Exhibit 10.37
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
SureBeam Corporation
March 29, 2002
Page 2
delivered shall be an original, but all of which shall together constitute one
and the 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.
FINAL MATURITY: 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 Loans under the Revolving Facility shall be prepaid
PREPAYMENT: 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 Voluntary and mandatory prepayments shall be made,
PREPAYMENTS: 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 Usual for facilities and transactions of this type
AND WARRANTIES: 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 The Lender's proposal to make the Revolving Facility
TO BORROWING: 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 Usual for facilities and transactions of this type
COVENANTS: 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 The Credit Agreement will contain commercially
COVENANTS: 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 All reasonable out-of-pocket costs of the Lender
INDEMNIFICATION: (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 California
AND FORUM:
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.
