Document:

Exhibit
10.1

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.

 

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“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.

 

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“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.

 

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“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.

 

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“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.

 

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“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

 

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(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.

 

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“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.

 

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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

 

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                                (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.

 

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“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;

 

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(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: 

  	
  /s/ David A. Rane

  
	
   

  	
  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 

 

4

 

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.

 

6

 

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

 

7

 

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.

 

8

 

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 

 

9

 

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 

 

10

 

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:

 

13

 

(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.]

 

6EXHIBIT 10.5

March 19, 2003

 

 

Larry Goldberg

1156 Via de la Paz

Pacific Palisades, CA  90272

 

 

Re:

                            Your Employment

Agreement dated January 1, 2001  (the “Employment Agreement”) 

 

Dear Larry:

 

This letter confirms our

agreement to amend the terms of your Employment Agreement with Activision

Publishing, Inc. in accordance with the provisions set forth below

(“Amendment”).  Capitalized terms not

defined in this Amendment shall have meanings ascribed to them in the Employment

Agreement.

 

The specific amendments to

the Employment Agreement shall be as follows:

 

1.               Paragraph 1 is

deleted in its entirety and is replaced with the following:

 

“The

term of your employment under this agreement shall commence on January 1, 2001  and expire on April 1, 2005, unless earlier

terminated as provided below.”

 

2.               Paragraph 2(a)

is amended by adding the following provision to the end of such Paragraph:

 

“Commencing on April 1, 2004

through the duration of the term of your employment, you shall receive a base

salary of $435,000.”

 

3.               Paragraph 2(e)

is amended by adding the following provision to the end of such Paragraph:

 

“Without limiting the

generality of the foregoing, you are also being granted, under Employer’s

existing or modified stock option plan, options to purchase 50,000 shares of

Employer’s common stock.  Such options

are in addition to the stock options previously granted to you by

Employer.  The options will be issued

upon execution of this Amendment and will have an exercise price that will be

the low market price of such common stock on the dated the options are

issued.  Commencing April 1, 2003, the

options will vest ratably over five years with twenty percent (20%) of the

amount granted vesting at the end of each such year.  Such options will be governed in all other respects by Employer’s

stock option plan in effect at the time of the grant.”

 

1

 

Except

as specifically set forth above, all terms and condition contained in the

Employment Agreement shall remain

unmodified and in full force and effect.

 

If

the foregoing accurately reflects your understanding of the provisions of your

Employment Agreement that is being

amended pursuant to this letter, please so indicate by signing in the space

provided below:

 

Very

truly yours,

 

	

  /s/ Ronald Doornink

  
	

  Ron Doornink

  

President

and Chief Executive Officer

 

 

ACCEPTED AND AGREED TO:

 

 

 

	

  /s/ Larry Goldberg

  
	

  Larry Goldberg

  

 

2

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