March 29, 2002
SureBeam Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-1199
Attention: Xxxxx Xxxx, Chief Financial Officer
Re: Surebeam Corporation/ Revolving Facility
Dear Xx. Xxxx:
The Titan Corporation, a Delaware corporation ("TITAN"), is pleased to confirm,
subject to the terms and conditions set forth in this letter agreement and in
the attached Summary of Principal Terms and Conditions (as defined below), its
firm and irrevocable commitment to underwrite and provide to SureBeam
Corporation, a Delaware Corporation ("SUREBEAM"), a secured revolving debt
financing facility up to an aggregate maximum available principal amount of
$25.0 million (the "REVOLVING FACILITY").
This letter agreement and the Summary of Principal Terms and Conditions of the
proposed Revolving Facility attached to this letter agreement and made a part
hereof (the "SUMMARY OF TERMS AND CONDITIONS"; and, together with this letter
agreement, the "COMMITMENT LETTER") represent an outline of the basis on which
Titan is prepared to provide the credit comprising the Revolving Facility. The
terms and conditions of the Revolving Facility, while substantially defined in
the Summary of Terms and Conditions, are not necessarily limited to those set
forth in the Summary of Terms and Conditions. Those matters that may
subsequently be determined and are not covered by the Summary of Terms and
Conditions are subject to the mutual agreement of Titan and SureBeam. SureBeam
and Titan further covenant and agree not to sue each other or your respective
directors, officers, employees, attorneys and affiliates (each a "COVERED
PERSON") for any claims, losses, damages, liabilities or expenses of any kind or
nature whatsoever which may be incurred by or asserted against or involve the
other party any such other covered person (whether asserted by you or any other
person or entity) as a result of or arising out of or in any way related to or
resulting from this Commitment Letter, except that this Commitment Letter shall
not have any effect upon any preexisting commitments that Titan may have to
SureBeam.
If you are in agreement with the foregoing, please sign and return to Titan
the enclosed copy of this Commitment Letter no later than 6:00 p.m. San Diego
time, March 29, 2002, whereupon this Commitment Letter will, unless previously
revoked by us, be effective. This Commitment Letter shall terminate at such time
unless this Commitment Letter has by such time been executed and delivered by
you to us. This Commitment Letter may be executed in any number of counterparts,
and by the different parties hereto on separate counterparts, each of which when
executed and delivered shall be an original, but all of which shall together
constitute one and the
Page 2
same instrument. This Commitment Letter and the rights and obligations of
the parities hereto and thereto shall be governed by and construed in accordance
with the internal laws of the State of California. This letter is not intended
to confer upon any person, other than the parties hereto and their successors
hereunder any benefit or any legal or equitable right, remedy or claim
hereunder.
We look forward to the successful consummation of the Revolving Facility.
Very truly yours,
THE TITAN CORPORATION
By: /s/ Xxxx Xxxx
-----------------------------------
Printed Name: Xxxx Xxxx
Title: Senior Vice President
Chief Financial Officer
AGREED TO AND ACCEPTED this 29th day of March , 2002.
SUREBEAM CORPORATION
By: /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: Senior Vice President
Chief Financial Officer
SUREBEAM CORPORATION
SENIOR SECURED CREDIT FACILITY
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
ACCOMPANYING LETTER AGREEMENT BETWEEN BORROWER
AND XXXXXX DATED MARCH 29, 2002
BORROWER: SureBeam Corporation (the "BORROWER"). The Borrower and each of its
subsidiaries are sometimes referred to herein as the "LOAN PARTIES".
LENDER: The Titan Corporation (the "LENDER").
SENIOR FACILITY: Senior secured revolving credit facility (the "REVOLVING
FACILITY") in an amount equal to $25 million (the "REVOLVING FACILITY
COMMITMENT"), of which up to $5 million will be available in the form of
letters of credit.
PURPOSE: Borrowings under the Revolving Facility will be used (i) to finance the
Borrower's working capital needs, (ii) to finance capital expenditures and
(iii) for general corporate purposes (including the payment of fees and
expenses related to the Revolving Facility). Letters of credit will be used
by the Borrower for the purposes set forth in clauses (i) and (iii) of the
preceding sentence.
AVAILABILITY: (A) Borrowings under the Revolving Facility will be available on
or prior to the earliest of (i) December 31, 2003, the date on which the
Revolving Facility Commitment is terminated in full (iii) the date of any
Commitment Termination Event (as defined in the Senior Secured Credit
Agreement, dated as of February 23, 2000 and as amended, among the Lender
and the various financial institutions that are parties thereto (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, the "LENDER'S CREDIT
AGREEMENT")). The date after which borrowings under the Revolving Facility
are no longer available is herein referred to as the
1.
"REVOLVING FACILITY COMMITMENT TERMINATION DATE."
The maximum number of borrowings made under the Revolving Facility,
excluding letters of credit, issued by the Lender to the Borrower during
any calendar month shall be one. No borrowings may be made under the
Revolving Facility or letters of credit issued sixty days after any of the
Borrower's fiscal quarters unless and until the quarterly compliance
certificate referred to below under "Compliance Certificates" for the
preceding fiscal quarter shall have been submitted by the Borrower to the
Lender. During the first sixty days of any of the Borrower's fiscal
quarters, until such quarterly compliance certificate for the preceding
fiscal quarter shall have been submitted by the Borrower to the Lender,
borrowing availability under the Revolving Facility and the availability of
letters of credit will be based on the quarterly compliance certificate
submitted by the Borrower to the Lender for the second preceding fiscal
quarter. Notwithstanding the above, in the event that the Borrower has made
any prepayment to the Lender under any of the circumstances set forth under
"Mandatory Prepayment" or "Voluntary Prepayment" during or at the end of
any given fiscal quarter, the Borrower may borrow (or, subject to the other
provisions contained in this Term Sheet, request letters of credit in the
amount of) all such amounts prepaid in ensuing fiscal quarters, regardless
of whether the Borrower has timely submitted a quarterly compliance
certificate to the Lender, and the amounts that the Borrower may so borrow
or request as letters of credit pursuant to this sentence shall not be
subject to reduction based on the state of the Borrower's compliance, at
the time of the applicable borrowing, with the EBITDA Requirements (defined
below). Any borrowing made by the Borrower or letter of credit issued by
the Lender to the Borrower pursuant to the preceding sentence shall be
referred to herein as a "PREPAYMENT BORROWING." The maximum amount of
borrowings and letters of credit, subject to the other provisions contained
in this Term Sheet, made under the Revolving Facility or issued during any
one of the Lender's fiscal quarters shall be $12.5 million (the "QUARTERLY
MAXIMUM"), which amount shall be subject to reduction based on the state of
the Borrower's
2.
compliance, at the time of the borrowing or issuance, with the EBITDA
Requirements. Prepayment Borrowings made during any given fiscal quarter
shall not count toward the Quarterly Maximum for such fiscal quarter.
Portions of the Quarterly Maximum (as such Quarterly Maximum may have been
reduced during the applicable fiscal quarter based on the state of the
Borrower's compliance with the EBITDA Requirements) not borrowed by the
Borrower or covered by a letter of credit issued by the Lender to the
Borrower in any fiscal quarter during the Borrower's fiscal 2002 will be
available (in addition to the Quarterly Maximum for such later fiscal
quarters) for borrowing or use in connection with a letter of credit during
any of the Borrower's later fiscal quarters during 2002.
(B) Letters of credit will be available at any time before the fifth business
day prior to the Revolving Facility Commitment Termination Date.
(C) EBITDA Requirements shall mean the following: for each fiscal quarter in
fiscal year 2003, the Quarterly Maximum shall be subject to the following:
(i) if the Borrower's EBITDA for the preceding fiscal quarter is less than
25% of the Borrower's target EBITDA set forth in the 2002-2003 Xxxxxxxx's
Operating plan previously delivered by Borrower to Lender ("EBITDA AOP
TARGET") for such preceding fiscal quarter, the Borrower shall be limited
to borrowings of $5 million for such fiscal quarter, provided that no
borrowings shall be available to the Borrower if the Borrower's operating
expenses exceeded $5 million in such preceding fiscal quarter; and (ii) if
the Borrower's EBITDA for such preceding fiscal quarter is 25% of the
EBITDA AOP Target for such preceding fiscal quarter, the Borrower may
borrow up to 50% of the Quarterly Maximum (the "ALLOWED QUARTERLY MAXIMUM")
for such fiscal quarter. 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 is above 25% of the
EBITDA AOP Target for such preceding fiscal quarter.
Beginning with the second fiscal quarter of fiscal year
3.
2003, if the Borrower has negative EBITDA in any fiscal quarter, the
Borrower may not make any borrowings in the following fiscal quarter.
Notwithstanding anything to the contrary, to the extent net proceeds from
issuances of equity or equity-related securities of the Loan Parties are
available for use by the Borrower, then Borrower shall not be permitted to
make any borrowings under the Revolving Facility until such funds are first
exhausted.
LETTERS OF CREDIT: Letters of credit under the Revolving Facility will be caused
to be issued by the Lender. Each letter of credit shall expire no later
than the earlier of (i) 12 months after its date of issuance; PROVIDED,
HOWEVER, that with respect to letters of credit with an aggregate undrawn
face amount not exceeding $500,000, the expiry date of such letters of
credit may be up to 24 months; or (ii) the fifth business day prior to the
Revolving Loan Maturity Date (as defined below).
Drawings under any letter of credit shall be reimbursed by the Borrower on
the next business day. To the extent that the Borrower does not reimburse
the Lender on the next business day, the amount that is not reimbursed
shall be deemed to be a borrowing under the Revolving Facility.
LENDER GUARANTIES: Borrower and Lender shall use their best efforts to terminate
the outstanding guaranties for the obligations of the Borrower existing on
the Closing Date (the "LENDER GUARANTIES").
Any payment made by the Lender, and any obligation for payment assumed by
the Lender, under a Lender Guaranty shall be deemed to have been made as a
borrowing under the Revolving Facility.
COMPLIANCE CERTIFICATES: For the first three fiscal quarters of each of the
Borrower's fiscal years during the term of the Revolving Facility, the
Borrower shall submit, on or prior to the date 60 days after that quarter's
end, a compliance certificate to the Lender pursuant to which an authorized
officer shall certify as to (i) the Borrower's compliance with the terms of
the credit agreement relating to the Revolving
4.
Facility (the "CREDIT AGREEMENT"), including the covenants and, where
applicable, supporting calculations for the Borrower's compliance
therewith, and the related collateral documentation (together with the
Credit Agreement, the "LOAN DOCUMENTS"), (ii) whether a default or event of
default has occurred and (iii) the outstanding balance of loans made under
the Revolving Facility as of the end of that quarter. For the fourth fiscal
quarter of each of the Borrower's fiscal years during the term of the
Revolving Facility, the Borrower shall submit, on or prior to the date 90
days after the close of such fiscal year, a compliance certificate to the
Lender pursuant to which an authorized officer shall certify as to the
matters referred to in clauses (i), (ii) and (iii) above. Furthermore, in
connection with any loan that is made under the Revolving Facility, the
Borrower shall submit to the Lender a certificate pursuant to which an
authorized officer shall certify as to the matters referred to in clause
(i) above as of the date that the loan is proposed to be made (a "BORROWING
DATE").
DEFAULT RATE: Following a default or event of default, interest on amounts due
under the Credit Agreement shall accrue at the rate that is two hundred
basis points in excess of the otherwise applicable rate.
FINALMATURITY: The Revolving Facility will mature on the earlier of (i)
December 31, 2005, (ii) the date on which the lenders under the Lender's
Credit Agreement accelerate the date for payment by Lender of amounts
outstanding thereunder and (iii) the date of termination, for any reason,
of the Lender's Credit Agreement (the "REVOLVING LOAN MATURITY DATE").
Loans made under the Revolving Facility will be repaid as follows (with the
quarterly percentages provided for below being applied with respect to the
outstanding balance of loans under the Revolving Facility as of the last
day of the Borrower's prior fiscal quarter for payments made during the
Borrower's fiscal 2003, and, thereafter, with the payments in the
Borrower's fiscal 2004 to be based upon the outstanding balance of loans
under the Revolving Facility as of December 31, 2003, such balances to be
as set forth in the quarterly compliance certificates referred to above
under "Compliance Certificates"):
QUARTERLY PERCENTAGE REPAID
Fiscal 2002 None
5.
Fiscal 2003 5%
Fiscal 2004 12.5%
Fiscal 2005 25% of outstanding balance of
principal and accrued interest on December 31, 2004
On December 31, 2005, 100.0% of the outstanding principal balance of the
Revolving Facility and all accrued and unpaid interest shall be paid.
All repayments provided for above shall be made as of the last day of each
fiscal quarter for the applicable fiscal year and shall permanently reduce
the Revolving Facility Commitment and correspondingly reduce the amounts
available for letters of credit.
GUARANTEES: All obligations of the Borrower under the Revolving Facility will be
unconditionally guaranteed by each existing and subsequently acquired or
organized subsidiary of the Borrower (provided for foreign subsidiaries no
adverse tax consequences would result therefrom).
SECURITY: The Revolving Facility and the related guarantees will be secured by
all the assets of the Borrower and each existing and subsequently acquired
or organized subsidiary of the Borrower (collectively, the "COLLATERAL"),
including but not limited to (i) a first priority pledge of 100% (or such
lesser amount owned by the Borrower or one of its subsidiaries) of the
capital stock of each existing and subsequently acquired or organized
subsidiary of the Borrower and (ii) perfected first priority (subject to
limited customary exceptions) security interests in, and mortgages on, all
tangible and intangible assets of the Borrower and each existing and
subsequently acquired or organized subsidiary of the Borrower (including
but not limited to accounts receivable (billed and unbilled), inventory,
equipment, contracts, contract rights (including royalty streams), general
intangibles, intellectual property (including patents, patent applications,
copyrights and trademarks (registered or otherwise)), real property,
deposit accounts, investment securities, leasehold mortgages and interests,
cash and proceeds of the foregoing).
All the above-described pledges, security interests and mortgages shall be
created on terms, and pursuant to documentation (prepared by the Lender's
counsel), satisfactory to the Lender, and, subject to limited customary
exceptions and applicable laws to be agreed upon, none of the Collateral
shall be subject to any other pledges,
6.
security interests or mortgages.
INTEREST RATES: Loans under the Revolving Facility shall bear interest at a rate
per annum equal to the Lender's effective weighted average term debt rate
plus three hundred basis points (so, if the Lender's effective weighted
average term debt rate as of a Borrowing Date is 10%, the interest rate per
annum on a loan made under the Revolving Facility as of such Borrowing Date
shall be 13%). The Lender's effective weighted average term debt rate shall
be calculated, for any Borrowing Date, by multiplying the Lender's average
daily debt outstanding on the Lender's Credit Agreement times the average
daily effective interest rate under the Lender's Credit Agreement divided
by the total number of days for that given period. The Lender's 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.
Interest on loans under the Revolving Facility shall be paid monthly, on
the first of each month beginning on January 1, 2003. Accrued and unpaid
interest from the date that the Lender and the Borrower execute the Credit
Agreement (the "CLOSING DATE") through December 31, 2002 on loans made
under the Revolving Facility shall constitute a borrowing (but shall not be
deemed a borrowing for purposes of determining the number of borrowings
that may be made under the Revolving Facility in any given month) under the
Revolving Facility.
Calculation of interest shall be on the basis of actual days elapsed in a
year of 360 days.
TAX GROSS UP: All payments shall be made without withholding or deduction for,
or on account of, any present or future taxes or duties imposed or levied
by or on behalf of any governmental taxing authority or, if any such
withholding or deductions are required to be made by law, with the payment
of such additional amounts as will result in the Lender receiving such
amounts as it would have received had no such withholding or reduction been
required.
MANDATORY PREPAYMENT: Loans under the Revolving Facility shall be prepaid with
(i) 100% of the net cash proceeds of all asset sales or other dispositions
of
7.
property (excepting sales of inventory in the ordinary course of business)
by the Loan Parties (including insurance and condemnation proceeds), (ii)
100% of the net cash proceeds of issuances of debt obligations of the Loan
Parties and (iii) 50% of the net cash proceeds in excess of $25 million of
issuances of equity or equity-related securities of the Loan Parties. At
the end of every fiscal quarter, the Borrower shall be required to prepay
loans under the Revolving Facility in an amount equal to the amount of cash
and cash equivalents that are in excess of $5 million on the Borrower's
balance sheet as of the fiscal quarter end, excepting net cash proceeds of
issuances of equity or equity-related securities of the Loan Parties which
are not subject to mandatory prepayment pursuant to (iii) above.
VOLUNTARY PREPAYMENT: Voluntary prepayments will be permitted in whole or in
part, at the option of the Borrower, in minimum principal amounts to be
agreed upon.
APPLICATION OF PREPAYMENTS: Voluntary and mandatory prepayments shall be made,
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.
Mandatory prepayments shall be applied to repay accrued and unpaid interest
and loans under the Revolving Facility and may be reborrowed, subject to
the other provisions of this Term Sheet.
REPRESENTATIONS AND WARRANTIES: Usual for facilities and transactions of this
type provided by institutional lenders and others to be determined by the
Lender, including but not limited to corporate status, power and authority;
enforceability; accuracy of financial statements; no material adverse
change; absence of litigation which, if adversely determined, could have a
material adverse effect; no violation of organizational documents,
agreement or instruments; compliance with laws (including employee
benefits, margin regulations and environmental laws and FDA and USDA
regulations); payment of taxes; ownership of properties; solvency;
effectiveness of regulatory approvals; governmental permits; labor matters;
ERISA; environmental matters; accuracy of information; validity, priority
and perfection of security interests in the Collateral;
8.
adequate insurance; Investment Company and Public Utility Acts not
applicable; intellectual property; absence of liens; and subsidiaries.
CONDITIONS PRECEDENT BORROWING: The Lender's proposal to make the Revolving
Facility TO available to the Borrower on the Closing Date is subject to the
satisfaction or waiver of the conditions set forth in Exhibit A hereto, as
well as to the Lender's ability to fund the Borrower's borrowing requests
in accordance with the Lender's Credit Agreement.
AFFIRMATIVE COVENANTS: Usual for facilities and transactions of this type
provided by institutional lenders and others to be agreed upon by the
Borrower and the Lender (to be applicable to each of the Loan Parties),
including, but not limited to, maintenance of corporate existence and
rights; performance of obligations; delivery of audited financial
statements (including the accountants' report thereon and a statement from
the accountants that, in performing the examination necessary to deliver
the audited financial statements, no knowledge was obtained by them of any
default or event of default under the Credit Agreement) on or prior to 90
days after the close of the Borrower's fiscal year and unaudited financial
statements prepared in accordance with generally accepted accounting
principles ("GAAP") on or prior to 60 days after the close of each of the
Borrower's preceding fiscal quarters (certified, in the case of the
unaudited financial statements, as to their completeness and correctness by
an authorized officer of the Borrower); delivery of other financial
information, including, but not limited to, detailed aged trial balances
for billed and unbilled accounts receivable and accounts payable, notices
of default, litigation and ERISA events, "management letters," the Annual
Operating Plan and the compliance certificates referred to under
"Compliance Certificates" above; maintenance of properties in good working
order; maintenance of insurance; compliance with laws, including employee
benefits and environmental laws and FDA and USDA regulations; inspection of
books and properties; further assurances and collateral matters; payment of
taxes; performance of contracts; and for agreements entered into after the
date hereof, receipt of 10% downpayments (or 10% irrevocable letters of
credit) with respect to the shipment of any permitted international sales
of the Borrower's equipment.
NEGATIVE COVENANTS: Usual for facilities and transactions of this type provided
by
9.
institutional lenders and others to be determined by the Lender (to be
applicable to each of the Loan Parties), including, but not limited to,
limitations on dividends on, and redemptions and repurchases of, capital
stock; limitations on prepayments, redemptions and repurchases of
subordinated debt; limitations on liens and sale-leaseback transactions;
limitations on loans and investments; limitations on debt; limitations on
mergers, acquisitions and asset sales (including sales of fixed assets
outside the ordinary course of business or overseas); limitations on
transactions with affiliates; limitations on changes in business conducted;
limitations on amendment of debt and other material agreements; limitations
on stock issuances; and limitations on restrictive agreements with respect
to dividends, distributions and transfers of assets by subsidiaries.
SELECTED FINANCIAL COVENANTS: The Credit Agreement will contain commercially
reasonable financial covenants that are mutually acceptable to Borrower and
Lender, which shall include, but not be limited to, Maximum Operating
Expense and Capital Expenditures covenants that are based on the Borrower's
revenue level as generally described in Exhibit B hereto.
EVENTS OF DEFAULT: Usual for facilities and transactions of this type (with
customary cure periods) and others to be determined by the Lender,
including but not limited to nonpayment of principal, interest or fees,
violation of covenants, incorrectness of representations and warranties,
cross default, bankruptcy, material judgments, employee benefits, actual or
asserted invalidity of the guarantees or the security documents, failure of
subordination, and Change in Control (the definition of which will be
agreed upon).
AMENDMENTS, ETC.: Amendments and waivers of the Loan Documents will require the
approval of the Borrower and Lender. COST AND YIELD The Credit Agreement
shall include standard PROTECTION: protective provisions for such matters
as capital adequacy, increased costs, funding losses, illegality and
withholding taxes borne by the Lender under the Lender's Credit Agreement.
ASSIGNMENTS: The Lender will be permitted to assign its rights under the Credit
10.
Agreement.
EXPENSES AND INDEMNIFICATION: All reasonable out-of-pocket costs of the Lender
(including reasonable fees, disbursements and other charges of counsel,
enforcement costs and documentary taxes) associated with the Loan
Documents, the Revolving Facility and any amendment to or consent under the
Lender's Credit Agreement entered into in connection with the Revolving
Facility (including reasonable fees, disbursements and other charges of
counsel to the lenders under the Lender's Credit Agreement) are to be paid
by the Borrower if the Credit Agreement is executed or any funds are drawn
thereunder. The Borrower will indemnify the Lender and its respective
officers, directors, employees, affiliates and agents collectively
("INDEMNIFIED PERSONS") and hold them harmless from and against all costs,
expenses (including reasonable fees, disbursements and other charges of
counsel) and liabilities of any such Indemnified Person arising out of or
relating to the financing contemplated hereby or arising out of or relating
to the Lender's borrowings under the Lender's Credit Agreement that are
used to finance the Revolving Facility, PROVIDED that none of the
Indemnified Persons will be indemnified for its gross negligence or willful
misconduct as determined by a court of competent jurisdiction in a final
and nonappealable decision.
COUNSEL FOR THE LENDER: Xxxxxx Godward LLP
GOVERNING LAW AND FORUM: California
11.
EXHIBIT A
CONDITIONS
The Lender's proposal to make the Revolving Facility available to the
Borrower is also subject to the following conditions:
ARTICLE I the preparation, execution and delivery of definitive documentation
for the Loan Documents satisfactory to the Lender, and the satisfaction (as
determined by the Lender) of customary closing conditions for transactions
similar to the Revolving Facility;
ARTICLE II since March 29, 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 with respect to the Loan Parties;
ARTICLE III subject to such exceptions as the Lender shall otherwise agree, the
Lender shall have a perfected first-priority security interest in and lien
on all assets as required under the heading "Security" set forth herein; In
the event that any of the conditions set forth above or in the Loan
Documents are not satisfied, the Lender reserves the right, in its sole
discretion, to decline to participate in the proposed financing.
(a) As used herein, a "Material Adverse Effect" shall mean 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 Loan Parties, in each case, taken as a whole, or (ii) the validity or
enforceability of any of the documents entered into in connection with the
Transactions, including, without limitation, the Loan Documents or the rights,
remedies and benefits available to the parties thereunder.
1.
EXHIBIT B
SELECTED FINANCIAL COVENANTS
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 2002-2003 Borrower's
Operating Plan previously delivered by Borrower to Lender, the Borrower
will not incur Capital Expenditures during the next Fiscal Quarter during
Fiscal Year 2002 that, when aggregated with all other Capital Expenditures
incurred by the Borrower during such next Fiscal Quarter during Fiscal Year
2002 and all prior Fiscal Quarters during Fiscal Year 2002, are greater
than Five Hundred Thousand Dollars ($500,000) in excess of the capital
expenditure budget for that next Fiscal Quarter during Fiscal Year 2002 and
all prior Fiscal Quarters during Fiscal Year 2002, set forth in the
2002-2003 Xxxxxxxx's Operating Plan previously delivered by Borrower to
Lender.
(b) (ii) If the Borrower's revenue for any Fiscal Quarter in Fiscal Year 2002
is less than or equal to eighty-five percent (85%) of the quarterly revenue
target set forth in the 2002-2003 Borrower's Operating Plan previously
delivered by Borrower to Lender, the Borrower will not incur Capital
Expenditures during the next Fiscal Quarter during Fiscal Year 2002 that,
when aggregated with all other Capital Expenditures incurred by the
Borrower during such next Fiscal Quarter during Fiscal Year 2002 and all
prior Fiscal Quarters during Fiscal Year 2002, are greater than Five
Hundred Thousand Dollars ($500,000) in excess of the "adjusted plan" model
capital expenditure budget for that next Fiscal Quarter during Fiscal Year
2002 and all prior Fiscal Quarters during Fiscal Year 2002, set forth in
the 2002-2003 Xxxxxxxx's Operating Plan previously delivered by Borrower to
Lender.
(c) 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 2002-2003 Borrower's Operating Plan
previously delivered by Borrower to Lender, then for the following Fiscal
Quarter during Fiscal Year 2002, 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, for such
Fiscal Quarter set forth in the 2002-2003 Xxxxxxxx's Operating Plan
previously delivered by Borrower to Lender.
(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
1.
Xxxxxxxx's Annual Operating Plan for such Fiscal Quarter, then for the
following Fiscal Quarter during Fiscal Year 2002:
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 Borrower's set forth in the 2002-2003
Xxxxxxxx's Operating Plan previously delivered by Borrower
to Lender.
B=Fiscal Quarter revenue of the immediately preceding Fiscal
Quarter from the " adjusted plan" as set forth in the
2002-2003 Xxxxxxxx's Operating Plan previously delivered by
Borrower to Lender.
C=Actual revenue from the immediately preceding Fiscal Quarter.
D=Operating expenses of the following Fiscal Quarter as set forth
in the 2002-2003 Xxxxxxxx's Operating Plan previously
delivered by Borrower to Lender.
E=Operating expenses of the following Fiscal Quarter from the
"adjusted plan" as set forth in the 2002-2003 Xxxxxxxx's
Operating Plan previously delivered by Borrower to Lender.
EXHIBIT C
KEY DEFINITIONS
"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,
including all royalty income recognized in accordance with the
Borrower's license agreement with the Lender,
PLUS
2.
(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
(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.
"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.
THE TITAN CORPORATION
By: /s/ Xxxx Xxxx
-----------------------------
Name: Xxxx Xxxx
Title: Senior Vice President
Chief Financial Officer
ACCEPTED AND AGREED TO
AS OF MARCH 29, 2002:
SUREBEAM CORPORATION
By: /s/ Xxxxx Xxxx
-------------------------------
Name: Xxxxx Xxxx
Title: Senior Vice President
Chief Financial Officer
3.
