this Guaranty)

or otherwise, in each case as provided in Section 10.10 of the Credit

Agreement.

Section 2.8             Payments; Application.  Each Guarantor hereby agrees with the

Secured Party as follows:

(a)           Each Guarantor agrees that all

payments made by such Guarantor hereunder will be made in Dollars to the

Secured Party, without set-off, counterclaim or other defense and in accordance

with Sections 4.2 and 4.3 of the Credit Agreement, free and clear of and

without deduction for any Taxes, the Guarantor hereby agreeing to comply with

and be bound by the provisions of Sections 4.2 and 4.3 of the Credit Agreement

in respect of all payments made by it hereunder and the provisions of which

Sections are hereby incorporated into and made a part of this Guaranty by this

reference as if set forth herein; provided, that references to the

“Borrower” in such Sections shall be deemed to be references to each Guarantor,

and references to “this Agreement” shall be deemed to be references to this

Guaranty.

(b)           All payments made hereunder shall be

applied upon receipt as follows:

(1)           first, to the payment of all

Obligations owing to the Secured Party pursuant to Section 10.3 of the Credit

Agreement;

(2)           second, after payment in full of the

amounts specified in clause (b)(1), to the payment of all other

Obligations owing to the Secured Party, with such amounts applied first to fees

and expenses, then to accrued and unpaid interest, then to the outstanding

principal amount of the Revolving Loan, then to Letter of Credit Outstandings,

then to Lender Guaranty Outstandings, and then to Interest Rate Hedging

Obligations, if any; and

(3)           third, after payment in full of the

amounts specified in clauses (b)(1) and (b)(2), and following the

Termination Date, to such Guarantor or any other Person lawfully entitled to

receive such surplus.

Section 2.9             Acceleration of Guaranty.  Each Guarantor hereby jointly and severally

agrees that, in the event of an Event of Default under the Credit Agreement,

each Guarantor 

 

6

 

jointly and severally agrees that all or any part of

the Guaranty Obligations may, at the option of the Secured Party and without

demand, notice, or legal process of any kind, be declared, and immediately

shall become, due and payable.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1             Representations.  In order to induce the Secured Party to

enter into the Credit Agreement and make Credit Extensions thereunder, each

Guarantor represents and warrants to the Secured Party that the representations

and warranties contained in Article VI of the Credit Agreement, insofar as the

representations and warranties contained therein are applicable to it and its

properties, are true and correct (it being understood that such representations

and warranties not qualified by reference to materiality or Material Adverse

Effect shall be true and correct in all material respects), each such representation

and warranty set forth in such Article VI (insofar as applicable as aforesaid)

and all other terms of the Credit Agreement to which reference is made therein,

together with all related definitions and ancillary provisions, being hereby

incorporated into this Guaranty by this reference as though specifically set

forth in this Article III.  Furthermore,

each Guarantor represents that it has knowledge of the Borrower’s and each

other Obligor’s financial condition and affairs and that it has adequate means

to obtain from the Borrower and each other Obligor on an ongoing basis,

information relating thereto and to the Borrower’s and such Obligor’s ability

to pay and perform the Obligations, and agrees to assume the responsibility for

keeping, and to keep, so informed for so long as this Guaranty is in

effect.  Each Guarantor acknowledges and

agrees that the Secured Party shall have no obligation to investigate the

financial condition or affairs of any Obligor for the benefit of such Guarantor

nor to advise such Guarantor of any fact respecting, or any change in, the

financial condition or affairs of the Borrower or any other Obligor that might

become known to the Secured Party at any time, whether or not the Secured Party

knows or believes or has reason to know or believe that any such fact or change

is unknown to such Guarantor, or might (or does) materially increase the risk

of such Guarantor as guarantor, or might (or would) affect the willingness of

such Guarantor to continue as a guarantor of the Obligations.

ARTICLE IV

COVENANTS, ETC.

Section 4.1             Covenants.  Each Guarantor covenants and agrees that, at

all times prior to the Termination Date, it will perform, comply with and be

bound by all of the agreements, covenants and obligations contained in the

Credit Agreement (including Articles VII and VIII thereof) which are applicable

to such Guarantor or its properties, each such agreement, covenant and

obligation contained in the Credit Agreement and all other terms of the Credit

Agreement to which reference is made herein, together with all related

definitions and ancillary provisions, being hereby incorporated into this

Guaranty by this reference as though specifically set forth in this Article IV.

 

7

 

ARTICLE V

MISCELLANEOUS PROVISIONS

Section 5.1             Loan Document.  This Guaranty is a Loan Document executed

pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions thereof.

Section 5.2             Binding on Successors,

Transferees and Assigns; Assignment. In addition to, and not in limitation

of, Section 2.6, this Guaranty shall be jointly and severally binding

upon each Guarantor and its successors, transferees and assigns and shall inure

to the benefit of and be enforceable by the Secured Party and its respective

successors, transferees and assigns (to the full extent provided pursuant to Section

2.6); provided, however, that no Guarantor may (unless otherwise

permitted under the terms of the Credit Agreement) assign any of its

obligations hereunder without the prior written consent of the Secured Party.

Section 5.3             Amendments, etc.  No amendment to or waiver of any provision

of this Guaranty, nor consent to any departure by any Guarantor therefrom,

shall in any event be effective unless the same shall be in writing and signed

by the Secured Party, and then such waiver or consent shall be effective only

in the specific instance and for the specific purpose for which given.

Section 5.4             Notices.  All notices and other communications

provided for hereunder shall be in writing (including facsimile communication)

and, mailed or telecopied or delivered to each Guarantor, in care of the

Borrower at the address or facsimile number of the Borrower specified in the

Credit Agreement.  All such notices and

other communications, when mailed and properly addressed with postage prepaid

or if properly addressed and sent by pre-paid courier service, shall be deemed

given when received; any such notice or communication, if transmitted by

facsimile, shall be deemed given when the confirmation of transmission thereof

is received by the transmitter.

Section 5.5             Additional Subsidiary Guarantors.  Upon the execution and delivery by any other

Person of an instrument in the form of Annex I hereto, such Person shall become

a “Guarantor” hereunder with the same force and effect as if originally named

as a “Guarantor” herein.  The execution

and delivery of any such instrument shall not require the consent of any other

Guarantor hereunder.  The rights and

obligations of each Guarantor hereunder shall remain in full force and effect

notwithstanding the addition of any new Guarantor as a party to this Guaranty.

Section 5.6             No Waiver; Remedies.  In addition to, and not in limitation of, Section

2.2 and Section 2.4 hereof, no failure on the part of the Secured

Party to exercise, and no delay in exercising, any right hereunder shall

operate as a waiver thereof; nor shall any single or partial exercise of any

right hereunder preclude any other or further exercise thereof or the exercise

of any other right.  The remedies herein

provided are cumulative and not exclusive of any remedies provided by law.

 

8

 

Section 5.7             Captions.  Section captions used in this Guaranty are

for convenience of reference only, and shall not affect the construction of

this Guaranty.

Section 5.8             Severability.  Wherever possible each provision of this

Guaranty shall be interpreted in such manner as to be effective and valid under

applicable law, but if any provision of this Guaranty shall be prohibited by or

invalid under such law, such provision shall be ineffective to the extent of

such prohibition or invalidity, without invalidating the remainder of such

provision or the remaining provisions of this Guaranty.

Section 5.9             Governing Law, Entire Agreement,

etc.  THIS GUARANTY SHALL BE DEEMED TO BE A

CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.  THIS GUARANTY AND THE OTHER LOAN DOCUMENTS

CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO

THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL,

WITH RESPECT THERETO.

Section 5.10           Forum Selection and Consent to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,

OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE

OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS

OF THE SECURED PARTY OR ANY GUARANTOR SHALL BE BROUGHT AND MAINTAINED IN THE

COURTS OF THE STATE OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY

SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE SECURED

PARTY’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE

FOUND.  EACH GUARANTOR IRREVOCABLY

CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY

PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA ADDRESSED TO SUCH

GUARANTOR, CARE OF THE BORROWER, AT THE ADDRESS FOR NOTICES SPECIFIED IN THE

CREDIT AGREEMENT.  EACH GUARANTOR HEREBY

EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE

STATE OF CALIFORNIA AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN

DISTRICT OF CALIFORINIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH

ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN

CONNECTION WITH SUCH LITIGATION.   EACH

GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT

PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE

LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO

ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN

INCONVENIENT FORUM.  TO THE EXTENT THAT

ANY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF

ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,

ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF 

 

9

 

EXECUTION

OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH GUARANTOR HEREBY

IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS

GUARANTY AND THE OTHER LOAN DOCUMENTS.

Section 5.11           Waiver of Jury Trial. EACH

GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT

MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR

ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN

DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL

OR WRITTEN) OR ACTIONS OF THE SECURED PARTY OR SUCH GUARANTOR.  EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT

IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT

THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES ENTERING INTO

THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.

Section 5.12           Counterparts.  This Guaranty may be executed by the parties

hereto in several counterparts, each of which shall be deemed to be an original

and all of which shall constitute together but one and the same agreement.

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly

executed and delivered by its officer thereunto duly authorized as of the date

first above written.

 

	

  GUARANTOR

  	

   

  	

  SB OPERATINGCO, LLC, 

  a Delaware limited liability company

  
	

   

  	

   

  	

  By:

  	

  /s/ L. A. OBERKFELL

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  L.

  A. Oberkfeff 

  President and Chief Executive Officer

  

 

 

10

 

ANNEX

I

to

the

Subsidiary Guaranty

SUPPLEMENT, dated as of _______________, ____

(this “Supplement”), to the Subsidiary Guaranty, dated as of August 2, 2002

(together with all amendments, supplements, restatements and other

modifications, if any, from time to time thereafter made thereto, the

“Guaranty”), among the initial signatories thereto and each other Person (such

capitalized term, and other terms used in this Supplement, to have the meanings

set forth in Article I of the Guaranty) which from time to time thereafter

became a party thereto pursuant to Section 5.5 thereof (each,

individually, a “Guarantor”, and, collectively, the “Guarantors”),

in favor of the Secured Party (as defined in the Guaranty).

W I T N E S S E T H:

WHEREAS,

pursuant to the provisions of Section 5.5 of the Guaranty, the

undersigned is becoming a Guarantor under the Guaranty; and

WHEREAS,

the undersigned Guarantor desires to become a “Guarantor” under the Guaranty in

order to induce the Secured Party to continue to extend Credit Extensions under

the Credit Agreement;

NOW

THEREFORE, in consideration of the premises, and for other consideration (the

receipt and sufficiency of which is hereby acknowledged), the undersigned

agrees, for the benefit of the Secured Party, as follows.

SECTION 1.           In accordance

with the terms of the Guaranty, by its signature below the undersigned hereby

irrevocably agrees to become a Guarantor under the Guaranty with the same force

and effect as if it were an original signatory thereto, and the undersigned

Guarantor hereby (a) agrees to be bound by and comply with all of the terms and

provisions of the Guaranty applicable to it as a Guarantor and (b) represents

and warrants that the representations and warranties made by it as a Guarantor

thereunder are true and correct as of the date hereof.  In furtherance of the foregoing, each

reference to a “Guarantor” in the Guaranty and each other Loan Document shall

be deemed to include the undersigned Guarantor.

SECTION 2.           The

undersigned Guarantor hereby represents and warrants that this Supplement has

been duly authorized, executed and delivered by it and that this Supplement and

the Guaranty constitute the legal, valid and binding obligation of the

undersigned Guarantor, enforceable against it in accordance with its terms.

SECTION 3.           Except as

expressly supplemented hereby, the Guaranty shall remain in full force and

effect in accordance with its terms.

SECTION 4.           In the event

any one or more of the provisions contained in this Supplement should be held

invalid, illegal or unenforceable in any respect, the validity, legality 

 

 

and enforceability

of the remaining provisions contained herein and in the Guaranty shall not in

any way be affected or impaired.

SECTION 5.           THIS

SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS

OF THE STATE OF CALIFORNIA.

SECTION 6.           This

Supplement may be executed by the parties hereto in several counterparts, each

of which shall be deemed to be an original and all of which shall constitute

together but one and the same agreement.

IN

WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly

executed and delivered by their respective officers thereunto duly authorized

as of the day and year first above written.

	

  [NAME OF ADDITIONAL

  SUBSIDIARY GUARANTORS]

  
	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

2

 

 

Exhibit K

SUBSIDIARY

PLEDGE AGREEMENT

 

This

SUBSIDIARY PLEDGE AGREEMENT (as amended, restated, supplemented, or otherwise

modified from time to time, this “Pledge Agreement”), dated as of August

2,2002 is made by each Subsidiary (as defined in the Credit Agreement referred

to below) of SUREBEAM CORPORATION, a Delaware corporation (the “Borrower”),

now or after the date hereof (including pursuant to Section 7.6) a signatory

hereto (each, individually, a “Pledgor,” and collectively, the “Pledgors”),

in favor of THE TITAN CORPORATION, a Delaware corporation (the “Pledgee”).

 

W I T N E S S E T H:

WHEREAS,

pursuant to a Senior Secured Credit Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented, or otherwise modified from time to time, the “Credit

Agreement”), between Borrower and Pledgee, the Pledgee has extended

Commitments to make Credit Extensions to the Borrower;

WHEREAS,

as a condition precedent to the making of the Credit Extensions (including the

initial Credit Extension) under the Credit Agreement, each Pledgor is required

to execute and deliver this Pledge Agreement;

WHEREAS,

each Pledgor has duly authorized the execution, delivery and performance of

this Pledge Agreement; and

WHEREAS,

it is in the best interests of each Pledgor to execute this Pledge Agreement

inasmuch as such Pledgor will derive substantial direct and indirect benefits

from the Credit Extensions made from time to time to the Borrower by the

Pledgee pursuant to the Credit Agreement;

NOW

THEREFORE, for good and valuable consideration the receipt and sufficiency of

which is hereby acknowledged, and in order to induce the Pledgee to make Credit

Extensions (including the initial Credit Extension) to the Borrower pursuant to

the Credit Agreement, each Pledgor jointly and severally agrees, for the

benefit of Pledgee, as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1             Certain Terms.  Capitalized terms used but not otherwise

defined herein shall have the meanings given them in the Credit Agreement.  The following terms (whether or not

underscored) when used in this Pledge Agreement, including its preamble and

recitals, shall have the following meanings (such definitions to be equally

applicable to the singular and plural forms thereof):

 

 

“Act”

is defined in Section 6.2.

“Certificated

Interests” means, collectively, all Pledged Shares evidenced by

certificates.

“Collateral”

is defined in Section 2.1.

“Credit

Agreement” is defined in the first recital.

“Distributions”

means all stock dividends, liquidating dividends, shares of stock resulting

from (or in connection with the exercise of) stock splits, reclassifications,

warrants, options, non-cash dividends, mergers, consolidations, and all other

distributions (whether similar or dissimilar to the foregoing) on or with

respect to any Pledged Interests or other shares of Capital Stock constituting

Collateral, but shall not include Dividends.

“Dividends”

means cash dividends and cash distributions with respect to any Pledged

Interests made in the ordinary course of business and not as a liquidating

dividend.

“Interest

Rate Hedging Agreements” means interest rate swap agreements, interest rate

cap agreements and interest rate collar agreements, and all other agreements or

arrangements designed to protect against fluctuations in interest rates,

entered into for the purpose of hedging interest rate risk with respect to the

Obligations.

“Interest

Rate Hedging Obligations” means all liabilities of the Pledgors under

Interest Rate Hedging Agreements.

“LLC”

means each limited liability company listed from time to time as a Pledged

Interest Issuer on Attachment 1 hereto.

“LLC

Interest” means the entire ownership interest of any Pledgor in each

Pledged Interest Issuer that is an LLC listed on Attachment 1 hereto,

including such Pledgor’s capital account, its gain, loss, deduction and credit

of such Pledged Interest Issuer, such Pledgor’s interest in all distributions

made or to be made by such Pledged Interest Issuer to such Pledgor and all of

the other rights, titles and interests of such Pledgor as an owner or a member

of such Pledged Interest Issuer, whether set forth in the operating or

membership agreement of such Pledged Interest Issuer, by separate agreement or

otherwise.

“Partnership”

means each general partnership or limited partnership listed from time to time

as a Pledged Interest Issuer on Attachment 1 hereto.

“Partnership

Interest” means the entire ownership interest of the Pledgor in each

Pledged Interest Issuer that is a Partnership listed on Attachment 1

hereto, including the Pledgor’s capital account, its gain, loss, deduction and

credit of such Pledged Interest Issuer, the Pledgor’s interest in all

distributions made or to be made by such Pledged Interest Issuer to the Pledgor

and all of the other rights, titles and interests of the Pledgor as an owner, a

general partner or a limited partner of 

 

2

 

such

Pledged Interest Issuer, whether set forth in the partnership agreement of such

Pledged Interest Issuer, by separate agreement or otherwise.

“Pledge

Agreement” is defined in the preamble.

“Pledged

Interest Issuers” means each Person identified in Attachment 1

hereto as the issuer of the Pledged Interests (including the maker of each

Pledged Note) identified opposite the name of such Person and each Person whose

ownership, equity or other similar interests, including shares of Capital

Stock, Partnership Interests and LLC Interests, are , or are required to be

pledged hereunder and under the Credit Agreement from time to time.

“Pledged

Interests” means (i) all Pledged Shares and (ii) all Pledged Notes.

“Pledged

Notes” means all promissory notes of any Pledged Interest Issuer,

identified on Attachment 1 hereto, and any promissory notes issued to

any Pledgor in the future, as such promissory notes are amended, restated,

supplemented or otherwise modified from time to time, in accordance with

Section 4.1.6, together with any promissory note of any Pledged Interest Issuer

taken in extension or renewal thereof or substitution therefor.

“Pledged

Shares” means (a) all ownership, equity or other similar interests,

including shares of Capital Stock, Partnership Interests and LLC Interests, of

any Pledged Interest Issuer listed on Attachment 1 hereto and any shares

of Capital Stock, Partnership Interests and LLC Interests of any Pledged

Interest Issuer obtained in the future by any Pledgor, (b) the certificates

representing all such ownership, equity or similar interests and (c) all

securities convertible into, and all warrants, options or other rights to

acquire, such ownership, equity or similar interests; but excluding all shares

of voting stock of each class of any Foreign Subsidiary in excess of sixty-five

percent (65%) of the total issued and outstanding shares of the voting stock of

each such class.

“Pledgee”

is defined in the preamble.

“Pledgor”

is defined in the preamble.

“Secured

Obligations” is defined in Section 2.2.

“Termination

Date” means the date on which all Obligations have been indefeasibly paid

in full in cash, all Commitments have been fully terminated and all Letters of

Credit have been canceled or otherwise terminated.

“U.C.C.”

means the Uniform Commercial Code, as in effect from time to time in the State

of California; provided, however, in the event that, by reason of

mandatory provisions of law, any or all of the attachment, perfection or

priority of Pledgee’s security interest in any Collateral is governed by the

Uniform Commercial Code (including Articles thereof) as in effect in a

jurisdiction other than the State of California, “U.C.C.” shall mean the

Uniform Commercial Code as in effect at such time in such other jurisdiction

for purposes of the provisions hereof relating to such attachment, 

 

3

 

perfection

or priority and for purposes of definitions related to such provisions.

SECTION 1.2             Credit Agreement Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Pledge Agreement, including its

preamble and recitals, have the meanings provided in the Credit Agreement.

SECTION 1.3             U.C.C. Definitions.  Unless otherwise defined herein or in the

Credit Agreement or the context otherwise requires, terms for which meanings

are provided in the U.C.C. are used in this Pledge Agreement, including its

preamble and recitals, with such meanings.

ARTICLE II

PLEDGE

SECTION 2.1             Grant of Security Interest.  Each Pledgor hereby pledges, hypothecates,

assigns, charges, mortgages, delivers and transfers to the Pledgee, and each

Pledgor hereby grants to the Pledgee, to secure the Secured Obligations, a

continuing security interest in, all of the following property (the “Collateral”):

(a)           all Pledged Interests;

(b)           all right, title and interest of such

Pledgor, whether now existing or hereafter arising or acquired, in, to and

under any partnership agreement, limited liability company agreement or similar

agreement which governs the rights and obligations of the holder of ownership,

equity or similar interests in a Pledged Interest Issuer;

(c)           all voting trust certificates held by

each Pledgor evidencing the right to vote any Pledged Shares subject to any

voting trust;

(d)           all Dividends, Distributions,

interest and without duplication, other payments and rights with respect to any

Pledged Interest; and

(e)           all Proceeds of any of the foregoing.

SECTION 2.2             Security for Obligations.  This Pledge Agreement secures the payment in

full of (i) all Obligations of the Borrower now or hereafter existing under the

Credit Agreement, each other Loan Document to which the Borrower is or may

become a party, and each Interest Rate Hedging Agreement, whether for

principal, interest, costs, fees, expenses, Interest Rate Hedging Obligations

or otherwise, and (ii) all Obligations of each Pledgor now or hereafter

existing under the Credit Agreement and each other Loan Document and each

Interest Rate Hedging Agreement, whether for principal, interest, costs, fees,

indemnities, expenses, Interest Rate Hedging Obligations or otherwise

(including all Obligations of each Pledgor now or hereafter existing under this

Pledge 

 

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Agreement and each other

Loan Document to which such Pledgor is or may become a party), with all such

Obligations being referred to as the “Secured Obligations”.

SECTION 2.3             Pledge and Transfer of Pledged

Interests.  Any Certificated

Interests representing or evidencing any Collateral shall be delivered to and

held by or on behalf of the Pledgee pursuant hereto, shall be in suitable form

for transfer by delivery, and shall be accompanied by all necessary instruments

or documents of transfer or assignment, duly executed in blank by the

applicable Pledgor or, if any Collateral is in the form of uncertificated

securities, confirmation and evidence satisfactory to the Pledgee that the

applicable Pledgor has taken all actions requested by the Pledgee to provide

for the transfer to and perfection by the Pledgee of the security interests in

such uncertificated securities in accordance with the U.C.C. and any other

applicable law.

SECTION 2.4             Dividends on Pledged Interests.

(a)           In the event that any Dividend or

other payment is to be paid on any Pledged Interests (including any payment of

any principal or interest on any Pledged Note) at a time when no Default has

occurred and is continuing or would result therefrom, such Dividend or payment

may be paid directly to the applicable Pledgor.

(b)           If any such Default or Event of

Default has occurred and is continuing, then any such Dividend or payment shall

be paid directly to the Pledgee.

SECTION 2.5             Continuing Security Interest.  This Pledge Agreement shall create a

continuing security interest in the Collateral and shall:

(a)           remain in full force and effect until

the Termination Date;

(b)           be binding upon each Pledgor and its

successors, transferees and assigns; and

(c)           inure to the benefit of and be

enforceable by the Pledgee.

Without

limiting clause (c), the Pledgee may assign or otherwise transfer (in whole or

in part) the Revolving Note or any Credit Extension or Commitment held by it to

any other Person, and such other Person shall thereupon become vested with all

the rights and benefits in respect thereof granted to the Pledgee under any

Loan Document (including this Pledge Agreement) or otherwise, in each case as

provided in Section 10.10 of the Credit Agreement.

Upon

(i) the sale, transfer or other disposition of Collateral in accordance with

the Credit Agreement, or (ii) the occurrence of the Termination Date, the

security interests granted herein shall automatically terminate with respect to

(x) such Collateral (in the case of clause (i)), or (y) all Collateral (in the

case of clause (ii)), and at such time the Pledgee will, at each Pledgor’s sole

expense, deliver to the applicable Pledgor, without any representations,

warranties or recourse of any kind whatsoever, all certificates and instruments

previously delivered to the Pledgee representing or 

 

5

 

evidencing

all Pledged Interests, together with all other Collateral held by the Pledgee

hereunder, and execute and deliver to the applicable Pledgor such documents as

a Pledgor shall reasonably request to evidence such termination.

SECTION 2.6             Security Interest Absolute.  All rights of the Pledgee and the security

interests granted to the Pledgee hereunder, and all obligations of each Pledgor

hereunder, shall be joint and several and shall be absolute and unconditional,

irrespective of:

(a)           any lack of validity or

enforceability of the Credit Agreement or any other Loan Document;

(b)           the failure of the Pledgee

(i)            to assert any claim or demand or to

enforce any right or remedy against any Obligor or any other Person under the

provisions of the Credit Agreement, any other Loan Document or otherwise, or

(ii)           to exercise any right or remedy

against any other guarantor of, or collateral securing, any Secured

Obligations;

(c)           any change in the time, manner or

place of payment of, or in any other term of, all or any of the Secured

Obligations or any other extension, compromise or renewal of any Secured

Obligation;

(d)           any reduction, limitation, impairment

or termination of any Secured Obligations for any reason, including any claim

of waiver, release, surrender, alteration or compromise, and shall not be

subject to (and each Pledgor hereby waives any right to or claim of) any

defense or setoff, counterclaim, recoupment or termination whatsoever by reason

of the invalidity, illegality, irregularity, compromise, unenforceability of,

or any other event or occurrence affecting, any Secured Obligations or

otherwise;

(e)           any amendment to, rescission, waiver,

or other modification of, or any consent to departure from, any of the terms of

the Credit Agreement or any other Loan Document;

(f)            any addition, exchange, release,

surrender or non-perfection of any collateral (including the Collateral), or

any amendment to or waiver or release of or addition to or consent to departure

from any guaranty, for any of the Secured Obligations; or

(g)           any other circumstances which might

otherwise constitute a defense available to, or a legal or equitable discharge

of, any Obligor, any surety or any guarantor.

 

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SECTION 2.7             Postponement of Subrogation,

etc.  Each Pledgor agrees that it

will not exercise any rights which it may acquire by way of rights of

subrogation under this Pledge Agreement, any payment made hereunder, whether by

way of subrogation, reimbursement or otherwise, until after the Termination

Date.  Any amount paid to any Pledgor on

account of any such subrogation rights prior to the Termination Date shall be

held in trust for the benefit of the Pledgee and shall immediately be paid to

the Pledgee and credited and applied against the Secured Obligations, whether

matured or unmatured, in accordance with the terms of the Credit Agreement; provided,

however, that if:

(a)           any Pledgor has made payment to the

Pledgee of all or any part of the Secured Obligations; and

(b)           the Termination Date has occurred;

then

the Pledgee agrees that, at such Pledgor’s request, the Pledgee will execute

and deliver to such Pledgor appropriate documents (without recourse and without

representation or warranty) necessary to evidence the transfer by subrogation

to such Pledgor of an interest in the Secured Obligations resulting from such

payment by such Pledgor.  In furtherance

of the foregoing, at all times prior to the Termination Date, each Pledgor

shall refrain from taking any action or commencing any proceeding against the

Borrower or any other Obligor (or its successors or assigns, whether in

connection with a bankruptcy proceeding or otherwise) to recover any amounts in

respect of payments made under this Pledge Agreement to the Pledgee.  Notwithstanding the foregoing, to the extent

necessary to toll the statute of limitations, such Pledgor may take such action

required to preserve any rights it has by way of rights of subrogation as

consented to by the Pledgee in its reasonable discretion.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1             Representations and Warranties,

etc.  In order to induce the Pledgee

to enter into the Credit Agreement and to make Credit Extensions thereunder,

each Pledgor represents and warrants to the Pledgee as set forth in this

Article III.

SECTION 3.1.1              Ownership, No Liens, etc.  Each Pledgor is the legal and beneficial

owner of, and has good and marketable title to (and has full right and

authority to pledge and assign) its Collateral, free and clear of all Liens, options

and other charges, except any Lien granted pursuant hereto in favor of the

Pledgee.

SECTION 3.1.2              Valid Security Interest.  With respect to U.S. entities, the execution

and delivery of this Pledge Agreement, together with (a)(i) in the case of

Collateral in the form of a Certificated Interest, the delivery of such

Collateral to the Pledgee together with undated stock powers executed in blank

by the Pledgor, (ii) in the case of Collateral in the form of an uncertificated

 

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security, the

registration  in the name of the Secured

Party as owner with the Pledged Interest Issuer of such uncertificated

security, or (iii) in the case of Collateral in the form of Pledged Notes,

delivery of such Collateral and an allonge to such Collateral to the Pledgee,

or (b) in the case of other than Certificated Interests, the filing of U.C.C.

financing statements in the filing offices listed on Attachment 2

hereto, is effective to create a valid, perfected, first priority security

interest in such Collateral and all Proceeds thereof, securing the Secured

Obligations.  Upon the performance of

the actions set forth in the first sentence of this Section 3.1.2, no

further action is necessary to perfect or protect such security interest in the

Collateral and the Proceeds thereof. 

The Pledgor agrees that it shall take all necessary actions reasonably

requested by the Pledgee to create a valid, perfected security interest in the

Collateral related to non-U.S. entities.

SECTION 3.1.3              As to Pledged Interests.  In the case of

(a)           any Pledged Interests (other than

Pledged Notes) constituting Collateral,

(i)            all of such Pledged Interests are

duly authorized, and validly issued, fully paid, and non-assessable, and

constitute that percentage of the issued and outstanding shares of Capital

Stock, Partnership Interests, LLC Interests and other ownership interests of

each Pledged Interest Issuer set forth on Attachment 1 hereto; and

(ii)           the Pledgor has delivered to the

Pledgee true and complete copies of the partnership, membership, operating or

ownership agreements, as applicable, for each Pledged Interest Issuer that is

an LLC or a Partnership, which agreements are currently in full force and

effect and have not been amended or modified except as disclosed to the Pledgee

in writing; and

(b)           each Pledged Note, all of such

Pledged Notes have been duly authorized, executed, endorsed, issued and

delivered, and are the legal, valid and binding obligation of the issuers

thereof, and no default or event of default has occurred and is continuing

thereunder.

SECTION 3.1.4              Location of Pledgor.  The jurisdictions in which the Pledgor is

located for purposes of Section 9307 of the U.C.C. are set forth in Attachment

1 hereto.

SECTION 3.1.5              Nature of Pledged Interests.  No LLC Interests or Partnership Interests

are Certificated Interests.

 

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ARTICLE IV

COVENANTS

SECTION 4.1             Covenants.  Each Pledgor covenants and agrees that, at

all times prior to the Termination Date, it will perform, comply with and be

bound by the obligations set forth in this Article IV.

SECTION 4.1.1              Protect Collateral; Further

Assurances, etc.  Each Pledgor

covenants and agrees that it will not sell, assign, transfer, pledge, or

encumber in any other manner the Collateral (except in favor of the Pledgee

hereunder or as permitted in the Credit Agreement).  Each Pledgor will warrant and defend the right and title herein

granted unto the Pledgee in and to the Collateral (and all right, title, and

interest represented by the Collateral) against the claims and demands of all

other Persons.  Each Pledgor agrees that

from time to time, at the expense of such Pledgor, it will promptly execute and

deliver all further instruments, and take all further action, that may be

necessary or desirable, or that the Pledgee may reasonably request, in order to

perfect and protect any security interest granted or purported to be granted

hereby or to enable the Pledgee to exercise and enforce its rights and remedies

hereunder with respect to any Collateral. 

The Pledgor will not, without thirty (30) days’ prior written notice to

the Pledgee, (i) change its name or structure so as to make any financing or

other statement filed pursuant to this Pledge Agreement become seriously

misleading or (ii) change the jurisdiction in which it is located to other than

those specified in Section 3.1.4 hereof.  Each Pledgor further covenants and agrees as follows:

(a)           If any Pledgor shall become entitled

to receive or shall receive any stock or other certificate (including any

certificate representing a Dividend or a Distribution in connection with any

reclassification, increase or reduction of capital or any certificate issued in

connection with any reorganization), option or rights, whether in addition to,

in substitution of, as a conversion of, or in exchange for any portion of the

Collateral (or otherwise in respect thereof), such Pledgor shall accept the

same as the agent of the Pledgee, hold the same in trust for the Pledgee and

deliver the same forthwith to the Pledgee in the exact form received, duly

endorsed (in blank) by such Pledgor to the Pledgee, if required, together with

an undated stock power or other necessary instrument of transfer covering such

certificate duly executed in blank by such Pledgor, to be held by the Pledgee,

subject to the terms of this Pledge Agreement, as additional security for the

Secured Obligations.  In addition, any

sums paid upon or in respect of the Collateral upon the liquidation or dissolution

of any Pledged Interest Issuer shall be held by the Pledgee as additional

security for the Secured Obligations. 

If any sums of money or property so paid or distributed in respect of

any Collateral shall be received by any Pledgor, then such Pledgor shall, until

such money or property is paid or delivered to the Pledgee, hold such money or

property in trust for the Pledgee, segregated from other funds of such Pledgor,

as additional collateral securing the Secured Obligations.

(b)           Except as otherwise expressly

permitted by the Credit Agreement, without the prior written consent of the

Pledgee, no Pledgor will (i) consent to any material modification, extension or

alteration of the terms of any membership, partnership or operating agreement

of the LLCs or the Partnerships or (ii) accept a 

 

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surrender of any

membership, partnership or operating agreement of any of the LLCs or the

Partnerships, as applicable, or waive any breach of or default under any such agreement

by any other party thereto.

(c)           Each Pledgor will advise the Pledgee

promptly, in reasonable detail (i) of any Lien or claim made or asserted

against any part of the Collateral, (ii) of any material change in the

composition of the Collateral, and (iii) of the occurrence of any other event

relating specifically to such Pledgor or its assets which could reasonably be

expected to have a material adverse effect on the aggregate value of the

Collateral or on the security interests created hereunder.

SECTION 4.1.2              Registration of Pledged

Interests, etc.  Concurrently with

the execution and delivery of this Pledge Agreement, each Pledgor shall execute

and deliver to the applicable Pledged Interest Issuer instructions to register,

substantially in the form of Exhibit A hereto, and cause each Pledged Interest

Issuer to execute and deliver to the Pledgee the Initial Transaction Statement,

substantially in the form of Exhibit B hereto, confirming that each Pledged

Interest Issuer (in which such Pledgor owns a Pledged Interest (other than in

the case of a Certificated Interest or a Pledged Note)) has registered the

pledge by such Pledgor effected by this Pledge Agreement on its books.  In addition, the Pledgor agrees that it

shall cause each issuer of Certificated Interests to execute and deliver to the

Pledgee an acknowledgment in a form satisfactory to the Pledgee.

SECTION 4.1.3              Stock Powers, etc.  Each Pledgor agrees that all Certificated

Interests constituting Collateral delivered by such Pledgor pursuant to this

Pledge Agreement will be accompanied by duly executed undated blank stock

powers, or other equivalent instruments or documents of transfer acceptable to

the Pledgee, as are necessary under all applicable laws to perfect the Lien in

favor of the Pledgee on such Collateral. 

Each Pledgor will, from time to time upon the request of the Pledgee,

promptly deliver to the Pledgee such stock powers, instruments, and similar

documents, satisfactory in form and substance to the Pledgee, with respect to

the Collateral as the Pledgee may reasonably request and will, from time to

time upon the request of the Pledgee after the occurrence, and during the

continuance, of any Event of Default, promptly transfer any Pledged Interests

or other shares of Capital Stock or other ownership interests constituting

Collateral into the name of any nominee designated by the Pledgee.

SECTION 4.1.4              Continuous Pledge.  Each Pledgor will, at all times, keep

pledged to the Pledgee pursuant hereto all Pledged Interests and all other shares

of Capital Stock or other ownership interests constituting Collateral, all

Dividends and Distributions with respect thereto [(provided that if no Event of

Default shall have occurred or be continuing, such Dividends and Distributions

may be used for working capital or other purposes)], all Pledged Notes, all

interest, principal and other proceeds received by the Pledgee with respect to

the Pledged Notes, and all other Collateral and other securities, instruments,

proceeds, and rights from time to time received by or distributable to such

Pledgor in respect of any Collateral, and will not permit any Pledged Interest

Issuer to issue any Capital Stock or other ownership interests or any options,

warrants or other rights 

 

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to subscribe for or

purchase Capital Stock (other than as permitted by the Credit Agreement) which

shall not have been immediately duly pledged hereunder on a first priority

perfected basis.

SECTION 4.1.5              Voting Rights; Dividends,

etc.  Each Pledgor agrees:

(a)           after any Event of Default shall have

occurred and be continuing, promptly upon receipt of notice thereof by such

Pledgor and without any request therefor by the Pledgee, such Pledgor will

deliver (properly endorsed where required hereby or requested by the Pledgee)

to the Pledgee all Dividends, Distributions, all other cash payments, and all

Proceeds of the Collateral, all of which shall be held by the Pledgee as

additional Collateral for use in accordance with Section 6.4 hereof; and

(b)           after any Event of Default shall have

occurred and be continuing and the Pledgee has notified any Pledgor of the

Pledgee’s intention to exercise its voting power under this Section 4.1.5:

(i)            the Pledgee may exercise (to the

exclusion of each Pledgor) the voting power and all other incidental rights of

ownership with respect to any Pledged Interests or other shares of Capital

Stock or other ownership interests constituting Collateral and each Pledgor

hereby grants the Pledgee an irrevocable proxy, exercisable under such

circumstances, to vote the Pledged Interests and such other Collateral; and

(ii)           to promptly deliver to the Pledgee

such additional proxies and other documents requested by the Pledgee as may be

necessary to allow the Pledgee to exercise such voting power.

All

Dividends, Distributions, cash payments and Proceeds which may at any time and

from time to time be held by any Pledgor but which such Pledgor is then

obligated to deliver to the Pledgee, shall, until delivery to the Pledgee, be held

by such Pledgor separate and apart from its other property in trust for the

Pledgee.  The Pledgee agrees that unless

an Event of Default shall have occurred and be continuing and the Pledgee shall

have given the notice referred to in clause (b), such Pledgor shall have the

exclusive voting power with respect to any shares of Capital Stock or other

ownership interests (including any of the Pledged Interests) constituting

Collateral and the Pledgee shall, upon the written request of such Pledgor,

promptly deliver such proxies and other documents, if any, as shall be

reasonably requested by such Pledgor which are necessary to allow such Pledgor

to exercise voting power with respect to any such share of Capital Stock or

other ownership interests (including any of the Pledged Interests) constituting

Collateral; provided, however, that no vote shall be cast, or consent, waiver,

or ratification given, or action taken by any Pledgor that would impair any

Collateral or be inconsistent with or violate any provision of the Credit

Agreement, any other Loan Document or any Interest Rate Hedging Agreement.

 

11

 

SECTION 4.1.6              Additional Undertakings.  No Pledgor will, without the prior written

consent of the Pledgee, take or omit to take any action the taking or the

omission of which could with reasonable likelihood result in any impairment or

alteration of any Instrument constituting Collateral.  In furtherance of the foregoing, each Pledgor agrees that it will

not, without the prior written consent of the Pledgee, which consent shall not

be unreasonably withheld:

(a)           enter into any agreement amending,

supplementing, or waiving any provision of any Pledged Note (including any

underlying Instrument pursuant to which such Pledged Note is issued) or

compromising or releasing or extending the time for payment of any obligation

of the maker thereof; or

(b)           take or omit to take any action the

taking or the omission of which would result in any impairment or alteration of

any obligation of the maker of any Pledged Note or other Instrument

constituting Collateral.

SECTION 4.1.7              Pledgor Remains Liable.  Anything herein to the contrary

notwithstanding:

(a)           each Pledgor shall remain liable to

perform all of its duties and obligations as an owner of the Pledged Interests,

to the same extent as if this Pledge Agreement had not been executed;

(b)           the exercise by the Pledgee of any of

its rights hereunder shall not release any Pledgor from any of its duties or

obligations as owner of the Pledged Interests; and

(c)           the Pledgee shall not have any

obligation or liability as an owner of any Pledged Interest, by reason of this

Pledge Agreement.

ARTICLE V

ATTORNEY IN FACT

SECTION 5.1             Pledgee Appointed

Attorney-in-Fact.  Each Pledgor

hereby irrevocably appoints the Pledgee as such Pledgor’s attorney-in-fact,

with full authority in the place and stead of such Pledgor and in the name of

such Pledgor or otherwise, from time to time in the Pledgee’s discretion, after

the occurrence and during the continuance of an Event of Default, to take any

action and to execute any instrument or document which such Pledgee may deem

necessary or advisable to accomplish the purposes of this Pledge Agreement,

including without limitation:

(a)           to ask, demand, collect, sue for,

recover, compromise, receive and give acquittance and receipts for moneys due

and to become due under or in respect of any of the Collateral;

 

12

 

(b)           to receive, endorse, and collect any

drafts or other instruments, documents and chattel paper, in connection with

clause (a); and

(c)           to file any claims or take any action

or institute any proceedings which the Pledgee may deem necessary or desirable

for the collection of any of the Collateral or otherwise to enforce the rights

of the Pledgee with respect to any of the Collateral.

Each

Pledgor hereby acknowledges, consents and agrees that the power of attorney

granted pursuant to this Section 5.1 is irrevocable and coupled with an

interest.

SECTION 5.2             Pledgee May Perform.  If any Pledgor fails to perform any

agreement contained herein, the Pledgee may itself perform, or cause

performance of, such agreement, and the reasonable expenses of the Pledgee

incurred in connection therewith shall be jointly and severally payable by the

Pledgors pursuant to Section 6.5 hereof.

SECTION 5.3             Pledgee Has No Duty.  The powers conferred on the Pledgee

hereunder are solely to protect its interests in the Collateral and shall not

impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral in its possession

and the accounting for moneys actually received by it hereunder, the Pledgee

shall have no duty as to any Collateral or responsibility for:

(a)           ascertaining or taking action with

respect to calls, conversions, exchanges, maturities, tenders or other matters

relative to any Pledged Interests, whether or not the Pledgee has or is deemed

to have knowledge of such matters; or

(b)           taking any necessary steps to

preserve rights against prior parties or any other rights pertaining to any

Collateral.

SECTION 5.4             Reasonable Care.  Other than the exercise of reasonable care

in the custody and preservation of the Collateral in its possession, the

Pledgee shall have no duty with respect thereto.  The Pledgee shall be deemed to have exercised reasonable care in

the custody and preservation of the Collateral in its possession if the

Collateral is accorded treatment substantially equal to that which the Pledgee

accords its own property.  The Pledgee

shall not be liable or responsible for any loss or damage to any of the

Collateral, or for any diminution in the value thereof, by reason of the act or

omission of any agent or bailee selected by the Pledgee in good faith.

 

ARTICLE VI

REMEDIES

SECTION 6.1             Certain Remedies.  If any Event of Default shall have occurred

and be continuing:

 

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(a)           The Pledgee may exercise in respect

of the Collateral, in addition to all other rights and remedies provided for

herein or otherwise available to it, all the rights and remedies of a secured

party under the U.C.C. (whether or not the U.C.C. applies to the affected

Collateral) and also may, without notice except as specified below, sell the

Collateral or any part thereof in one or more parcels at public or private

sale, at the Pledgee’s offices or elsewhere, for cash, on credit or for future

delivery, and upon such other terms as the Pledgee may deem commercially

reasonable.  Each Pledgor agrees that,

to the extent notice of sale shall be required by law, at least ten (10) days’

prior notice to any Pledgor of the time and place of any public sale or the

time after which any private sale is to be made shall constitute reasonable

notification.  The Pledgee shall not be

obligated to make any sale of Collateral regardless of notice of sale having

been given.  The Pledgee may adjourn any

public or private sale from time to time by announcement at the time and place

fixed therefor, and such sale may, without further notice, be made at the time

and place to which it was so adjourned.

(b)           The Pledgee may:

(i)            transfer all or any part of the

Collateral into the name of the Pledgee or its nominee, with or without

disclosing that such Collateral is subject to the Lien hereunder;

(ii)           notify the parties obligated on any

of the Collateral to make payment to the Pledgee of any amount due or to become

due thereunder;

(iii)          enforce collection of any of the

Collateral by suit or otherwise, and surrender, release or exchange all or any

part thereof, or compromise or extend or renew for any period (whether or not

longer than the original period) any obligations of any nature of any party

with respect thereto;

(iv)          endorse any checks, drafts, or other

writings in any Pledgor’s name to allow collection of the Collateral;

(v)           take control of any Proceeds of the

Collateral;

(vi)          execute (in the name, place and stead

of any Pledgor) endorsements, assignments, stock powers and other instruments

or other documents of conveyance or transfer with respect to all or any of the

Collateral;

(vii)         accelerate any Pledged Note which may

be accelerated in accordance with its terms and take any other action to

collect upon any Pledged Note (including, without limitation, making any demand

for payment thereon); and

 

14

 

(viii)        to vote all or any part of the Pledged

Interests (whether or not transferred into the name of the Pledgee) and give

all consents, waivers and ratifications in respect of the Collateral

(including, without limitation, under all operating agreements, partnership

agreements or other agreements relating to the Collateral) and otherwise act

with respect thereto as if the Pledgee were the outright owner thereof.

SECTION 6.2             Securities Laws.  If the Pledgee shall determine to exercise

its right to sell all or any of the Collateral pursuant to Section 6.1

hereof, each Pledgor agrees that, upon request of the Pledgee, such Pledgor

will, at such Pledgor’s own expense:

(a)           execute and deliver, and cause each

issuer of the Collateral contemplated to be sold and cause the directors and

officers thereof to execute and deliver, all such instruments and documents,

and do or cause to be done all such other acts and things, as may be necessary

or, in the opinion of the Pledgee, advisable to register such Collateral under

the provisions of the Securities Act of 1933, as from time to time amended (the

“Act”), and comparable legislation in other jurisdictions, and to cause the

registration statement relating thereto to become effective and to remain

effective for such period as prospectuses are required by law to be furnished,

and to make all amendments and supplements thereto and to the related

prospectus which, in the opinion of the Pledgee, are necessary or advisable, all

in conformity with the requirements of the Act and the rules and regulations of

the Securities and Exchange Commission applicable thereto and comparable

legislation, rules and regulations in other jurisdictions;

(b)           use its best efforts to qualify the

Collateral under the applicable state securities or “Blue Sky” laws and to

obtain all necessary governmental approvals for the sale of the Collateral, as

requested by the Pledgee;

(c)           cause each such Pledged Interest

Issuer to make available to its security holders, as soon as practicable, an

earnings statement that will satisfy the provisions of Section 11(a) of the Act

and comparable legislation in other jurisdictions; and

(d)           do or cause to be done all such other

acts and things as may be necessary to make such sale of the Collateral or any

part thereof valid and binding and in compliance with applicable law.

Each

Pledgor further acknowledges the impossibility of ascertaining the amount of

damages that would be suffered by the Pledgee by reason of the failure by such

Pledgor to perform any of the covenants contained in this Section 6.2

and, consequently, jointly and severally, agrees that, if any Pledgor shall

fail to perform any of such covenants, such Pledgor shall pay, as liquidated

damages and not as a penalty, an amount equal to the value (as determined by

the Pledgee) of the Collateral on the date the Pledgee shall demand compliance

with this Section.  Notwithstanding the

provisions 

 

15

 

of

this Section 6.2, the Pledgee shall not be obligated to register any of

the Collateral under the Act in connection with the exercise of remedies

hereunder and may elect, in its sole discretion, to sell the Collateral or any

part thereof by private sale in such manner and under such circumstances as the

Pledgee may deem necessary or advisable in order that such sale be effected

without such registration.

SECTION 6.3             Compliance with Restrictions.  Each Pledgor agrees that in any sale of any

of the Collateral whenever an Event of Default shall have occurred and be

continuing, the Pledgee is hereby authorized to comply with any limitation or

restriction in connection with such sale as it may be advised by counsel is

necessary in order to avoid any violation of applicable law (including

compliance with such procedures as may restrict the number of prospective

bidders and purchasers, require that such prospective bidders and purchasers

have certain qualifications, and restrict such prospective bidders and

purchasers to Persons who will represent and agree that they are purchasing for

their own account for investment and not with a view to the distribution or

resale of such Collateral), or in order to obtain any required approval of the

sale or of the purchase by any governmental regulatory authority or official,

and each Pledgor further agrees that such compliance shall not result in such

sale being considered or deemed not to have been made in a commercially

reasonable manner, nor shall the Pledgee be liable or accountable to any Pledgor

for any discount allowed by the reason of the fact that such Collateral is sold

in compliance with any such limitation or restriction.

SECTION 6.4             Application of Proceeds.  All cash proceeds received by the Pledgee in

respect of any sale of, collection from, or other realization upon, all or any

part of the Collateral may, in the discretion of the Pledgee, be held by the

Pledgee as additional collateral security for, or then or at any time

thereafter be applied in whole or in part by the Pledgee against all or any

part of the Secured Obligations as follows:

(i)            first, to the payment of all

Obligations owing to the Pledgee pursuant to Section 10.3 of the Credit

Agreement and Section 6.5 hereof;

(ii)           second, after payment in full of the

amounts specified in clause (i), to the payment of all other Obligations

owing to the Pledgee, with such amounts applied first to fees and expenses,

then to accrued and unpaid interest, then to the outstanding principal amount

of the Revolving Loan, and then to Letter of Credit Outstandings and then to

Interest Rate Hedging Obligations, if any; and

(iii)          third, after payment in full of the

amounts specified in clauses (i) and (ii), and following the Termination Date,

to the Pledgors or any other Person lawfully entitled to receive such surplus.

SECTION 6.5             Indemnity and Expenses.  Each Pledgor hereby jointly and severally

agrees to indemnify and hold harmless the Pledgee from and against any and all

claims, losses, and liabilities arising out of or resulting from this Pledge

Agreement (including enforcement of this 

 

16

 

Pledge Agreement), except

claims, losses, or liabilities resulting from the Pledgee’s gross negligence or

willful misconduct.  Upon demand, each

Pledgor jointly and severally agrees that it will pay to the Pledgee the amount

of any and all reasonable expenses, including the reasonable fees and

disbursements of its counsel and of any experts, which the Pledgee may incur in

connection with:

(a)           the administration of this Pledge

Agreement, the Credit Agreement and any other Loan Document;

(b)           the custody, preservation, use, or

operation of, or the sale of, collection from, or other realization upon, any

of the Collateral;

(c)           the exercise or enforcement of any of

the rights of the Pledgee hereunder; or

(d)           the failure by any Pledgor to perform

or observe any of the provisions hereof.

The

provisions of this Section 6.5 shall survive the Termination Date.

 

ARTICLE VII

 

MISCELLANEOUS PROVISIONS

SECTION 7.1             Loan Document.  This Pledge Agreement is a Loan Document

executed pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions thereof, including Article X thereof.

SECTION 7.2             Protection of Collateral.  The Pledgee may from time to time, at its

option, perform any act which any Pledgor agrees hereunder to perform and which

such Pledgor shall fail to perform after being requested in writing so to

perform (it being understood that no such request need be given after the

occurrence and during the continuance of an Event of Default) and the Pledgee

may from time to time take any other action which the Pledgee reasonably deems

necessary for the maintenance, preservation or protection of any of the

Collateral or of its security interest therein.

SECTION 7.3             Binding on Successors,

Transferees and Assigns; Assignment. 

This Pledge Agreement shall be jointly and several binding upon each

Pledgor and each of their successors, transferees and assigns and shall inure

to the benefit of and be enforceable by Pledgee and its successors, transferees

and assigns; provided, however, that no Pledgor may assign any of

its obligations hereunder without the prior written consent of the Pledgee.

SECTION 7.4             Amendments, etc.  No amendment to or waiver of any provision

of this Pledge Agreement, nor consent to any departure by any Pledgor herefrom,

shall in any event be 

 

17

 

effective unless the same

shall be in writing and signed by the Pledgee and then such waiver or consent

shall be effective only in the specific instance and for the specific purpose

for which given.

SECTION 7.5             Notices.  All notices and other communications

provided for hereunder shall be in writing (including facsimile communication)

and, mailed or telecopied or delivered to each Pledgor, in care of the Borrower

at the address specified in the Credit Agreement.  All such notices and other communications, when mailed and

properly addressed with postage prepaid or if properly addressed and sent by

pre-paid courier service, shall be deemed given when received; any such notice

or communication, if transmitted by telecopier, shall be deemed given when

transmitted and electronically confirmed.

SECTION 7.6             Additional Subsidiary Pledgors.  Upon the execution and delivery by any other

Person of an instrument in the form of Annex I hereto, such Person shall become

a “Pledgor” hereunder with the same force and effect as if originally named as

a “Pledgor” herein.  The execution and

delivery of any such instrument shall not require the consent of any other

Pledgor hereunder.  The rights and

obligations of each Pledgor hereunder shall remain in full force and effect

notwithstanding the addition of any new Pledgor as a party to this Pledge

Agreement.

SECTION 7.7             No Waiver; Remedies.  No failure on the part of the Pledgee to

exercise, and no delay in exercising, any right hereunder shall operate as a

waiver thereof; nor shall any single or partial exercise of any right hereunder

preclude any other or further exercise thereof or the exercise of any other

right.  The remedies herein provided are

cumulative and not exclusive of any remedies provided by law.

SECTION 7.8             Captions.  Section captions used in this Pledge

Agreement are for convenience of reference only, and shall not affect the

construction of this Pledge Agreement.

SECTION 7.9             Severability.  Wherever possible, each provision of this

Pledge Agreement shall be interpreted in such manner as to be effective and

valid under applicable law, but if any provision of this Pledge Agreement shall

be prohibited by or invalid under such law, such provision shall be ineffective

to the extent of such prohibition or invalidity, without invalidating the

remainder of such provision or the remaining provisions of this Pledge

Agreement.

SECTION 7.10           Counterparts.  This Pledge Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

SECTION 7.11           Governing Law, Entire Agreement,

etc.  THIS PLEDGE AGREEMENT SHALL BE DEEMED TO

BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF

CALIFORNIA.  THIS PLEDGE AGREEMENT AND

THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES

HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR

AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

 

18

 

SECTION 7.12               Forum Selection and Consent to

Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING

OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AGREEMENT OR ANY OTHER LOAN

DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL

OR WRITTEN) OR ACTIONS OF THE PLEDGEE OR ANY PLEDGOR SHALL BE BROUGHT AND

MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF CALIFORNIA OR IN THE

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA; PROVIDED,

HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT,

AT THE PLEDGEE’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY

MAY BE FOUND.  EACH PLEDGOR HEREBY

EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE

OF CALIFORNIA AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT

OF CALIFORNIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND

IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION

WITH SUCH LITIGATION. EACH PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF

PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR

WITHOUT THE STATE OF CALIFORNIA.  EACH

PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT

PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE

LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO

ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN

INCONVENIENT FORUM.  TO THE EXTENT THAT

ANY PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY

COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT

PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO

ITSELF OR ITS PROPERTY, SUCH PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN

RESPECT OF ITS OBLIGATIONS UNDER THIS PLEDGE AGREEMENT AND THE OTHER LOAN

DOCUMENTS.

SECTION 7.13               Waiver of Jury Trial.  EACH PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND

INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF

ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,

THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF CONDUCT,

COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE

PLEDGEE OR SUCH PLEDGOR.  EACH PLEDGOR

ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION

FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE

PLEDGEE ENTERING INTO THE CREDIT AGREEMENT AND EACH OTHER LOAN DOCUMENT.

 

19

 

 

 

[Remainder of page intentionally left blank]

 

20

 

IN

WITNESS WHEREOF, the Pledgor has caused this Subsidiary Pledge Agreement to be

duly executed and delivered by its officer thereunto duly authorized as of the

date first above written.

	

   

  	

   

  	

  SB

  OPERATINGCO, LLC,  

  as Pledgor

  
	

   

  	

   

  	

  By:

  	

  /s/ L. A.

  OBERKFELL

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  L.

  A. Oberkfell 

  President, 

  Chief Executive Officer

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  THE TITAN CORPORATION,  

  as Pledgee

  
	

   

  	

   

  	

  By:

  	

  /s/ MARK

  W. SOPP

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Mark W. Sopp 

  Senior Vice President, 

  Chief Financial Officer

  

 

 

21

 

ATTACHMENT

1

 

 

	

  Owner

  	

   

  	

  Issuer

  	

   

  	

  Class

  	

   

  	

  Certificate

  Numbers, if applicable

  	

   

  	

  Number of

  Shares or percentage ownership interest

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

Pledged Notes

 

Location of Pledgor (Section 3.1.4)

SB OperatingCo,

LLC — Delaware

9276 Scranton

Road, Suite 600

San Diego,

California  92121

 

 

22

 

ANNEX I

 

SUPPLEMENT,

dated as of ________________, ____ (this “Supplement”), to the Subsidiary

Pledge Agreement, dated as of August 2, 2002 (together with all amendments,

supplements, restatements and other modifications, if any, from time to time

thereafter made thereto, the “Pledge Agreement”), among the initial

signatories thereto and each other Person (such capitalized term, and other

terms used in this Supplement, to have the meanings set forth in Article I of

the Pledge Agreement) which from time to time thereafter became a party thereto

pursuant to Section 7.6 thereof (each, individually, a “Pledgor”, and,

collectively, the “Pledgors”), in favor of the Pledgee (as defined in

the Pledge Agreement).

W I T N E S S E T H:

WHEREAS,

pursuant to the provisions of Section 7.6 of the Pledge Agreement, the

undersigned is becoming a Pledgor under the Pledge Agreement; and

WHEREAS,

the undersigned Pledgor desires to become a “Pledgor” under the Pledge

Agreement in order to induce the Pledgee to continue to extend Credit

Extensions under the Credit Agreement;

NOW,

THEREFORE, in consideration of the premises, and for other consideration (the

receipt and sufficiency of which is hereby acknowledged), the undersigned

agrees, for the benefit of Pledgee, as follows.

SECTION 1.           In accordance

with the terms of the Pledge Agreement, by its signature below the undersigned

hereby irrevocably agrees to become a Pledgor under the Pledge Agreement with

the same force and effect as if it were an original signatory thereto and the

undersigned Pledgor, hereby (a) agrees to be bound by and comply with all of

the terms and provisions of the Pledge Agreement applicable to it as a Pledgor

and (b) represents and warrants that the representations and warranties made by

it as a Pledgor thereunder are true and correct as of the date hereof.  In furtherance of the foregoing, each

reference to a “Pledgor” in the Pledge Agreement shall be deemed to include the

undersigned Pledgor.

SECTION 2.           The

undersigned Pledgor hereby represents and warrants that this Supplement has

been duly authorized, executed and delivered by it and that this Supplement and

the Pledge Agreement constitute the legal, valid and binding obligation of the

undersigned Pledgor, enforceable against it in accordance with its terms.

SECTION 3.           Except as

expressly supplemented hereby, the Pledge Agreement shall remain in full force

and effect in accordance with its terms.

 

23

 

SECTION 4.           In the event

any one or more of the provisions contained in this Supplement should be held

invalid, illegal or unenforceable in any respect, the validity, legality and

enforceability of the remaining provisions contained herein and in the Pledge

Agreement shall not in any way be affected or impaired.

SECTION 5.           THIS

SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS

OF THE STATE OF CALIFORNIA.

SECTION 6.           This

Supplement may be executed by the parties hereto in several counterparts, each

of which shall be deemed to be an original and all of which shall constitute

together but one and the same agreement.

 

IN

WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly

executed and delivered by their respective officers thereunto duly authorized

as of the day and year first above written.

 

	

  [NAME OF ADDITIONAL

  SUBSIDIARY PLEDGOR]

  
	

   

  	

   

  
	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

ACCEPTED

BY:

THE TITAN CORPORATION,

as

Pledgee

 

	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

24

 

EXHIBIT A

 

INSTRUCTION TO REGISTER PLEDGE

 

___________

__, ____

 

[                        ]

Attention:

________________

Ladies

and Gentlemen:

The

undersigned, a [member] [partner] [shareholder] of ___________, a [___________

limited liability company] [a ________ partnership] [a __________ corporation]

(the “Company”), hereby instructs the Company to register on the books of the

Company the pledge of the undersigned’s [membership] [partnership] interest in

favor of THE TITAN CORPORATION, a Delaware corporation, as Pledgee (the

“Pledgee”), pursuant to the Subsidiary Pledge Agreement, dated as of May 24,

2002, made by, among others, the undersigned in favor of the Pledgee.

Very truly yours,

[NAME OF PLEDGOR]

 

	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

cc: 

The Titan Corporation

 

25

 

EXHIBIT B

 

INITIAL TRANSACTION STATEMENT

 

___________

__, ____

To:          The Titan Corporation

                Attention:

This

statement is to advise you that a pledge of the following uncertificated

securities has been registered in the name of The Titan Corporation (the

“Pledgee”), as follows:

1.             Uncertificated Securities:

The entire [limited liability company]

[partnership] interests of [NAME OF PLEDGOR] in the undersigned [limited

liability company] [________ partnership] [corporation].

2.             Registered Owner:

[NAME OF PLEDGOR]

 

3.             Pledged in favor of:

The

Titan Corporation,

   as the Pledgee

4.             There are no liens or restrictions of the undersigned

[limited liability company] [________ partnership] [corporation] and no adverse

claims to which the uncertificated securities are or may be subject known to

the undersigned [limited liability company] [________ partnership]

[corporation], other than in favor of The Titan Corporation, in its capacity as

the Pledgee.

5.             The pledge was registered on _______ __, ____.

6.             No transfer of the uncertificated securities shall be

made without the prior written consent of the Pledgee.

THIS

STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE TIME OF

ITS ISSUANCE.  DELIVERY OF THIS

STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT.  THIS STATEMENT IS NEITHER A 

 

26

 

NEGOTIABLE

INSTRUMENT NOR A SECURITY.

Very truly yours,

[NAME OF PLEDGED INTEREST ISSUER]

 

	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

27

 

Exhibit L

SUBSIDIARY SECURITY AGREEMENT

This SUBSIDIARY SECURITY

AGREEMENT (as amended, restated, supplemented, or otherwise modified from time

to time, this “Security Agreement”), dated as of August 2, 2002, is made

by each Subsidiary (as defined in the Credit Agreement referred to below) of

the Borrower (as defined below), now or after the date hereof (including

pursuant to Section 7.4) a signatory hereto (each, individually, a “Grantor,”

and collectively, the “Grantors”), in favor of THE TITAN CORPORATION, a

Delaware corporation (the “Secured Party”).

W  I  T  N  E  S

S  E  T  H :

WHEREAS, pursuant to a

Senior Secured Credit Agreement, dated as of August 2, 2002 (as amended,

restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between SUREBEAM CORPORATION, a Delaware corporation (the “Borrower”)

and Secured Party, the Secured Party has extended Commitments to make Credit

Extensions to the Borrower;

WHEREAS, as a condition

precedent to the making of the Credit Extensions (including the initial Credit

Extension) under the Credit Agreement, each Grantor is required to execute and

deliver this Security Agreement;

WHEREAS, each Grantor is

a Subsidiary of the Borrower;

WHEREAS, each Grantor has

duly authorized the execution, delivery and performance of this Security

Agreement; and

WHEREAS, it is in the

best interests of each Grantor to execute this Security Agreement inasmuch as

such Grantor will derive substantial direct and indirect benefits from the

Credit Extensions made from time to time to the Borrower by the Secured Party

pursuant to the Credit Agreement;

NOW THEREFORE, for good

and valuable consideration the receipt and sufficiency of which is hereby

acknowledged, and in order to induce the Secured Party to make Credit

Extensions (including the initial Credit Extension) to the Borrower pursuant to

the Credit Agreement, each Grantor jointly and severally agrees, for the

benefit of the Secured Party, as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1             Certain

Terms.  The following terms (whether

or not underscored) when used in this Security Agreement, including its

preamble and recitals, shall have the following meanings (such definitions to

be equally applicable to the singular and plural forms thereof):

“Borrower” is

defined in the first recital.

 

 

“Chattel Paper”

has the meaning provided in the U.C.C.

“Collateral” is

defined in Section 2.1.

“Collateral Account”

is defined in Section 4.1.2(b).

“Commercial Tort

Claims” means any claim arising in tort now or hereafter owned, acquired,

or received by any Grantor in which any Grantor now holds or hereafter acquires

any right or interest.

“Computer Hardware and

Software Collateral” means:

(a)       all

computer and other electronic data processing hardware, integrated computer

systems, central processing units, memory units, display terminals, printers,

features, computer elements, card readers, tape drives, hard and soft disk

drives, cables, electrical supply hardware, generators, power equalizers,

accessories and all peripheral devices and other related computer hardware;

(b)       all software programs

(including both source code, object code and all related applications and data

files), whether now owned, licensed or leased or hereafter acquired by any

Grantor, designed for use on the computers and electronic data processing

hardware described in clause (a) above;

(c)       all firmware associated

therewith;

(d)       all documentation

(including flow charts, logic diagrams, manuals, guides and specifications)

with respect to such hardware, software and firmware described in the preceding

clauses (a) through (c); and

(e)       all rights with respect

to all of the foregoing, including any and all copyrights, licenses, options,

warranties, service contracts, program services, test rights, maintenance

rights, support rights, improvement rights, renewal rights and indemnifications

and any substitutions, replacements, additions or model conversions of any of

the foregoing.

“Contracts” means

all agreements between any Grantor and one or more additional parties.

“Contract Rights”

means all rights of any Grantor (including, without limitation, all rights to

payment) under each Contract.

“Copyright Collateral”

means all copyrights (including all copyrights for semi-conductor chip product

mask works) of each Grantor, whether statutory or common law, registered or

unregistered, now or hereafter in force throughout the world including all of

such Grantor’s right, title and interest in and to all copyrights registered in

the United States Copyright Office or anywhere else in the world and also

including the copyrights referred to in Item A of Schedule IV

attached hereto, and all applications for registration thereof, whether pending

or in preparation, all copyright licenses, including each copyright license referred

to in Item B of Schedule IV attached hereto, the right to sue for

past, present and future infringements of any thereof, all rights 

 

2

 

corresponding

thereto throughout the world, all extensions and renewals of any thereof and

all Proceeds of the foregoing, including licenses, royalties, income, payments,

claims, damages and Proceeds of suit.

“Credit Agreement”

is defined in the first recital.

“Deposit Accounts”

has the meaning provided in the U.C.C. and, in any event, includes, without

limitation, any demand, time, savings, passbook or like account maintained with

a depositary institution, including those Deposit Accounts set forth in Item

G of Schedule I hereto.

“Documents” has

the meaning provided in the U.C.C.

“Equipment” has

the meaning provided in the U.C.C. and, in any event, includes, without

limitation, all equipment in all of its forms of the Grantors, wherever

located, including all parts thereof and all accessions, additions,

attachments, improvements, substitutions and replacements thereto and therefor

and all accessories related thereto.

“Fixtures” has the

meaning provided in the U.C.C., and in any event, includes, without limitation,

with respect to the Grantors, regardless of where located, any of the fixtures,

systems, machinery, apparatus, equipment or fittings of any kind or nature

whatsoever, and all appurtenances and additions thereto and substitutions or

replacements thereof, now or hereafter attached or affixed to or constituting a

part of, or located in or upon, real property wherever located, including sign,

escalator, elevator, any heating, electrical, mechanical, lighting, lifting,

plumbing, ventilating, air-conditioning or air cooling, refrigerating, food

preparation, incinerating or power, loading or unloading, boilers,

communication, switchboard, tank, pump, filter, sprinkler or other fire

prevention or extinguishing fixture, system, machinery, apparatus or equipment,

and any engine, motor, dynamo, machinery, pipe, pump, tank, conduit or duct

constituting a part of any of the foregoing, together with all extensions,

improvements, betterments, renewals, substitutes, and replacements of, and all

additions and appurtenances to any of the foregoing property, and all

conversions of the security constituted thereby, immediately upon any

acquisition or release thereof or any such conversion, as the case may be.

“General Intangibles”

has the meaning provided in the U.C.C. and, in any event, includes, without

limitation, with respect to the Grantors, all Contracts, agreements,

Instruments and indentures in any form, and portions thereof, to which any

Grantor is a party or under which any Grantor has any right, title or interest

or to which any Grantor or any property of any Grantor is subject, as the same

may from time to time be amended, supplemented or otherwise modified,

including, without limitation, (i) all rights of any Grantor to receive moneys

due and to become due to it thereunder or in connection therewith, (ii) all

rights of any Grantor to damages arising thereunder and (iii) all rights of any

Grantor to perform and to exercise all remedies thereunder.

“Goods” has the

meaning provided in the U.C.C.

“Grantor” and “Grantors”

are defined in the preamble.

“Instrument” has

the meaning provided in the U.C.C.

 

3

 

“Intellectual Property

Collateral” means, collectively, the Computer Hardware and Software

Collateral, the Copyright Collateral, the Patent Collateral, the Trademark

Collateral and the Trade Secrets Collateral.

“Inventory” has

the meaning provided in the U.C.C. and, in any event, includes, without

limitation, all inventory in all of its forms of the Grantors, wherever

located, including

(i)      all raw

materials and work in process therefor, finished goods thereof, and materials

used or consumed in the manufacture or production thereof,

(ii)     all

goods in which any Grantor has an interest in mass or a joint or other interest

or right of any kind (including goods in which such Grantor has an interest or

right as consignee), and

(iii)    all

goods which are returned to or repossessed by any Grantor,

and all accessions

thereto, products thereof and documents therefor.

“Investment Property”

has the meaning provided in the U.C.C.

“Letter of Credit

Right” means any right of any Grantor to payment or performance under a

letter of credit (as such term in defined in Article 5 of the U.C.C.), whether

or not the beneficiary has demanded or is at the time entitled to demand

payment or performance.

“Patent Collateral”

means:

(a)       all letters patent and

applications for letters patent throughout the world, including all patent

applications in preparation for filing anywhere in the world and including each

patent and patent application referred to in Item A of Schedule II

attached hereto;

(b)       all reissues, divisions,

continuations, continuations-in-part, extensions, renewals and reexaminations

of any of the items described in clause (a);

(c)       all patent licenses,

including each patent license referred to in Item B of Schedule II

attached hereto; and

(d)       all Proceeds of, and

rights associated with, the foregoing (including license royalties and Proceeds

of infringement suits), the right to sue third parties for past, present or

future infringements of any patent or patent application, including any patent

or patent application referred to in Item A of Schedule II

attached hereto, and for breach or enforcement of any patent license, including

any patent license referred to in Item B of Schedule II attached

hereto, and all rights corresponding thereto throughout the world.

“Payment Intangibles”

has the meaning provided in the U.C.C.

“Promissory Notes”

has the meaning provided in the U.C.C.

 

4

 

“Proceeds” has the

meaning provided in the U.C.C., and shall include, in any event, with respect

to any Grantor, any and all currently owned or after-acquired (a) Receivables,

Chattel Paper, Instruments, Investment Property, cash or other forms of money,

currency or funds or other property of any nature, type or land whatsoever

payable to or renewable by any Grantor from time to time in respect of the

Collateral, including upon the sale, lease, license, exchange or other

disposition of any Collateral, (b) proceeds of any insurance, indemnity,

warranty or guaranty payable to any Grantor from time to time with respect to

any of the Collateral, including by reason of the loss, nonconformity or

interference with the use of, defects or infringement of rights in, or damage

to, any of the Collateral, (c) payments (in any form whatsoever) made or due

and payable to any Grantor from time to time in connection with any

requisition, confiscation, condemnation, seizure or forfeiture of all or any

part of the Collateral by any governmental authority (or any person acting

under color of governmental authority), (d) claims of any Grantor against third

parties arising out of the loss, nonconformity, interference with the use of,

defects or infringements of rights in, or damage to, any of the Collateral,

including any claim (i) for past, present or future infringement of any patent

or patent license, copyright or copyright license or (ii) for past, present or

future infringement or dilution of any Trademark or Trademark license or for

injury to the goodwill associated with any Trademark, Trademark registration or

Trademark licensed under any Trademark license, (e) certificates, dividends,

cash, Instruments or other forms of money, currency or funds and other Property

received or distributed in respect of or in exchange for any Investment

Property, (f) cash or other forms of money, currency or funds and other

proceeds received under and in respect of any letter of credit or other support

obligation, (g) rights arising out of any of the Collateral, and (h) other

property of any nature, type or kind whatsoever from time to time paid or

payable under or in connection with, collected on, or distributed on account

of, any of the Collateral.

“Receivables”

means “accounts” (as such term is defined in the U.C.C.), including but not

limited to rights to payments for goods sold or leased or services rendered,

whether now existing or hereafter arising, including, without limitation,

rights evidenced by an account, note, Contract, security agreement, Chattel

Paper, or other evidence of indebtedness or security, together with (a) all

security pledged, assigned, hypothecated or granted to or held by any Grantor

to secure the foregoing, (b) all of any Grantor’s right, title and interest in

and to any goods, the sale of which gave rise thereto, (c) all guarantees,

endorsements and indemnifications on, or of, any of the foregoing, (d) all

powers of attorney for the execution of any evidence of indebtedness or

security or other writing in connection therewith, (e) all books, records,

ledger cards, and invoices relating thereto, (f) all evidences of the filing of

financing statements and other statements and the registration of other

Instruments in connection therewith and amendments thereto, notices to other

creditors or secured parties, and certificates from filing or other

registration officers, (g) all credit information, reports and memoranda

relating thereto and (h) all other writings related in any way to the

foregoing.

“Secured Obligations”

is defined in Section 2.2.

“Secured Party” is

defined in the preamble.

“Securities Account”

has the meaning provided in the U.C.C., including without limitation those

Securities Accounts listed in Item H of Schedule I hereto.

“Security Agreement”

is defined in the preamble.

 

5

 

“Supporting

Obligations” has the meaning provided in the U.C.C.

“Termination Date”

means the date on which all Obligations have indefeasibly been paid in full in

cash, all Commitments have been fully terminated and all Letters of Credit and

Lender Guaranties have been canceled or otherwise terminated.

“Trademark Collateral”

means:

(a)       all trademarks, trade

names, corporate names, company names, business names, fictitious business

names, trade styles, service marks, certification marks, collective marks,

logos, other source of business identifiers, prints and labels on which any of

the foregoing have appeared or appear, designs and General Intangibles of a

like nature (all of the foregoing items in this clause (a) being

collectively called a “Trademark”), now existing anywhere in the world

or hereafter adopted or acquired, whether currently in use or not, all

registrations and recordings thereof and all applications in connection

therewith, whether pending or in preparation for filing, including

registrations, recordings and applications in the United States Patent and

Trademark Office or in any office or agency of the United States of America or

any State thereof or any foreign country, including those referred to in Item A

of Schedule III attached hereto;

(b)       all Trademark licenses,

including each Trademark license referred to in Item B of Schedule

III attached hereto;

(c)       all reissues, extensions

or renewals of any of the items described in clauses (a) and (b);

(d)       all of the goodwill of

the business connected with the use of, and symbolized by the items described

in, clauses (a) and (b); and

(e)       all Proceeds of, and

rights associated with, the foregoing, including any claim by any Grantor

against third parties for past, present or future infringement or dilution of

any Trademark, Trademark registration or Trademark license, including any

Trademark, Trademark registration or Trademark license referred to in Item A

and Item B of Schedule III attached hereto, or for any injury

to the goodwill associated with the use of any such Trademark or for breach or

enforcement of any Trademark license.

“Trade Secrets

Collateral” means all common law and statutory trade secrets and all other

confidential or proprietary or useful information and all know-how obtained by

or used in or contemplated at any time for use in the business of any Grantor

(all of the foregoing being collectively called a “Trade Secret”),

whether or not such Trade Secret has been reduced to a writing or other tangible

form, including all documents and things embodying, incorporating or referring

in any way to such Trade Secret, all Trade Secret licenses, including each

Trade Secret license referred to in Schedule V attached hereto, and

including the right to sue for and to enjoin and to collect damages for the

actual or threatened misappropriation of any Trade Secret and for the breach or

enforcement of any such Trade Secret license.

 

6

 

“U.C.C.” means the

Uniform Commercial Code, as in effect from time to time in the State of

California; provided, however, in the event that, by reason of

mandatory provisions of law, any or all of the attachment, perfection or

priority of Secured Party’s security interest in any Collateral is governed by

the Uniform Commercial Code as in effect in a jurisdiction other than the State

of California, the term “U.C.C.” shall mean the Uniform Commercial Code

(including the Articles thereof) as in effect at such time in such other

jurisdiction for purposes of the provisions hereof relating to such attachment,

perfection or priority and for purposes of definitions related to such

provisions.

SECTION 1.2             Credit

Agreement Definitions.  Unless

otherwise defined herein or the context otherwise requires, terms used in this

Security Agreement, including its preamble and recitals, have the meanings

provided in the Credit Agreement.

SECTION 1.3             U.C.C.

Definitions.  Unless otherwise

defined herein or in the Credit Agreement or the context otherwise requires,

terms for which meanings are provided in the U.C.C. are used in this Security

Agreement, including its preamble and recitals, with such meanings.

ARTICLE II

SECURITY INTEREST

SECTION 2.1             Grant

of Security.  Each Grantor hereby

assigns and pledges to the Secured Party, and hereby grants to the Secured

Party, to secure the Secured Obligations, a security interest in all of the

following, whether now or hereafter existing or acquired by such Grantor (the “Collateral”):

(a)       the Collateral Account;

(b)       all Commercial Tort

Claims;

(c)       all Computer Hardware

and Software Collateral;

(d)       all Contracts, together

with any Contract Rights arising thereunder;

(e)       all Deposit Accounts;

(f)        all Equipment;

(g)       all Fixtures;

(h)       all Intellectual

Property Collateral;

(i)        all Inventory;

(j)        all Investment

Property;

(k)       all Letter of Credit

Rights;

 

7

 

(l)        all Receivables;

(m)      all Securities Accounts;

(n)       all Supporting

Obligations;

(o)       all other Goods, Chattel

Paper, Documents, Instruments (including, without limitation, Promissory

Notes), and General Intangibles (including, without limitation, Payment

Intangibles and tax refunds) of such Grantor now or hereafter existing;

(p)       all books, records,

writings, data bases, information and other property relating to, used or

useful in connection with, evidencing, embodying, incorporating or referring

to, any of the foregoing in this Section 2.1;

(q)       all of such Grantor’s

other personal property and rights of every kind and description and interests

therein; and

(r)        all products and

Proceeds of and from any and all of the foregoing Collateral (including

Proceeds which constitute property of the types described in clauses (a)

through (q) and, to the extent not otherwise included, all payments

under insurance which such Grantor is entitled to receive (whether or not the

Secured Party is the loss payee thereof), or any indemnity, warranty or

guaranty, payable by reason of loss or damage to or otherwise with respect to

any of the foregoing Collateral.

Notwithstanding

anything herein to the contrary, in no event shall the Collateral include, and

no Grantor shall be deemed to have granted a security interest in, any of such

Grantor’s rights or interests in any license, contract or agreement to which

such Grantor is a party or any of its rights or interests thereunder to the

extent, but only to the extent, that such a grant would, under the express

terms of such license, contract or agreement or otherwise, result in a breach

of the terms of, or constitute a default under such license, contract or

agreement (other than to the extent that any such term would be rendered

ineffective pursuant to Sections 9407(a) or 9408(a) of the U.C.C. or any other

applicable law (including the Bankruptcy Code) or principles of equity); provided,

that immediately upon the ineffectiveness, waiver, lapse or termination of any

such provision, the Collateral shall include, and such Grantor shall have

granted a security interest in, all such rights and interests as if such

provision had never been in effect.

SECTION 2.2             Security

for Obligations.  This Security

Agreement secures the payment of (i) all Obligations of the Borrower now or

hereafter existing under the Credit Agreement and each other Loan Document to

which the Borrower is or may become a party, whether for principal, interest,

costs, fees, expenses, Interest Rate Hedging Obligations or otherwise, and (ii)

all obligations of each Grantor and each other Obligor now or hereafter

existing under this Security Agreement and each other Loan Document to which

such Grantor or such other Obligor is or may become a party, with all such

obligations of the Borrower and each Grantor and each other Obligor being

collectively referred to as the “Secured Obligations”.

SECTION 2.3             Continuing

Security Interest; Transfer of Notes. 

This Security Agreement shall create a continuing security interest in

the Collateral and shall:

 

8

 

(a)       remain in full force and

effect until the Termination Date;

(b)       be binding upon each

Grantor and each of their successors, transferees and assigns; and

(c)       inure to the benefit of

the Secured Party.

The Secured Party

may assign or otherwise transfer (in whole or in part) the Revolving Note or

any Credit Extension held by it to any other Person or entity, and such other

Person or entity shall thereupon become vested with all the rights and benefits

in respect thereof granted to the Secured Party under any Loan Document

(including this Security Agreement) or otherwise, subject, however, to the

provisions of Section 10.10 of the Credit Agreement.

SECTION 2.4             Grantors

Remain Liable.  Anything herein to

the contrary notwithstanding:

(a)       each Grantor shall

remain liable under the Contracts and agreements included in the Collateral to

the extent set forth therein, and shall perform all of its duties and

obligations under such Contracts and agreements to the same extent as if this

Security Agreement had not been executed;

(b)       the exercise by the

Secured Party of any of its rights hereunder shall not release any Grantor from

any of its duties or obligations under any such Contracts or agreements

included in the Collateral; and

(c)       the Secured Party shall

not have any obligation or liability under any such Contracts or agreements

included in the Collateral by reason of this Security Agreement, nor shall the

Secured Party be obligated to perform any of the obligations or duties of any

Grantor thereunder or to take any action to collect or enforce any claim for

payment assigned hereunder.

SECTION 2.5             Security

Interest Absolute.  All rights of

the Secured Party and the security interests granted to the Secured Party

hereunder, and all obligations of each Grantor hereunder, shall be absolute and

unconditional, irrespective of:

(a)       any lack of validity or

enforceability of the Credit Agreement or any other Loan Document;

(b)       the failure of the

Secured Party

(i)      to

assert any claim or demand or to enforce any right or remedy against any

Obligor or any other Person under the provisions of the Credit Agreement, any

other Loan Document or otherwise, or

(ii)     to

exercise any right or remedy against any other guarantor of, or collateral

securing, any Secured Obligations;

 

9

 

(c)       any change in the time,

manner or place of payment of, or in any other term of, all or any of the

Secured Obligations or any other extension, compromise or renewal of any

Secured Obligation;

(d)       any reduction,

limitation, impairment or termination of any Secured Obligations for any

reason, including any claim of waiver, release, surrender, alteration or

compromise, and shall not be subject to (and each Grantor hereby waives any

right to or claim of) any defense or setoff, counterclaim, recoupment or

termination whatsoever by reason of the invalidity, illegality, irregularity,

compromise, unenforceability of, or any other event or occurrence affecting,

any Secured Obligations or otherwise;

(e)       any amendment to,

rescission, waiver, or other modification of, or any consent to departure from,

any of the terms of the Credit Agreement or any other Loan Document;

(f)        any addition, exchange,

release, surrender or non-perfection of any collateral (including the

Collateral), or any amendment to or waiver or release of or addition to or

consent to departure from any guaranty, for any of the Secured Obligations; or

(g)       any other circumstances

which might otherwise constitute a defense available to, or a legal or

equitable discharge of, any Obligor, any surety or any guarantor.

SECTION 2.6             Postponement

of Subrogation, etc.  Each Grantor

agrees that it will not exercise any rights which it may acquire by way of

rights of subrogation under this Security Agreement, by any payment made

hereunder, whether by way of subrogation, reimbursement or otherwise, until

after the Termination Date.  Any amount

paid to any Grantor on account of any such subrogation rights prior to the

Termination Date shall be held in trust for the benefit of the Secured Party

and shall immediately be paid to the Secured Party and credited and applied

against the Secured Obligations, whether matured or unmatured, in accordance

with the terms of the Credit Agreement; provided, however, that if:

(a)       any Grantor has made

payment to the Secured Party of all or any part of the Secured Obligations; and

(b)       the Termination Date has

occurred;

then the Secured

Party agrees that, at such Grantor’s request, the Secured Party will execute

and deliver to such Grantor appropriate documents (without recourse and without

representation or warranty) necessary to evidence the transfer by subrogation

to such Grantor of an interest in the Secured Obligations resulting from such

payment by such Grantor.  In furtherance

of the foregoing, at all times prior to the Termination Date, each Grantor

shall refrain from taking any action or commencing any proceeding against the

Borrower or any other Obligor (or its successors or assigns, whether in

connection with a bankruptcy proceeding or otherwise) to recover any amounts in

respect of payments made under this Security Agreement to the Secured

Party.  Notwithstanding the foregoing,

to the extent necessary to toll the statute of limitations, such Grantor may

take such action required to preserve any rights it has by way of rights of

subrogation as consented to by the Secured Party in its reasonable discretion.

 

10

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1             Representations

and Warranties.  Each Grantor

represents and warrants to the Secured Party (a) as to all matters contained in

Article VI of the Credit Agreement insofar as the representations and

warranties contained therein are applicable to such Grantor and its properties,

each such representation and warranty set forth in such Article (insofar as

applicable as aforesaid) and all other terms of the Credit Agreement to which

reference is made therein, together with all related definitions and ancillary

provisions, being hereby incorporated into this Security Agreement by reference

as though specifically set forth in this Section 3.1 and (b) insofar as

the representations and warranties contained herein are applicable to such

Grantor and its properties, as set forth in this Article.

SECTION 3.1.1              Location

of Collateral, etc.  All of the

Equipment and Inventory of such Grantor is located at the places specified in Item

A and Item B, respectively, of Schedule I hereto, except for

such property in transit in the ordinary course.  None of the Equipment and Inventory has, within the four (4)

months preceding the date of this Security Agreement, been located at any place

other than the places specified in Item A and Item B, respectively, of Schedule

I applicable to such Grantor hereto except as set forth in a footnote

thereto.  The place(s) of business and

chief executive office of such Grantor and the office(s) where such Grantor

keeps its records concerning the Receivables, and all originals of all Chattel

Paper which evidence Receivables, are located at the address set forth in Item

D of Schedule I applicable to such Grantor hereto.  Such Grantor has no trade names other than

those set forth in Item E of Schedule I applicable to such

Grantor hereto.  During the four (4)

months preceding the date hereto, such Grantor has not been known by any legal

name different from the one set forth on the signature page hereto, nor has

such Grantor been the subject of any merger or other corporate reorganization,

except as set forth in Item F of Schedule I applicable to such

Grantor hereto.  All Receivables[, if

such Receivables are in excess of Two Hundred Fifty Thousand Dollars

($250,000), and otherwise at the request of Security Party) evidenced by a

promissory note or other Instrument, negotiable Document or Chattel Paper have

been duly endorsed and accompanied by duly executed instruments of transfer or

assignment, all in form and substance satisfactory to the Secured Party and

delivered and pledged to the Secured Party pursuant to Section 4.1.7

hereto.

SECTION 3.1.2              Ownership,

No Liens, etc.  Such Grantor and/or

the Borrower (with respect to Collateral shown on Schedules II through V

hereto) owns its Collateral free and clear of any Lien, security interest,

charge or encumbrance except for the security interest created by this Security

Agreement and except as permitted by the Credit Agreement.  No effective financing statement or other

instrument similar in effect covering all or any part of the Collateral is on

file in any recording office, except such as may have been filed in favor of

the Secured Party relating to this Security Agreement or as have been filed in

connection with Liens permitted pursuant to Section 8.3 of the Credit

Agreement.

SECTION 3.1.3              Possession

and Control.  Such Grantor has

exclusive possession and control of its Equipment and Inventory, except for

property in transit in the ordinary course.

 

11

 

SECTION 3.1.4              Negotiable

Documents, Instruments and Chattel Paper. 

Such Grantor has, contemporaneously herewith, delivered to the Secured Party

possession of all originals of all negotiable Documents, Instruments and

Chattel Paper currently owned or held by such Grantor (duly endorsed in blank,

if requested by the Secured Party).

SECTION 3.1.5              Intellectual

Property Collateral.  With respect to

any Intellectual Property Collateral the loss, impairment or infringement of

which is reasonably likely to have a Material Adverse Effect:

(a)       such Intellectual

Property Collateral is subsisting and has not been adjudged invalid or

unenforceable, in whole or in part;

(b)       such Intellectual

Property Collateral is valid and enforceable;

(c)       such Grantor (and/or the

Borrower) has made all necessary filings and recordations to protect its

interest in such Intellectual Property Collateral, including recordations of

all of its interests in the Patent Collateral and Trademark Collateral in the

United States Patent and Trademark Office and in corresponding offices

throughout the world and its claims to the Copyright Collateral in the United

States Copyright Office and in corresponding offices throughout the world, in

each case where it is commercially reasonable to do so;

(d)       other than as previously

disclosed in writing to the Secured Party, such Grantor (and/or the Borrower)

is the exclusive owner of the entire and unencumbered right, title and interest

in and to such Intellectual Property Collateral and no claim has been made that

the use of such Intellectual Property Collateral does or may violate the

asserted rights of any third party; and

(e)       such Grantor has performed

and will continue to perform and cause all acts and has paid and will continue

to pay all required fees and taxes to maintain each and every item of

Intellectual Property Collateral in full force and effect throughout the world,

as applicable, unless such Grantor (i) has reasonably and in good faith

determined that any of the Intellectual Property Collateral is of negligible

economic value to such Grantor, or (ii) has a reasonable and valid business

purpose to do otherwise.

Such Grantor owns directly

or is entitled to use by license or otherwise, all patents, Trademarks, Trade

Secrets, copyrights, mask works, licenses, technology, know-how, processes and

rights with respect to any of the foregoing necessary to the conduct of such

Grantor’s business as presently conducted.

SECTION 3.1.6              Validity,

Priority, etc.  Assuming the proper

filing of one or more financing statements identifying the Collateral with the

proper local, state and/or federal authorities, the security interests in the

Collateral granted to the Secured Party hereunder constitute valid and

continuing first priority perfected security interests in the Collateral

(subject to Liens permitted under the Credit Agreement), securing payment of

the Secured Obligations, to the extent such security interests may be perfected

by the filing of financing statements or other filings with the United States

Patent and Trademark Office or United States Copyright Office.

 

12

 

SECTION 3.1.7              Authorization,

Approval, etc.  Except as have been

obtained or made and are in full force and effect, no authorization, approval

or other action by, and no notice to or filing with, any governmental authority

or regulatory body is required under U.S. law, except for necessary filings in

connection with the U.C.C., either:

(a)       for the grant by such

Grantor of the security interest granted hereby or for the execution, delivery

and performance of this Security Agreement by such Grantor; or

(b)       for the perfection of or

the exercise by the Secured Party of its rights and remedies hereunder.

SECTION 3.1.8              Compliance

with Laws.  Such Grantor is in

compliance in all material respects with the requirements of all applicable

laws (including the provisions of the Fair Labor Standards Act), rules,

regulations and orders of every governmental authority, the non-compliance with

which is reasonably likely to have a Material Adverse Effect or which is

reasonably likely to materially adversely affect the value of the Collateral or

the worth of the Collateral as collateral security.

ARTICLE IV

COVENANTS

SECTION 4.1             Certain

Covenants.  Each Grantor covenants

and agrees that, so long as any portion of the Secured Obligations shall remain

unpaid, any Letters of Credit shall be outstanding or the Secured Party shall

have any outstanding Commitment, such Grantor will, unless the Secured Party

shall otherwise consent in writing, perform, comply with and be bound by (a)

all of the agreements, covenants and obligations contained in Article VII of the

Credit Agreement which are applicable to such Grantor or its properties, each

such agreement, covenant and obligation contained in such Article and all other

terms of the Credit Agreement to which reference is made herein, together with

all related definitions and ancillary provisions, being hereby incorporated

into this Security Agreement by reference as though specifically set forth in

this Section 4.1 and (b) the obligations set forth in this Article.

SECTION 4.1.1              As

to Equipment and Inventory.  Such Grantor

hereby agrees that it shall:

(a)       keep all the Equipment

and Inventory (other than Inventory sold or certain Equipment in transit and is

permitted under the Credit Agreement), each in the ordinary course of business,

or except as otherwise provided in the Credit Agreement or any of the other

Loan Documents) at the places therefor specified in Section 3.1.1 hereof

or, upon thirty (30) days’ prior written notice to the Secured Party, at such

other places in a jurisdiction where all representations and warranties set

forth in Article III shall be true and correct, and all action required

pursuant to the first sentence of Section 4.1.7 hereof shall have

been taken with respect to the Equipment and Inventory (collectively, “Specified

Locations”);

(b)       cause the Equipment to

be maintained and preserved in the same condition, repair and working order as

when new, ordinary wear and tear excepted, and in accordance 

 

13

 

with any

manufacturer’s manual or good business practice; and forthwith, or in the case

of any loss or damage to any of the Equipment, as quickly as practicable after

the occurrence thereof, make or cause to be made all repairs, replacements, and

other improvements in connection therewith which are necessary or desirable to

such end; and promptly furnish to the Secured Party a statement respecting any

material loss or damage to any of the Equipment; and

(c)       pay promptly when due

all property and other taxes, assessments and governmental charges or levies

imposed upon, and all claims (including claims for labor, materials and

supplies) against, the Equipment and Inventory, except to the extent the

validity thereof is being contested in good faith by appropriate proceedings

and for which adequate reserves in accordance with GAAP have been set aside.

SECTION 4.1.2              As

to Receivables and Contracts.

(a)       Such Grantor shall keep

its place(s) of business and chief executive office and the office(s) where it

keeps its records concerning the Receivables, and all originals of all Chattel

Paper which evidences Receivables, located at the address(es) set forth in Item

D of Schedule I hereto, or, upon thirty (30) days’ prior

written notice to the Secured Party, at such other locations in a jurisdiction

where all actions required by the first sentence of Section 4.1.7 hereof

shall have been taken with respect to the Receivables; not change its name

except upon thirty (30) days’ prior written notice to the Secured Party; hold

and preserve such records and Chattel Paper; and permit representatives of the

Secured Party at any time during normal business hours to inspect (upon

reasonable prior written notice so long as no Event of Default shall have

occurred and be continuing) and make abstracts from such records and Chattel Paper.  In addition, such Grantor shall give the

Secured Party a supplement to Schedule I hereto on each date a Compliance

Certificate is required to be delivered by the Borrower to the Secured Party

under the Credit Agreement, which shall set forth any changes to the

information set forth in Section 3.1.1 hereof.

(b)       Upon written notice by

the Secured Party to such Grantor pursuant to this clause, all Proceeds of

Collateral received by such Grantor shall be delivered in kind to the Secured

Party for deposit to a deposit account (the “Collateral Account”) of

such Grantor maintained with Comerica Bank-California, and such Grantor shall

not commingle any such Proceeds, and shall hold separate and apart from all

other property, all such Proceeds in express trust for the benefit of the

Secured Party until delivery thereof is made to the Secured Party.  The Secured Party will not give the notice

referred to in the preceding sentence unless there shall have occurred and be continuing

an Event of Default.

(c)       The Secured Party shall

have the right to apply any amount in any such Collateral Account to the

payment of any Secured Obligations which are due and payable or payable upon

demand, or to the payment of any Secured Obligations at any time that an Event

of Default shall exist.

(d)       Such Grantor shall not

enter into any government contract which prohibits assignment to the Secured

Party of any payments due or to become due thereunder or under 

 

14

 

any other

government contract, other than contracts for which the government has

determined that a prohibition on assignment of claims is in the government’s

interest.

(e)       Without Lender’s prior

written consent, which consent shall not be unreasonably withheld, such Grantor

shall not cause the aggregate value of Receivables or Contracts or Contract

Rights and the value of similar Receivables and Contracts as to which a Lien in

favor of the Secured Party cannot be granted hereunder pursuant to the final

paragraph of Section 2.1 (including Liens granted by other Grantors), or

pursuant to the Borrower Security Agreement to exceed $[500,000] at any time.

SECTION 4.1.3              As

to Collateral.

(a)       Until the occurrence and

continuance of an Event of Default, such Grantor (i) may in the ordinary course

of its business, at its own expense, sell, lease or furnish under the contracts

of service any of the Inventory normally held by such Grantor for such purpose,

and use and consume, in the ordinary course of its business, any raw materials,

work in process or materials normally held by such Grantor for such purpose,

(ii) will, at its own expense, endeavor to collect, as and when due, all

amounts due with respect to any of the Collateral, including the taking of such

action with respect to such collection as the Secured Party may reasonably

request following the occurrence of an Event of Default or, in the absence of

such request, as such Grantor may reasonably deem advisable, and (iii) may

grant, in the ordinary course of business, to any party obligated on any of the

Collateral, any rebate, refund or allowance to which such party may be lawfully

entitled, and may accept, in connection therewith, the return of goods, the

sale or lease of which shall have given rise to such Collateral.  The Secured Party may, at any time following

an Event of Default, whether before or after any revocation of such power and

authority or the maturity of any of the Secured Obligations, notify any parties

obligated on any of the Collateral to make payment to the Secured Party of any

amounts due or to become due thereunder and enforce collection of any of the

Collateral by suit or otherwise and surrender, release, or exchange all or any

part thereof, or compromise or extend or renew for any period (whether or not

longer than the original period) any indebtedness thereunder or evidenced

thereby.  Upon request of the Secured

Party following an Event of Default, such Grantor will, at its own expense,

notify any parties obligated on any of the Collateral to make payment to the

Secured Party of any amounts due or to become due thereunder.

(b)       After an Event of

Default, the Secured Party is authorized to endorse, in the name of such

Grantor, any item, howsoever received by the Secured Party, representing any

payment on or other Proceeds of any of the Collateral.

SECTION 4.1.4              As

to Intellectual Property Collateral. 

Each Grantor covenants and agrees to comply with the following

provisions as such provisions relate to any Intellectual Property Collateral of

such Grantor:

(a)       Such Grantor shall not

do any act, or omit to do any act, whereby any of its Patent Collateral may

lapse or become abandoned or dedicated to the public or unenforceable, unless

such Grantor shall either (i) reasonably and in good faith determine 

 

15

 

that any of its

Patent Collateral is of negligible economic value to such Grantor, or (ii) have

a reasonable and valid business purpose to do otherwise.

(b)       Such Grantor shall not,

and such Grantor shall not permit any of its licensees to:

(i)        fail to continue to use

any of its Trademark Collateral in order to maintain all of its Trademark

Collateral in full force free from any claim of abandonment for non-use,

(ii)       fail to maintain as in

the past the quality of products and services offered under all of its

Trademark Collateral,

(iii)      fail to employ all of

its Trademark Collateral registered with any Federal or state or foreign

authority with an appropriate notice of such registration,

(iv)      adopt or use any other

Trademark which is confusingly similar or a colorable imitation of any of its

Trademark Collateral,

(v)       use any of its Trademark

Collateral registered with any Federal or state or foreign authority except for

the uses for which registration or application for registration of all of its

Trademark Collateral has been made, and

(vi)      do or permit any act or

knowingly omit to do any act whereby any of its Trademark Collateral may lapse

or become invalid or unenforceable,

unless such Grantor shall

either (x) reasonably and in good faith determine that any of its Trademark

Collateral is of negligible economic value to such Grantor, or (y) have a

reasonable and valid business purpose to do otherwise.

(c)       Such Grantor shall not

do or permit any act or knowingly omit to do any act whereby any of its

Copyright Collateral or any of its Trade Secrets Collateral may lapse or become

invalid or unenforceable or placed in the public domain except upon expiration

of the end of an unrenewable term of a registration thereof, unless such

Grantor shall either (i) reasonably and in good faith determine that any of its

Copyright Collateral or any of its Trade Secrets Collateral is of negligible

economic value to such Grantor, or (ii) have a reasonable and valid business

purpose to do otherwise.

(d)       Such Grantor shall

notify the Secured Party immediately if it knows, or has reason to know, that

any application or registration relating to any material item of its

Intellectual Property Collateral may become abandoned or dedicated to the public

or be placed in the public domain or become invalid or unenforceable, or of any

adverse determination or development (including the institution of, or any such

determination or development in, any proceeding in the United States Patent and

Trademark Office, the United States Copyright Office or any foreign counterpart

thereof or any court) regarding such Grantor’s ownership of any of its

Intellectual Property Collateral, its right to register the same or to keep and

maintain and enforce the same.

 

16

 

(e)       In no event shall such

Grantor or any of its agents, employees, designees or licensees file an

application for the registration of any Intellectual Property Collateral with

the United States Patent and Trademark Office, the United States Copyright

Office or any similar office or agency in any other country or any political

subdivision thereof, unless it promptly upon such filing informs the Secured

Party, and upon request of the Secured Party, executes and delivers any and all

agreements, instruments, documents and papers as the Secured Party may

reasonably request to evidence the Secured Party’s security interest in such

Intellectual Property Collateral and the goodwill and general intangibles of

such Grantor relating thereto or represented thereby.

(f)        Such Grantor shall take

all necessary steps, including in any proceeding before the United States

Patent and Trademark Office, the United States Copyright Office or any similar

office or agency in any other country or any political subdivision thereof, to

maintain and pursue any application (and to obtain the relevant registration)

filed with respect to, and to maintain any registration of, its Intellectual

Property Collateral, including the filing of applications for renewal,

affidavits of use, affidavits of incontestability and opposition, interference

and cancellation proceedings and the payment of fees and taxes (except to the

extent that dedication, abandonment or invalidation is permitted under the foregoing

clauses (a), (b) and (c)).

(g)       Such Grantor shall,

contemporaneously herewith, execute and deliver to the Secured Party a Patent

Security Agreement, a Trademark Security Agreement and a Copyright Security

Agreement in the forms of Exhibit A, Exhibit B and Exhibit C

hereto, respectively, and shall execute and deliver to the Secured Party any

other document required to acknowledge or register or perfect the Secured

Party’s interest in any part of its Intellectual Property Collateral.

SECTION 4.1.5              Insurance.  Such Grantor will maintain or cause to be

maintained with financially sound and reputable insurance companies insurance

with respect to its business and properties (including the Equipment and

Inventory) against such casualties and contingencies and of such types and in

such amounts as is required pursuant to the Credit Agreement and will, upon the

request of the Secured Party, furnish a certificate of a reputable insurance

broker setting forth the nature and extent of all insurance maintained by such Grantor

in accordance with this Section. 

Without limiting the foregoing, such Grantor further agrees as follows:

(a)       Each policy for property

insurance shall show the Secured Party as loss payee.

(b)       Each policy for

liability insurance shall show the Secured Party as an additional insured.

(c)       Each insurance policy

shall provide that at least thirty (30) days’ prior written notice of

cancellation or of lapse shall be given to the Secured Party by the insured (or

at least ten (10) days’ prior written notice of cancellation shall be given

with respect to failure to pay the premium).

(d)       Such Grantor shall, if

so requested by the Secured Party, deliver to the Secured Party a copy of each

insurance policy.

 

17

 

SECTION 4.1.6              Transfers

and Other Liens.  Such Grantor shall

not:

(a)       sell, assign (by

operation of law or otherwise) or otherwise dispose of any of the Collateral,

except as may be permitted by the Credit Agreement; or

(b)       create or suffer to

exist any Lien or other charge or encumbrance upon or with respect to any of

the Collateral, except for the security interest created by this Security

Agreement and except as permitted by the Credit Agreement, including the cure

periods set forth therein

SECTION 4.1.7              Further

Assurances, etc.  Such Grantor

agrees that, from time to time at its own expense, it will promptly execute and

deliver all further instruments and documents, and take all further action,

that may be necessary or desirable (provided that it is reasonable), or that

the Secured Party may reasonably request, in order to perfect, preserve and

protect any security interest granted or purported to be granted hereby or to

enable the Secured Party to exercise and enforce its rights and remedies

hereunder with respect to any Collateral. 

Without limiting the generality of the foregoing, each Grantor will:

(a)       mark conspicuously each

Document (evidencing title) included in the Inventory, each Chattel Paper

included in the Receivables and, at the request of the Secured Party, and upon

the occurrence and during the continuance of an Event of Default, each of its

records pertaining to the Collateral with a legend, in form and substance

satisfactory to the Secured Party, indicating that such Document, Chattel Paper,

or Collateral is subject to the security interest granted hereby;

(b)       if any Receivable shall

be evidenced by a Promissory Note or other Instrument, negotiable Document or

Chattel Paper, deliver and pledge to the Secured Party hereunder such

Promissory Note, Instrument, negotiable Document or Chattel Paper duly endorsed

and accompanied by duly executed Instruments of transfer or assignment, all in

form and substance satisfactory to the Secured Party; provided, however, if

such evidences amounts less than Two Hundred Fifty Thousand Dollars ($250,000)

such delivery and pledge shall be at Secured Party’s Request;

(c)       execute and file such

financing or continuation statements, or amendments thereto, and such other

Instruments or notices as may be necessary or desirable, or as the Secured

Party may reasonably request, in order to perfect and preserve the security

interests and other rights granted or purported to be granted to the Secured

Party hereby;

(d)       promptly execute and

file any notice or other required form under or pursuant to the federal

assignment of claims statute, 31 U.S.C. § 3727, any successor or amended

version thereof or any regulation promulgated under or pursuant to any version

thereof, as the Secured Party may reasonably request; and

(e)       furnish to the Secured

Party, from time to time at the Secured Party’s request, statements and

schedules further identifying and describing the Collateral and such other

reports in connection with the Collateral as the Secured Party may reasonably

request, all in reasonable detail.

 

18

 

With respect to the

foregoing and the grant of the security interest hereunder, such Grantor hereby

authorizes the Secured Party to file one or more financing or continuation

statements, and amendments thereto, relative to all or any part of the

Collateral without the signature of such Grantor.  A carbon, photographic or other reproduction of this Security

Agreement or any financing statement covering the Collateral or any part thereof

shall be sufficient as a financing statement where permitted by law.

ARTICLE V

ATTORNEY-IN-FACT

SECTION 5.1             Secured

Party Appointed Attorney-in-Fact. 

Each Grantor hereby irrevocably appoints the Secured Party such

Grantor’s attorney-in-fact, with full authority in the place and stead of such

Grantor and in the name of such Grantor or otherwise, from time to time in the

Secured Party’s discretion, following the occurrence and continuation of an

Event of Default, to take any action and to execute any instrument which the

Secured Party may deem necessary or advisable to accomplish the purposes of

this Security Agreement, including:

(a)       to ask, demand, collect,

sue for, recover, compromise, receive and give acquittance and receipts for

moneys due and to become due under or in respect of any of the Collateral;

(b)       to receive, endorse, and

collect any drafts or other Instruments, Documents and Chattel Paper, in

connection with clause (a) above;

(c)       to file any claims or

take any action or institute any proceedings which the Secured Party may deem

necessary or desirable for the collection of any of the Collateral or otherwise

to enforce the rights of the Secured Party with respect to any of the

Collateral; and

(d)       to perform the

affirmative obligations of such Grantor hereunder (including all obligations of

such Grantor pursuant to Section 4.1.7 hereof).

Such Grantor

hereby acknowledges, consents and agrees that the power of attorney granted

pursuant to this Section is irrevocable until the Obligations are satisfied and

coupled with an interest.

SECTION 5.2             Secured

Party May Perform.  If any Grantor

fails to perform any agreement contained herein, the Secured Party may itself

perform, or cause performance of, such agreement, and the expenses of the

Secured Party incurred in connection therewith shall be payable by such Grantor

pursuant to Section 6.2 hereof.

SECTION 5.3             Secured

Party Has No Duty.  In addition to,

and not in limitation of, Section 2.4(c) hereof, the powers conferred on the

Secured Party hereunder are solely to protect its interest in the Collateral

and shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral

in its possession and the accounting for moneys actually received by it

hereunder, the Secured Party shall have no duty as to any Collateral or as to

the taking of any necessary steps to preserve rights against prior parties or

any other rights pertaining to any Collateral.

 

19

 

SECTION 5.4             Reasonable

Care.  Other than the exercise of

reasonable care in the custody and preservation of the Collateral, the Secured

Party shall have no duty with respect thereto. 

The Secured Party shall be deemed to have exercised reasonable care in

the custody and preservation of the Collateral in its possession if the

Collateral is accorded treatment substantially equal to that which the Secured

Party accords its own property.  The

Secured Party shall not be liable or responsible for any loss or damage to any

of the Collateral, or for any diminution in the value thereof, by reason of the

act or omission of any agent or bailee selected by the Secured Party in good

faith.

ARTICLE VI

REMEDIES

SECTION 6.1             Certain

Remedies.  If any Event of Default

shall have occurred and be continuing:

(a)       The Secured Party may

exercise in respect of the Collateral, in addition to other rights and remedies

provided for herein or otherwise available to it, all the rights and remedies

of a secured party under the U.C.C. (whether or not the U.C.C. applies to the

affected Collateral) and also may:

(i)        require each Grantor

to, and such Grantor hereby agrees that it will, at its expense and upon

request of the Secured Party forthwith, assemble all or part of the Collateral

as directed by the Secured Party and make it available to the Secured Party at

a place to be designated by the Secured Party which is reasonably convenient to

both parties;

(ii)       reclaim, take

possession, recover, store, maintain, finish, repair, prepare for sale or

lease, shop, or advertise for sale or lease the Collateral;

(iii)      without notice except

as specified below, sell the Collateral or any part thereof in one or more

parcels at public or private sale, at any of the Secured Party’s offices or

elsewhere, for cash, on credit or for future delivery, and upon such other

terms as the Secured Party may deem commercially reasonable.  Each Grantor agrees that, to the extent

notice of sale shall be required by law, at least ten days’ prior notice to

such Grantor of the time and place of any public sale or the time after which

any private sale is to be made shall constitute reasonable notification.  The Secured Party shall not be obligated to

make any sale of Collateral regardless of notice of sale having been

given.  The Secured Party may adjourn

any public or private sale from time to time by announcement at the time and

place fixed therefor, and such sale may, without further notice, be made at the

time and place to which it was so adjourned;

(iv)      withdraw all monies,

securities and Instruments in the Collateral Account for application to the

Obligations; and

 

20

 

(v)       license or sublicense,

whether on an exclusive or nonexclusive basis, any Trademark Collateral, Patent

Collateral or Copyright Collateral included in the Intellectual Property

Collateral for such term and on such conditions and in such manner as the

Secured Party shall in its sole judgment determine.

(b)       All cash proceeds

received by the Secured Party in respect of any sale of, collection from, or

other realization upon all or any part of the Collateral may, in the discretion

of the Secured Party, be held by the Secured Party as collateral for, and/or

then or at any time thereafter applied (after payment of any amounts payable to

the Secured Party pursuant to Section 6.2 hereof) in whole or in part by

the Secured Party against, all or any part of the Secured Obligations in such

order as the Secured Party shall elect. 

Each Grantor shall remain liable for any deficiency if the proceeds of

any sale or disposition of its Collateral are insufficient to pay all amounts

to which the Secured Party is entitled from such Grantor.  Any surplus of such cash or cash proceeds

held by the Secured Party and remaining after payment in full in cash of all

the Secured Obligations shall be paid over to the applicable Grantor or to

whomsoever may be lawfully entitled to receive such surplus.

(c)       To the extent such

Grantor has the right to do so, such Grantor authorizes the Secured Party to

take possession of the Collateral, or any part of it, and to pay, purchase,

contract, or compromise any encumbrance, charge, or Lien which, in the opinion

of the Secured Party, appears to be prior or superior to its security interest.

(d)       The Secured Party shall

have the right upon any such public sale or sales, and, to the extent permitted

by law, upon any such private sale or sales, to purchase the whole or any part

of said Collateral so sold, free of any right or equity of redemption, which

equity of redemption such Grantor hereby releases.

(e)       To the maximum extent

permitted by law, the Grantors waive all claims, damages, and demands against

the Secured Party arising out of the repossession, retention, or sale of the

Collateral.

(f)        As to any Collateral

constituting certificated securities or uncertificated securities, if, at any

time when the Secured Party shall determine to exercise its right to sell the

whole or any part of such Collateral hereunder, such Collateral or the part

thereof to be sold shall not, for any reason whatsoever, be effectively

registered under Securities Act of 1933, as amended (as so amended the “Act”),

the Secured Party may, in its discretion (subject only to applicable

requirements of law), sell such Collateral or part thereof by private sale in

such manner and under such circumstances as the Secured Party may deem

necessary or advisable, but subject to the other requirements of this Section

6.1(f), and shall not be required to effect such registration or cause the

same to be effected.  Without limiting

the generality of the foregoing, in any such event the Secured Party may, in

its sole discretion, (i) in accordance with applicable securities laws, proceed

to make such private sale notwithstanding that a registration statement for the

purpose of registering such Collateral or part thereof could be or shall have

been filed under the Act; (ii) approach and negotiate with a single possible

purchaser to effect such sale; and (iii) restrict such sale to a purchaser who

will represent and agree that such purchaser is purchasing for its own 

 

21

 

account, for

investment, and not with a view to the distribution or sale of such Collateral

or part thereof.  In addition to a

private sale as provided above in this Section 6.1(f), if any of such

Collateral shall not be freely distributable to the public without registration

under the Act at the time of any proposed sale hereunder, then the Secured

Party shall not be required to effect such registration or cause the same to be

effected but may, in its sole discretion (subject only to applicable

requirements of law), require that any sale hereunder (including a sale at

auction) be conducted subject to such restrictions as the Secured Party may, in

its sole discretion, deem necessary or appropriate in order that such sale

(notwithstanding any failure so to register) may be effected in compliance with

the Bankruptcy Code and other laws affecting the enforcement of creditors’

rights and the Act and all applicable state securities laws.

(g)       Each Grantor agrees that

in any sale of any of such Collateral, whether at a foreclosure sale or

otherwise, the Secured Party is hereby authorized to comply with any limitation

or restriction in connection with such sale as it may be advised by counsel is

necessary in order to avoid any violation of applicable law (including

compliance with such procedures as may restrict the number of prospective

bidders and purchasers, require that such prospective bidders and purchasers

have certain qualifications and restrict such prospective bidders and

purchasers to persons who will represent and agree that they are purchasing for

their own account for investment and not with a view to the distribution or

resale of such Collateral), or in order to obtain any required approval of the

sale or of the purchaser by any governmental authority, and such Grantor

further agrees that such compliance shall not result in such sale being

considered or deemed not to have been made in a commercially reasonable manner,

nor shall the Secured Party be liable nor accountable to such Grantor for any

discount allowed by the reason of the fact that such Collateral is sold in

compliance with any such limitation or restriction.

SECTION 6.2             Indemnity

and Expenses.

(a)       Each Grantor jointly and

severally agrees to indemnify the Secured Party and its officers, employees,

and agents from and against any and all claims, losses and liabilities arising

out of or resulting from this Security Agreement (including enforcement of this

Security Agreement), except claims, losses or liabilities resulting from the

gross negligence or willful misconduct of the Secured Party.

(b)       Each Grantor will upon

demand pay to the Secured Party the amount of any and all reasonable expenses,

including the reasonable fees and disbursements of its counsel and of any

experts and agents, which the Secured Party may incur in connection with:

(i)        the administration of

this Security Agreement;

(ii)       the custody,

preservation, use or operation of, or the sale of, collection from, or other

realization upon, any of the Collateral;

(iii)      the exercise or

enforcement of any of the rights of the Secured Party hereunder: or

 

22

 

(iv)      the failure by any

Grantor to perform or observe any of the provisions hereof.

The provisions of

this Section 6.2 shall survive the Termination Date.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1             Loan

Document.  This Security Agreement

is a Loan Document executed pursuant to the Credit Agreement and shall (unless

otherwise expressly indicated herein) be construed, administered and applied in

accordance with the terms and provisions thereof.

SECTION 7.2             Amendments;

etc.  No amendment to or waiver of

any provision of this Security Agreement nor consent to any departure by any

Grantor here from, shall in any event be effective unless the same shall be in

writing and signed by the Secured Party, and then such waiver or consent shall

be effective only for the specified Grantor, in the specific instance, and for

the specific purpose for which given.

SECTION 7.3             Notices.  All notices and other communications

provided for hereunder shall be in writing (including facsimile communication)

and, if to any Grantor, mailed or telecopied or delivered to it, addressed to

it, care of the Borrower at the address for the Borrower specified in the

Credit Agreement, if to Secured Party, mailed or telecopied or delivered to it,

addressed to it at the address of the Secured Party specified in the Credit

Agreement.  All such notices and other

communications, when mailed and properly addressed with postage prepaid or if

properly addressed and sent by pre-paid courier service, shall be deemed given

when received; any such notice or communication, if transmitted by telecopier,

shall be deemed given when transmitted and electronically confirmed.

SECTION 7.4             Additional

Subsidiary Grantors.  Upon the

execution and delivery by any other Person of an instrument in the form of Annex

I hereto, such Person shall become a “Grantor” hereunder with the same

force and effect as if originally named as a “Grantor” herein.  The execution and delivery of any such

instrument shall not require the consent of any other Grantor hereunder.  The rights and obligations of each Grantor

hereunder shall remain in full force and effect notwithstanding the addition of

any new Grantor as a party to this Security Agreement.

SECTION 7.5             Captions.  Section captions used in this Security

Agreement are for convenience of reference only, and shall not affect the

construction of this Security Agreement.

SECTION 7.6             Severability.  Wherever possible each provision of this

Security Agreement shall be interpreted in such manner as to be effective and

valid under applicable law, but if any provision of this Security Agreement

shall be prohibited by or invalid under such law, such provision shall be

ineffective to the extent of such prohibition or invalidity, without

invalidating the remainder of such provision or the remaining provisions of

this Security Agreement.

 

23

 

SECTION 7.7             Counterparts.  This Security Agreement may be executed by

the parties hereto in several counterparts, each of which shall be deemed an

original and all of which shall constitute together but one and the same

agreement.

SECTION 7.8             Governing

Law, Entire Agreement, etc.  THIS

SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY

THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR

PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN

RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION

OTHER THAN THE STATE OF CALIFORNIA. 

THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE

ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT

MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT

THERETO.

SECTION 7.9             Forum

Selection and Consent to Jurisdiction. 

ANY

LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS

SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE

OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED

PARTY OR ANY GRANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS

OF THE STATE OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT

SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT

THE SECURED PARTY’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH

COLLATERAL OR OTHER PROPERTY MAY BE FOUND. 

EACH GRANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY

REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE

STATE OF CALIFORNIA ADDRESSED TO SUCH GRANTOR, CARE OF THE BORROWER, AT THE

ADDRESS FOR NOTICES SPECIFIED IN THE CREDIT AGREEMENT.  EACH GRANTOR HEREBY EXPRESSLY AND

IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF

CALIFORNIA AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

CALIFORNIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND

IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION

WITH SUCH LITIGATION.  EACH GRANTOR

IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE

PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA.  EACH GRANTOR HEREBY EXPRESSLY AND

IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH

IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION

BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH

LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT ANY GRANTOR HAS OR HEREAFTER MAY ACQUIRE ANY

IMMUNITY FROM JURISDICTION OF 

 

24

 

ANY COURT OR FROM ANY LEGAL PROCESS

(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN

AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH

GRANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS

UNDER THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS.

SECTION 7.10       Waiver

of Jury Trial.  EACH GRANTOR HEREBY KNOWINGLY,

VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY

IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN

CONNECTION WITH, THIS SECURITY AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF

DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTY

OR SUCH GRANTOR. EACH GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL

AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF

EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A

MATERIAL INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE CREDIT AGREEMENT

AND EACH SUCH OTHER LOAN DOCUMENT.

[Remainder of page

left blank intentionally.]

 

25

 

IN WITNESS WHEREOF, each

Grantor has caused this Subsidiary Security Agreement to be duly executed and

delivered by its officer thereunto duly authorized as of the date first above

written.

	

   

  	

   

  	

  SB

  OPERATINGCO, LLC, 

  as Grantor

  
	

   

  	

   

  	

  By:

  	

  /s/ L. A.

  OBERKFELL

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  L.

  A. Oberkfell 

  President, 

  Chief Executive Officer

  

 

 

26

 

ANNEX I

SUPPLEMENT, dated as of

________________, ____ (this “Supplement”), to the Subsidiary Security

Agreement, dated as of August 2, 2002 (together with all amendments, supplements,

restatements and other modifications, if any, from time to time thereafter made

thereto, the “Security Agreement”), among the initial signatories

thereto and each other Person (such capitalized term, and other terms used in

this Supplement, to have the meanings set forth in Article I of the Security

Agreement) which from time to time thereafter became a party thereto pursuant

to Section 7.4 thereof (each, individually, a “Grantor”, and,

collectively, the “Grantors”), in favor of the Secured Party.

W  I  T  N  E  S

S  E  T  H :

WHEREAS, pursuant to the

provisions of Section 7.4 of the Security Agreement, the undersigned is

becoming a Grantor under the Security Agreement; and

WHEREAS, the undersigned

Grantor desires to become a “Grantor” under the Security Agreement in order to

induce the Secured Party to continue to extend Credit Extensions under the

Credit Agreement;

NOW, THEREFORE, in

consideration of the premises, and for other consideration (the receipt and

sufficiency of which is hereby acknowledged), the undersigned agrees, for the

benefit of the Secured Party, as follows.

SECTION 1.           In

accordance with the terms of the Security Agreement, by its signature below the

undersigned hereby irrevocably agrees to become a Grantor under the Security

Agreement with the same force and effect as if it were an original signatory

thereto and the undersigned Grantor, hereby (a) agrees to be bound by and

comply with all of the terms and provisions of the Security Agreement

applicable to it as a Grantor and (b) represents and warrants that the

representations and warranties made by it as a Grantor thereunder are true and

correct as of the date hereof.  In

furtherance of the foregoing, each reference to a “Grantor” in the Security

Agreement shall be deemed to include the undersigned Grantor.

SECTION 2.           The

undersigned Grantor hereby represents and warrants that this Supplement has

been duly authorized, executed and delivered by it and that this Supplement and

the Security Agreement constitute the legal, valid and binding obligation of

the undersigned Grantor, enforceable against it in accordance with its terms.

SECTION 3.           Except

as expressly supplemented hereby, the Security Agreement shall remain in full

force and effect in accordance with its terms.

 

 

SECTION 4.           In

the event any one or more of the provisions contained in this Supplement should

be held invalid, illegal or unenforceable in any respect, the validity,

legality and enforceability of the remaining provisions contained herein and in

the Security Agreement shall not in any way be affected or impaired.

SECTION 5.           THIS

SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS

OF THE STATE OF CALIFORNIA.

SECTION 6.           This

Supplement may be executed by the parties hereto in several counterparts, each

of which shall be deemed to be an original and all of which shall constitute

together but one and the same agreement.

IN WITNESS

WHEREOF, the parties hereto have caused this Supplement to be duly executed and

delivered by their respective officers thereunto duly authorized as of the day

and year first above written.

[NAME OF ADDITIONAL SUBSIDIARY GRANTOR]

	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

ACCEPTED BY:

THE TITAN CORPORATION, as Secured Party

	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

2

 

SCHEDULE I

Item

A.  Location of Equipment

	

  Location

  	

   

  	

  Description

  
	

  9276

  Scranton Road, Suite 600

  	

   

  	

  Leasehold

  improvements, furniture

  
	

  San

  Diego, CA 92121

  	

   

  	

  and

  computer equipment

  
	

   

  	

   

  	

   

  
	

  6780

  Sierra Court, Suite A

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Dublin,

  CA 94568

  	

   

  	

  machinery

  and computer equipment.

  
	

   

  	

   

  	

   

  
	

  9040

  Activity Road, Suite A

  	

   

  	

  Leasehold

  improvements, furniture

  
	

  San

  Diego, CA

  	

   

  	

  and

  computer equipment

  
	

   

  	

   

  	

   

  
	

  2640

  Murray Street

  	

   

  	

  Furniture,

  computer equipment and machinery

  
	

  Sioux

  City, IA 51111

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  9300

  Underwood Avenue Suite 150

  	

   

  	

  Leasehold

  improvements, furniture and

  
	

  Omaha,

  NE 68114-2684

  	

   

  	

  computer

  equipment

  
	

   

  	

   

  	

   

  
	

  3285

  East Vernon Avenue

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Vernon,

  CA 90058

  	

   

  	

  computer

  equipment and machinery

  
	

   

  	

   

  	

   

  
	

  300

  Regency Drive

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  Glendale

  Heights, IL60139

  	

   

  	

  computer

  equipment and machinery

  
	

   

  	

   

  	

   

  
	

  400

  Discovery Drive

  	

   

  	

  Machinery

  and equipment

  
	

  College

  Station, TX 77845

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Avenida

  Brasil 19001

  	

   

  	

  Leasehold

  improvements, furniture,

  
	

  (Proximo

  Ao lado Pavilhao 100

  	

   

  	

  computer

  equipment and machinery

  
	

  CEASA)

  Rio de Janeiro, RJ

  	

   

  	

   

  
	

  Brazil

  21-531-140

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Abbraj

  Att’awuneya BLDG

  	

   

  	

  Leasehold

  improvements, furniture and

  
	

  8th

  floor North

  	

   

  	

  computer

  equipment

  
	

  King

  Fahad Road

  	

   

  	

   

  
	

  Riyadh 11533

  	

   

  	

   

  
	

  Kingdom of Saudi Arabia

  	

   

  	

   

  

 

3

 

Item

B.  Location of Inventory

	

  Location

  	

   

  	

  Description

  
	

  9276

  Scranton Road, Suite 600

  	

   

  	

  Inventory

  
	

  San

  Diego, CA 92121

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  6780

  Sierra Court, Suite A

  	

   

  	

  Inventory

  
	

  Dublin,

  CA 94568

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  9040

  Activity Road, Suite A

  	

   

  	

  Inventory

  
	

  San

  Diego, CA

  	

   

  	

   

  

 

*Item C. 

Location of Lock Boxes

	

   

  	

   

  	

   

  	

   

  	

  Contact

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  
	

  Comerica Bank California

  	

   

  	

  1891382754

  	

   

  	

   

  
	

  600 B Street

  	

   

  	

  1891505008

  	

   

  	

   

  
	

  San Diego, CA  92101

  	

   

  	

   

  	

   

  	

   

  

 

 

Item

D.  Place(s) of Business and Chief

Executive Office

Current:                  9276 Scranton Road, Suite 600

                                San Diego, CA  92121

 

Former:                   3033 Science Park Road

                                San Diego, CA  92121

 

 

Item

E.  Trade Names

SB OperatingCo, LLC (8/1/02)

SB OperatingCo, Inc. (8/3/00)

SureBeam Corporation (4/17/00)

Titan Scan Corp. (8/25/98)

Titan Purification Inc. (12/8/97)

SureBeam Brasil

LTDA

* Accounts are SB OperatingCo, LLC and/or

Borrower accounts.

 

4

 

Item

F.  Merger or Other Corporate

Reorganization

 

*Item

G.  Location of Deposit Accounts

	

   

  	

   

  	

   

  	

   

  	

  Contact

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  
	

  Comerica Bank California

  	

   

  	

  1891507129

  	

   

  	

   

  
	

  600 B Street

  	

   

  	

  1891428169

  	

   

  	

   

  
	

  San Diego, CA  92101

  	

   

  	

  1891427583

  	

   

  	

   

  
	

   

  	

   

  	

  1891382747

  	

   

  	

   

  
	

   

  	

   

  	

  1891427591

  	

   

  	

   

  
	

   

  	

   

  	

  1891507970

  	

   

  	

   

  
	

   

  	

   

  	

  2176994453

  	

   

  	

   

  
	

   

  	

   

  	

  1891504993

  	

   

  	

   

  

 

Item

H.  Location of Securities Accounts

	

   

  	

   

  	

   

  	

   

  	

  Contact

  	

   

  
	

  Bank Name

  and Address

  	

   

  	

  Account

  Number

  	

   

  	

  Person

  	

   

  

                None.

 

 

5

 

SCHEDULE

II

Item

A.  Patents

	

  Country

  	

   

  	

  Patent No.

  	

   

  	

  Issue Date

  	

   

  	

  Title

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  U.S.

  	

   

  	

  5,590,602

  	

   

  	

  1/7/1997

  	

   

  	

  Conveyor System Utilizing

  Articles Carriers

  
	

  PCT

  	

   

  	

  5,994,706

  	

   

  	

  11/30/1999

  	

   

  	

  Article Irradiation System

  ________ Intermediate Wall of ________ Shielding Material Within Loop of

  Conveyor System That Transports the Articles

  
	

  U.S. 

  PCT 

  EPO 

  JAP 

  CA

  	

   

  	

  5,994,706

  	

   

  	

  11/30/1999

  	

   

  	

  Article Irradiation System

  in Which Articles Transporting Conveyor is Closely Encompassed by Shielding

  Material

  
	

  U.S. 

  AUS 

  DAN 

  CAN 

  EPO 

  JAP 

  KR 

  MA

  	

   

  	

  5,396,074

  	

   

  	

  3/7/1995

  	

   

  	

  Irradiation System

  Utilizing Conveyor Transported Article Carriers

  
	

  U.S.

  	

   

  	

  6,127,687

  	

   

  	

  10/3/2000

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  
	

  U.S.

  	

   

  	

  6,236,055

  	

   

  	

  5/22/2001

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  
	

  U.S.

  	

   

  	

  6,285,030

  	

   

  	

  9/4/2001

  	

   

  	

  Article Irradiation System

  in Which Article Transporting Conveyor is Closely Encompassed by Shielding

  
	

  U.S.

  	

   

  	

  6,294,791

  	

   

  	

  9/24/2001

  	

   

  	

  Article Irradiation System

  having Intermediate Wall of Radiation Shielding Material Within Loop of

  Conveyor System that transports the Articles.

  

 

 

6

 

Pending Patent Applications

	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Title

  
	

  U.S

  	

   

  	

  09/710,730

  	

   

  	

  11/10/2000

  	

   

  	

  System For and Method of

  Irradiating an Object with an Optimal Amount of Radiation

  
	

  U.S.

  	

   

  	

  09/872131

  	

   

  	

  6/1/2001

  	

   

  	

  System For, and Method of

  Irradiating Article with Multiple Irradiations

  
	

  U.S.

  	

   

  	

  09/872,441

  	

   

  	

  6/1/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles

  
	

  U.S.

  	

   

  	

  09/456,061

  	

   

  	

  12/7/1999

  	

   

  	

  System For and Methods Of,

  Irradiating Articles to Sterilize The Articles

  
	

  U.S.

  	

   

  	

  9/753,287

  	

   

  	

  12/29/2000

  	

   

  	

  System For, And Method Of,

  Irradiating Articles With X-Ray Beam

  
	

  U.S.

  	

   

  	

  09/881,257

  	

   

  	

  6/13/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles With X-Ray Beam

  
	

  U.S.

  	

   

  	

  09/710,730

  	

   

  	

  11/10/2000

  	

   

  	

  System For, And Methods Of, Irradiating Opposite Sides Of

  Articles With Optimal amounts of Cumulative Irradiation

  
	

  U.S.

  	

   

  	

  09/569,402

  	

   

  	

  5/12/2000

  	

   

  	

  System For, and Method of Providing Frequency Hopping

  
	

  PCT  

  WO

  	

   

  	

  09/458,051

  	

   

  	

  12/7/1999

  	

   

  	

  Apparatus For, And Methods for Sterilizing Products,

  Primarily Food Products

  
	

  U.S.

  	

   

  	

  60/141,781

  	

   

  	

  6/30/1999

  	

   

  	

  Apparatus For, And Methods

  for Sterilizing Products, Primarily Food Products

  
	

  U.S.

  	

   

  	

  09/912,576

  	

   

  	

  7/24/2001

  	

   

  	

  System For, and Methods

  Of, Irradiating Articles

  
	

  U.S.

  	

   

  	

  09/971,986

  	

   

  	

  10/4/2001

  	

   

  	

  Compact Self-Shielded

  Irradiation System and Method

  
	

  U.S.

  	

   

  	

  10/167,544

  	

   

  	

  6/10/2002

  	

   

  	

  System For, and Method Of,

  Irradiating Articles To Sterilize Articles

  
	

  U.S.

  	

   

  	

  09/964,785

  	

   

  	

  9/26/2001

  	

   

  	

  System For, And Methods

  Of, Irradiating Opposite Sides Of Articles With Optimal amounts of Cumulative

  Irradiation

  

 

 

7

 

Patent Applications in Preparation

	

  Expected*Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Inventor(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Patent Licenses

 

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

8

 

SCHEDULE III

Item

A.  Trademarks

Registered Trademarks

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Registration No.

  	

   

  	

  Status

  
	

  United States

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (RN) 1,855,367

  	

   

  	

  Registered

  
	

  Lebanon

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (RN) 88045

  	

   

  	

  Registered

  

 

Pending Trademark Applications

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Status

  
	

  United States

  	

   

  	

  GOOD FOOD. MADE BETTER. in class 40

  	

   

  	

  (SN) 76/326,832

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SAFER FRESHER BETTER in class 40

  	

   

  	

  (SN) 76/326,461

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SERVE WITH CONFIDENCE in class 40

  	

   

  	

  (SN) 76/264,588

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SERVED WITH CONFIDENCE in class 40

  	

   

  	

  (SN) 76/264,589

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 76/260,478

  	

   

  	

  Published

  
	

  United States

  	

   

  	

  SUREBEAM & Design in class 40

  	

   

  	

  (SN) 76/326,834

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  SUREMAIL in class 40

  	

   

  	

  (SN) 76/335,335

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  YOUR FAVORITE FOODS MADE BETTER in class 40

  	

   

  	

  (SN) 76/264,590

  	

   

  	

  Pending

  
	

  United States

  	

   

  	

  Be SureBeam Safe

  	

   

  	

  78/145,494

  	

   

  	

  Pending

  
	

  Australia

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 894010

  	

   

  	

  Pending

  
	

  Australia

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 865938

  	

   

  	

  Allowed for Registration

  
	

  Brazil

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 822,218,100

  	

   

  	

  Published

  
	

  Brazil

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 822,218,119

  	

   

  	

  Published

  
	

  Canada

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 1068730

  	

   

  	

  Pending

  
	

  China

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001165531

  	

   

  	

  Pending

  
	

  China

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001179227

  	

   

  	

  Pending

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

9

 

	

  Egypt

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 144891

  	

   

  	

  Pending

  
	

  Egypt

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 144892

  	

   

  	

  Pending

  
	

  Guatemala

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 07579

  	

   

  	

  Pending

  
	

  Guatemala

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 07580

  	

   

  	

  Pending

  
	

  Indonesia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 16501-16604

  	

   

  	

  Pending

  
	

  Indonesia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 16502-16605

  	

   

  	

  Published

  
	

  India

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 1012183

  	

   

  	

  Pending

  
	

  Japan

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 2000-097384

  	

   

  	

  Published

  
	

  Kuwait

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 52208

  	

   

  	

  Pending

  
	

  Mexico

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 496290

  	

   

  	

  Pending

  
	

  Mexico

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 496291

  	

   

  	

  Pending

  
	

  New Zealand

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 647625

  	

   

  	

  Pending

  
	

  Oman

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 25945

  	

   

  	

  Pending

  
	

  Oman

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 25946

  	

   

  	

  Pending

  
	

  Panama

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 117604

  	

   

  	

  Pending

  
	

  Panama

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 115892

  	

   

  	

  Pending

  
	

  Philippines

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  (SN) 4-2001005137

  	

   

  	

  Pending

  
	

  Pakistan

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 172685

  	

   

  	

  Pending

  
	

  Pakistan

  	

   

  	

  SUREBEAM in class 16

  	

   

  	

  (SN) 173569

  	

   

  	

  Pending

  
	

  Qatar

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 25783

  	

   

  	

  Pending

  
	

  Qatar

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 25784

  	

   

  	

  Pending

  
	

  Russia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001721891

  	

   

  	

  Pending

  
	

  Russia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001721845

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 73859

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 71887

  	

   

  	

  Pending

  
	

  Saudi Arabia

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 71888

  	

   

  	

  Pending

  
	

  South Africa

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2001/12160

  	

   

  	

  Pending

  
	

  South Africa

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2001/12161

  	

   

  	

  Pending

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 7

  	

   

  	

  (SN) 40200051220

  	

   

  	

  Published

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 40200041625

  	

   

  	

  Published

  
	

  South Korea

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 41200023540

  	

   

  	

  Pending

  
	

  Spain

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 2351499

  	

   

  	

  Published

  
	

  Spain

  	

   

  	

  SUREBEAM in class 37

  	

   

  	

  (SN) 2414906

  	

   

  	

  Published

  
	

  Spain

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 2346640

  	

   

  	

  Published

  
	

  Thailand

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 472133

  	

   

  	

  Pending

  
	

  Thailand

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 472134

  	

   

  	

  Pending

  
	

  Turkey

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  (SN) 2001-22756

  	

   

  	

  Pending

  
	

  United Arab Emirates

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  (SN) 44556

  	

   

  	

  Pending

  
	

  United Arab Emirates

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  (SN) 44557

  	

   

  	

  Pending

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

10

 

	

  Argentina

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Brazil

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Guatemala

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Jordan

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Jordan

  	

   

  	

  SUREBEAM in class 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Japan

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Mexico

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number and

  confirmation of application filed from local counsel

  	

   

  	

  Unfiled

  
	

  Philippines

  	

   

  	

  GOOD FOOD. MADE BETTER. in

  class 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Turkey

  	

   

  	

  SUREBEAM in classes 9

  & 40

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  
	

  Yemen

  	

   

  	

  SUREBEAM in class 9

  	

   

  	

  Awaiting serial number

  from local counsel

  	

   

  	

  Pending

  

 

Trademark Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

  Products/

  	

   

  
	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Services

  	

   

  

 

Item

B.  Trademark Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  
	

  Territory

  	

   

  	

  Trademark

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

11

 

SCHEDULE IV

Item

A.  Copyrights/Mask Works

Registered Copyrights/Mask Works

	

  *Country

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Pending Registration Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

Copyright/Mask Work Registration Applications in Preparation

	

   

  	

   

  	

   

  	

   

  	

  Expected

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Docket No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  

 

 

Item

B.  Copyright/Mask Work Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

12

 

SCHEDULE V

Trade Secret or Know-How Licenses

	

  *Country or

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Effective

  	

   

  	

  Expiration

  	

   

  	

  Subject

  	

   

  
	

  Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Date

  	

   

  	

  Date

  	

   

  	

  Matter

  	

   

  

 

13

 

EXHIBIT A

SUBSIDIARY PATENT SECURITY AGREEMENT

This SUBSIDIARY PATENT

SECURITY AGREEMENT (this “Agreement”), dated as of August 2, 2002, is

made between ___________________, a ____________ (the “Grantor”), and

THE TITAN CORPORATION, a Delaware corporation (the “Secured Party”);

W  I  T  N  E  S

S  E  T  H :

WHEREAS, pursuant to a

Senior Secured Credit Agreement, dated as of August 2, 2002 (as amended,

restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between SUREBEAM CORPORATION, a Delaware corporation (the “Borrower”),

and the Secured Party, the Secured Party has extended Commitments to make

Credit Extensions to the Borrower;

WHEREAS, in connection

with the Credit Agreement, the Grantor has executed and delivered to the

Secured Party a Subsidiary Security Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Security

Agreement”);

WHEREAS, as a condition

precedent to the making of the Credit Extensions (including the initial Credit

Extension) under the Credit Agreement, the Grantor is required to execute and

deliver this Agreement;

WHEREAS, the Grantor has

duly authorized the execution, delivery and performance of this Agreement; and

WHEREAS, it is in the

best interests of the Grantor to execute this Agreement inasmuch as the Grantor

will derive substantial direct and indirect benefits from the Credit Extensions

made from time to time to the Borrower by the Secured Party pursuant to the

Credit Agreement;

NOW THEREFORE, for good

and valuable consideration the receipt of which is hereby acknowledged, and in

order to induce the Secured Party to make Credit Extensions (including the

initial Credit Extension) to the Borrower pursuant to the Credit Agreement, the

Grantor agrees, for the benefit of the Secured Party, as follows:

SECTION 1.    Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.    Grant of Security Interest.  For good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, to secure all of the

Secured Obligations, the Grantor does hereby mortgage, pledge and hypothecate

to the Secured Party, and grant to the 

 

 

Secured Party a security

interest in all of the following property (the “Patent Collateral”),

whether now owned or hereafter acquired or existing by it:

(a)           all letters patent and applications

for letters patent throughout the world, including all patent applications in

preparation for filing anywhere in the world and including each patent and

patent application referred to in Item A of Attachment 1 attached

hereto;

(b)           all reissues, divisions,

continuations, continuations-in-part, extensions, renewals and reexaminations

of any of the items described in clause (a);

(c)           all patent licenses, including each

patent license referred to in Item B of Attachment 1 attached

hereto; and

(d)           all Proceeds of, and rights

associated with, the foregoing (including license royalties and Proceeds of

infringement suits), the right to sue third parties for past, present or future

infringements of any patent or patent application, including any patent or

patent application referred to in Item A of Attachment 1 attached

hereto, and for breach or enforcement of any patent license, including any

patent license referred to in Item B of Attachment 1 attached

hereto, and all rights corresponding thereto throughout the world.

Notwithstanding

anything herein to the contrary, in no event shall the Collateral include, and

the Grantor shall not be deemed to have granted a security interest in, any of

the Grantor’s rights or interests in any license, contract or agreement to

which the Grantor is a party or any of its rights or interests thereunder to

the extent, but only to the extent, that such a grant would, under the express

terms of such license, contract or agreement or otherwise, result in a breach

of the terms of, or constitute a default under such license, contract or

agreement (other than to the extent that any such term would be rendered

ineffective pursuant to Sections 9407(a) or 9408(a) of the U.C.C. or any other

applicable law (including the Bankruptcy Code) or principles of equity);

provided, that immediately upon the ineffectiveness, waiver, lapse or

termination of any such provision, the Collateral shall include, and the

Grantor shall have granted a security interest in, all such rights and

interests as if such provision had never been in effect.

SECTION 3.    Security Agreement.  This Agreement has been executed and

delivered by the Grantor for the purpose of registering the security interest

of the Secured Party in the Patent Collateral with the United States Patent and

Trademark Office and corresponding offices in other countries of the world.  The security interest granted hereby has been

granted as a supplement to, and not in limitation of, the security interest

granted to the Secured Party under the Security Agreement.  The Security Agreement (and all rights and

remedies of the Secured Party thereunder) shall remain in full force and effect

in accordance with its terms.

SECTION 4.    Release of Security Interest.  Upon the Termination Date, the Secured Party

shall, at the Grantor’s expense, execute and deliver to the Grantor all

Instruments and other Documents as may be necessary or proper to release the

lien on and security interest in the Patent Collateral which has been granted

hereunder.

 

14

 

SECTION 5.    Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Patent Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

SECTION 6.    Loan Document, etc.  This Agreement is a Loan Document executed

pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions of the Credit Agreement.

SECTION 7.    Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

IN WITNESS

WHEREOF, the parties hereto have caused this Subsidiary Patent Security

Agreement to be duly executed and delivered by their respective officers

thereunto duly authorized as of the day and year first above written.

 

[NAME OF GRANTOR]

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

THE TITAN CORPORATION,

as Secured Party

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

15

 

ATTACHMENT 1

Item A.   Patents

Issued Patents

	

   

  	

   

  	

  Patent No.

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Title

  	

   

  	

  Issue Date

  	

   

  	

  Inventor(s)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Pending Patent

Applications

	

   

  	

   

  	

  Serial No.

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Title

  	

   

  	

  Filing

  Date

  	

   

  	

  Inventor(s)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Patent

Applications in Preparation

	

   

  	

   

  	

  Docket No.

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  *Country

  	

   

  	

  Title

  	

   

  	

  Expected

  Filing Date

  	

   

  	

  Inventor(s)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Item B.                    Patent

Licenses

	

  *Country or Territory

  	

   

  	

  Subject

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Effective

  Date

  	

   

  	

  Expiration

  Date

  	

   

  	

  Subject

  Matter

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

16

 

EXHIBIT B

SUBSIDIARY TRADEMARK SECURITY AGREEMENT

This SUBSIDIARY TRADEMARK

SECURITY AGREEMENT (this “Agreement”), dated as of August 2, 2002, is

made between _____________________, a ___________ __________ (the “Grantor”),

and THE TITAN CORPORATION, a Delaware corporation (the “Secured Party”);

W  I  T  N  E  S

S  E  T  H :

WHEREAS, pursuant to a Senior

Secured Credit Agreement, dated as of August 2, 2002 (as amended, restated,

supplemented or otherwise modified from time to time, the “Credit Agreement”),

between SUREBEAM CORPORATION, a Delaware corporation, (the “Borrower”) and the

Secured Party, the Secured Party has extended Commitments to make Credit

Extensions to the Borrower;

WHEREAS, in connection

with the Credit Agreement, the Grantor has executed and delivered to the

Secured Party a Subsidiary Security Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the

“Security Agreement”);

WHEREAS, as a condition

precedent to the making of the Credit Extensions (including the initial Credit

Extension) under the Credit Agreement, the Grantor is required to execute and

deliver this Agreement;

WHEREAS, the Grantor has

duly authorized the execution, delivery and performance of this Agreement; and

WHEREAS, it is in the

best interests of the Grantor to execute this Agreement inasmuch as the Grantor

will derive substantial direct and indirect benefits from the Credit Extensions

made from time to time to the Borrower by the Secured Party pursuant to the

Credit Agreement;

NOW THEREFORE, for good

and valuable consideration the receipt of which is hereby acknowledged, and in

order to induce the Secured Party to make Credit Extensions (including the

initial Credit Extension) to the Borrower pursuant to the Credit Agreement, the

Grantor agrees, for the benefit of the Secured Party, as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of Security Interest.  For good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, to secure all of the

Secured Obligations, the Grantor does hereby mortgage, pledge and hypothecate

to the Secured Party, and grant to the 

 

1

 

Secured Party a security

interest in all of the following property (the “Trademark Collateral”),

whether now owned or hereafter acquired or existing by it:

(a)           all

trademarks, trade names, corporate names, company names, business names,

fictitious business names, trade styles, service marks, certification marks,

collective marks, logos, other source of business identifiers, prints and

labels on which any of the foregoing have appeared or appear, designs and

general intangibles of a like nature (all of the foregoing items in this clause (a)

being collectively called a “Trademark”), now existing anywhere in the

world or hereafter adopted or acquired, whether currently in use or not, all

registrations and recordings thereof and all applications in connection

therewith, whether pending or in preparation for filing, including

registrations, recordings and applications in the United States Patent and

Trademark Office or in any office or agency of the United States of America or

any State thereof or any foreign country, including those referred to in Item

A of Attachment 1 attached hereto;

(b)           all

Trademark licenses, including each Trademark license referred to in Item B

of Attachment 1 attached hereto;

(c)           all

reissues, extensions or renewals of any of the items described in clauses

(a) and (b);

(d)           all

of the goodwill of the business connected with the use of, and symbolized by

the items described in, clauses (a) and (b); and

(e)           all

Proceeds of, and rights associated with, the foregoing, including any claim by

the Grantor against third parties for past, present or future infringement or

dilution of any Trademark, Trademark registration or Trademark license,

including any Trademark, Trademark registration or Trademark license referred

to in Item A and Item B of Attachment 1 attached hereto,

or for any injury to the goodwill associated with the use of any such Trademark

or for breach or enforcement of any Trademark license.

Notwithstanding

anything herein to the contrary, in no event shall the Collateral include, and

the Grantor shall not be deemed to have granted a security interest in, any of

the Grantor’s rights or interests in any license, contract or agreement to

which the Grantor is a party or any of its rights or interests thereunder to

the extent, but only to the extent, that such a grant would, under the express

terms of such license, contract or agreement or otherwise, result in a breach

of the terms of, or constitute a default under such license, contract or

agreement (other than to the extent that any such term would be rendered

ineffective pursuant to Sections 9407(a) or 9408(a) of the U.C.C. or any other

applicable law (including the Bankruptcy Code) or principles of equity);

provided, that immediately upon the ineffectiveness, waiver, lapse or

termination of any such provision, the Collateral shall include, and the

Grantor shall have granted a security interest in, all such rights and

interests as if such provision had never been in effect.

SECTION 3.           Security Agreement.  This Agreement has been executed and

delivered by the Grantor for the purpose of registering the security interest

of the Secured Party in the Trademark Collateral with the United States Patent

and Trademark Office and corresponding offices in other countries of the

world.  The security interest granted

hereby has been granted as a supplement to, 

 

2

 

and not in limitation of,

the security interest granted to the Secured Party under the Security

Agreement.  The Security Agreement (and

all rights and remedies of the Secured Party thereunder) shall remain in full

force and effect in accordance with its terms.

SECTION 4.           Release

of Security Interest.  Upon the

Termination Date, the Secured Party shall, at the Grantor’s expense, execute

and deliver to the Grantor all Instruments and other Documents as may be

necessary or proper to release the lien on and security interest in the

Trademark Collateral which has been granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Trademark Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference

herein as if fully set forth herein.

SECTION 6.           Loan

Document, etc.  This Agreement is a

Loan Document executed pursuant to the Credit Agreement and shall (unless

otherwise expressly indicated herein) be construed, administered and applied in

accordance with the terms and provisions of the Credit Agreement.

SECTION 7.           Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

IN WITNESS WHEREOF, the

parties hereto have caused this Subsidiary Trademark Security Agreement to be

duly executed and delivered by their respective officers thereunto duly

authorized as of the day and year first above written.

[NAME OF GRANTOR]

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

THE TITAN CORPORATION,

as Secured Party

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

3

ATTACHMENT 1

Item A.   Trademarks

Registered

Trademarks

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Pending Trademark

Applications

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Trademark

Applications in Preparation

	

  *Country

  	

   

  	

  Trademark

  	

   

  	

  Docket No.

  	

   

  	

  Expected

  Filing Date

  	

   

  	

  Products/

  Services

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Item B.                    Trademark

Licenses

	

  *Country or Territory

  	

   

  	

  Trademark

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Effective

  Date

  	

   

  	

  Expiration

  Date

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

*              List items related to the United

States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

4

 

EXHIBIT C

SUBSIDIARY COPYRIGHT SECURITY AGREEMENT

This SUBSIDIARY COPYRIGHT

SECURITY AGREEMENT (this “Agreement”), dated as of August 2, 2002, is

made between _____________________, a __________ __________ (the “Grantor”),

and THE TITAN CORPORATION, a Delaware corporation (the “Secured Party”);

W  I  T  N  E  S

S  E  T  H :

WHEREAS, pursuant to a

Senior Secured Credit Agreement, dated as of August 2, 2002 (as amended,

restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), between SUREBEAM CORPORATION, a Delaware corporation (the “Borrower”),

and the Secured Party, the Secured Party has extended Commitments to make

Credit Extensions to the Borrower;

WHEREAS, in connection

with the Credit Agreement, the Grantor has executed and delivered to the

Secured Party a Subsidiary Security Agreement, dated as of August 2, 2002 (as

amended, restated, supplemented or otherwise modified from time to time, the “Security

Agreement”);

WHEREAS, as a condition

precedent to the making of the Credit Extensions (including the initial Credit

Extension) under the Credit Agreement, the Grantor is required to execute and

deliver this Agreement;

WHEREAS, the Grantor has

duly authorized the execution, delivery and performance of this Agreement; and

WHEREAS, it is in the

best interests of the Grantor to execute this Agreement inasmuch as the Grantor

will derive substantial direct and indirect benefits from the Credit Extensions

made from time to time to the Borrower by the Secured Party pursuant to the

Credit Agreement;

NOW THEREFORE, for good

and valuable consideration the receipt of which is hereby acknowledged, and in

order to induce the Secured Party to make Credit Extensions (including the

initial Credit Extension) to the Borrower pursuant to the Credit Agreement, the

Grantor agrees, for the benefit of the Secured Party, as follows:

SECTION 1.           Definitions.  Unless otherwise defined herein or the

context otherwise requires, terms used in this Agreement, including its

preamble and recitals, have the meanings provided (or incorporated by

reference) in the Security Agreement.

SECTION 2.           Grant of Security Interest.  For good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, to secure all of the

Secured Obligations, the Grantor does hereby mortgage, pledge and hypothecate

to the Secured Party, and grant to the Secured Party a security interest in all

of the following property (the “Copyright Collateral”), 

 

1

 

whether now owned or

hereafter acquired or existing by it, being all copyrights (including all

copyrights for semi-conductor chip product mask works) of the Grantor, whether

statutory or common law, registered or unregistered, now or hereafter in force

throughout the world including all of the Grantor’s right, title and interest

in and to all copyrights registered in the United States Copyright Office or

anywhere else in the world and also including the copyrights referred to in Item

A of Attachment 1 attached hereto, and all applications for

registration thereof, whether pending or in preparation, all copyright

licenses, including each copyright license referred to in Item B of Attachment

1 attached hereto, the right to sue for past, present and future

infringements of any thereof, all rights corresponding thereto throughout the

world, all extensions and renewals of any thereof and all Proceeds of the

foregoing, including licenses, royalties, income, payments, claims, damages and

Proceeds of suit.

Notwithstanding

anything herein to the contrary, in no event shall the Collateral include, and

the Grantor shall not be deemed to have granted a security interest in, any of

the Grantor’s rights or interests in any license, contract or agreement to

which the Grantor is a party or any of its rights or interests thereunder to

the extent, but only to the extent, that such a grant would, under the express

terms of such license, contract or agreement or otherwise, result in a breach

of the terms of, or constitute a default under such license, contract or

agreement (other than to the extent that any such term would be rendered

ineffective pursuant to Sections 9407(a) or 9408(a) of the U.C.C. or any other

applicable law (including the Bankruptcy Code) or principles of equity);

provided, that immediately upon the ineffectiveness, waiver, lapse or termination

of any such provision, the Collateral shall include, and the Grantor shall have

granted a security interest in, all such rights and interests as if such

provision had never been in effect.

SECTION 3.           Security Agreement.  This Agreement has been executed and

delivered by the Grantor for the purpose of registering the security interest

of the Secured Party in the Copyright Collateral with the United States

Copyright Office and corresponding offices in other countries of the world.  The security interest granted hereby has

been granted as a supplement to, and not in limitation of, the security

interest granted to the Secured Party under the Security Agreement.  The Security Agreement (and all rights and

remedies of the Secured Party thereunder) shall remain in full force and effect

in accordance with its terms.

SECTION 4.           Release of Security Interest.  Upon the Termination Date, the Secured Party

shall, at the Grantor’s expense, execute and deliver to the Grantor all

Instruments and other Documents as may be necessary or proper to release the

lien on and security interest in the Copyright Collateral which has been

granted hereunder.

SECTION 5.           Acknowledgment.  The Grantor does hereby further acknowledge

and affirm that the rights and remedies of the Secured Party with respect to

the security interest in the Copyright Collateral granted hereby are more fully

set forth in the Security Agreement, the terms and provisions of which

(including the remedies provided for therein) are incorporated by reference herein

as if fully set forth herein.

SECTION 6.           Loan Document, etc.  This Agreement is a Loan Document executed

pursuant to the Credit Agreement and shall (unless otherwise expressly

indicated herein) be construed, administered and applied in accordance with the

terms and provisions of the Credit Agreement.

 

2

 

SECTION 7.           Counterparts.  This Agreement may be executed by the

parties hereto in several counterparts, each of which shall be deemed to be an

original and all of which shall constitute together but one and the same

agreement.

 

3

 

IN WITNESS WHEREOF, the

parties hereto have caused this Subsidiary Copyright Security Agreement to be

duly executed and delivered by their respective officers thereunto duly

authorized as of the day and year first above written.

[NAME OF GRANTOR]

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

THE TITAN CORPORATION,

as Secured Party

	

  By

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

4

 

ATTACHMENT 1

Item A.   Copyrights/Mask Works

Registered

Copyrights/Mask Works

	

  *Country

  	

   

  	

  Registration

  No.

  	

   

  	

  Registration

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Copyright/Mask

Work Pending Registration Applications

	

  *Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing

  Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Copyright/Mask

Work Registration Applications in Preparation

	

  *Country

  	

   

  	

  Docket No.

  	

   

  	

  Expected

  Filing Date

  	

   

  	

  Author(s)

  	

   

  	

  Title

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

Item B.                    Copyright/Mask

Work Licenses

	

  *Country or Territory

  	

   

  	

  Licensor

  	

   

  	

  Licensee

  	

   

  	

  Effective

  Date

  	

   

  	

  Expiration

  Date

  	

   

  	

  Subject

  Matter

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

*              List items related

to the United States first for ease of recordation.

List items related to other countries next, grouped by country and in

alphabetical order by country name.

 

5

 

EXHIBIT A

DESCRIPTION OF

PREMISES

[See attached.]

 

6

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