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SUBORDINATED PROMISSORY NOTE
$ Not to Exceed $75,000,000 AUGUST 4, 2000
San Diego, California
FOR VALUE RECEIVED, SB OPERATING CO., a Delaware corporation
("BORROWER"), hereby unconditionally promises to pay to the order of THE TITAN
CORPORATION, a Delaware corporation ("LENDER"), in lawful money of the United
States of America and in immediately available funds, the principal sum not to
exceed seventy-five million dollars ($75,000,000) (the "LOAN") together with
accrued and unpaid interest thereon, each due and payable on the dates and in
the manner set forth below.
1. PRINCIPAL REPAYMENT. The outstanding principal amount of the Loan
shall be due and payable on August 4, 2005, provided that Borrower shall not use
any proceeds from the initial public offering of SureBeam Corporation to pay any
principal or interest on the Loan or pay principal or interest on any
re-financing of this indebtedness with outside third parties. If Borrower sells
any of its assets other than in the ordinary course of its business or if
Borrower obtains a credit facility from a third party lender and the facility
permits the use of proceeds to repay existing indebtedness, then Borrower may
with Lender's approval prepay the Loan in an amount equal to the net proceeds
from the sale of the assets or the net proceeds from the credit facility. Net
proceeds shall be the gross proceeds of the asset sale or credit facility, as
applicable, less all of the transaction costs, including commitment fees,
brokerage or investment banking fees, professional fees and other expenses, and
less any taxes payable by Borrower with respect to such transaction. There shall
be no prepayment penalty or premium for any early payment of principal.
2. INTEREST RATE. Borrower further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of higher of (i) the interest rate
payable by Lender on its senior credit facility during the period for which
interest is accruing or (ii) ten percent (10%) per annum, subject to the maximum
rate permitted by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans). Interest shall be due and payable quarterly in arrears on April 15, July
15, October 15 and January 15, commencing on January 15, 2001 and shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
3. PLACE OF PAYMENT. All amounts payable hereunder shall be payable at
the Lender, unless another place of payment shall be specified in writing by
Lender.
4. APPLICATION OF PAYMENTS. Payment on this Note shall be applied first
to accrued interest, and thereafter to the outstanding principal balance hereof.
5. DEFAULT. Each of the following events shall be an "EVENT OF DEFAULT"
hereunder:
(a) Borrower fails to pay timely any of the principal amount
due under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due
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under this Note on the date the same becomes due and payable or within five (5)
business days thereafter;
(b) Borrower files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law or any other law
for the relief of, or relating to, debtors, now or hereafter in effect, or makes
any assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or
(c) An involuntary petition is filed against Borrower (unless
such petition is dismissed or discharged within sixty (60) days) under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Borrower.
Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Lender, and, in the case of an Event of Default pursuant to (b) or (c) above,
automatically, be immediately due, payable and collectible by Lender pursuant to
applicable law.
6. SUBORDINATION. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of the Senior Indebtedness.
"SENIOR INDEBTEDNESS" shall mean, unless expressly subordinated to or
made on a parity with the amounts due under this Note, the principal of, unpaid
interest on and amounts reimbursable, fees, expenses, costs of enforcement and
other amounts due in connection with (a) indebtedness of Borrower to banks or
commercial finance or other lending institutions regularly engaged in the
business of lending money excluding venture capital, investment banking or
similar institutions and their affiliates which sometimes engage in lending
activities but which are primarily engaged in investments in equity securities),
whether or not secured, and (b) any such indebtedness or any debentures, notes
or other evidence of indebtedness issued in exchange for such Senior
Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor.
6.1 INSOLVENCY PROCEEDINGS. If there shall occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization, or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation, or any other marshaling of the assets and
liabilities of Borrower, (a) no amount shall be paid by Borrower in respect of
the principal of, interest on or other amounts due with respect to this Note at
the time outstanding, unless and until the principal of and interest on the
Senior Indebtedness then outstanding shall be paid in full, and (b) no claim or
proof of claim shall be filed by or on behalf of Lender which shall assert any
right to receive any payments in respect of the principal of and interest on
this Note except subject to the payment in full of the principal of and interest
on all of the Senior Indebtedness then outstanding.
6.2 DEFAULT ON SENIOR INDEBTEDNESS. If there shall occur an
event of default which has been declared in writing with respect to any Senior
Indebtedness, as defined therein,
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or in the instrument under which it is outstanding, permitting the holder to
accelerate the maturity thereof and Lender shall have received written notice
thereof from the holder of such Senior Indebtedness, then, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of the principal of or interest on this Note unless within one
hundred eighty (180) days after the happening of such event of default the
maturity of such Senior Indebtedness shall not have been accelerated. Not more
than one notice may be given to Lender pursuant to the terms of this SECTION 6.2
during any 365 day period.
6.3 FURTHER ASSURANCES. By acceptance of this Note Lender
agrees to execute and deliver customary forms of subordination agreement
requested from time to time by the holders of Senior Indebtedness and, as a
condition to Lender's rights hereunder, Borrower may require that Lender execute
such forms of subordination agreement, provided that such forms shall not impose
on Lender terms less favorable than those provided herein.
6.4 OTHER INDEBTEDNESS. No indebtedness which does not
constitute Senior Indebtedness shall be senior in any respect to the
indebtedness represented by this Note.
6.5 SUBROGATION. Subject to the payment in full of all Senior
Indebtedness, Lender shall be subrogated to the rights of the holder(s) of such
Senior Indebtedness (to the extent of the payments or distributions made to the
holder(s) of such Senior Indebtedness pursuant to the provisions of this SECTION
6.5) to receive payments and distributions of assets of Borrower applicable to
the Senior Indebtedness. No such payments or distributions applicable to the
Senior Indebtedness shall, as between Borrower and its creditors, other than the
holders of Senior Indebtedness and Lender, be deemed to be a payment by Borrower
to or on account of this Note; and for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness to which Lender would be
entitled except for the provisions of this SECTION 6.5 shall, as between
Borrower and its creditors, other than the holders of Senior Indebtedness and
Lender, be deemed to be a payment by Borrower to or on account of the Senior
Indebtedness.
6.6 NO IMPAIRMENT. Subject to the rights, if any, of the
holders of Senior Indebtedness under this SECTION 6.6 to receive cash,
securities or other properties otherwise payable or deliverable to Lender,
nothing contained in this SECTION 6.6 shall impair, as between Borrower and
Lender, the obligation of Borrower, subject to the terms and conditions hereof,
to pay to Lender the principal hereof and interest hereon as and when the same
become due and payable, or shall prevent Lender, upon default hereunder, from
exercising all rights, powers and remedies otherwise provided herein or by
applicable law.
6.7 LIEN SUBORDINATION. Any lien or security interest of
Lender, whether now or hereafter existing in connection with the amounts due
under this Note, on any assets or property of Borrower or any proceeds or
revenues therefrom which Lender may have at any time as security for any amounts
due and obligations under this Note, shall be subordinate to all liens or
security interests now or hereafter granted to a holder of Senior Indebtedness
by Borrower or by law notwithstanding the date, order or method of attachment or
perfection of any such lien or security interest or the provisions of any
applicable law.
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6.8 APPLICABILITY OF PRIORITIES. The priority of the holder of
the Senior Indebtedness provided for herein with respect to security interests
and liens are applicable only to the extent that such security interests and
liens are enforceable and perfected and have not been avoided; if a security
interest or lien is judicially determined to be unenforceable or unperfected or
is judicially avoided with respect to any claim of the holder of the Senior
Indebtedness or any part thereof, the priority provided for herein shall not be
available to such security interest or lien to the extent that it is avoided or
determined to be unenforceable or unperfected. The foregoing notwithstanding,
Lender covenants and agrees that it shall not challenge, attack or seek to avoid
any security interest or lien to the extent that it secures any holder of the
Senior Indebtedness. Nothing in this SECTION 6.8 affects the operation of any
subordination of indebtedness or turnover of payment provisions hereof, or of
any other agreements among any of the parties hereto.
6.9 RELIANCE OF HOLDERS OF SENIOR INDEBTEDNESS. Lender, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
7. WAIVER. Borrower waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to
any demands hereunder is hereby waived to the full extent permitted by law.
8. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
9. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to
the benefit of and be binding on any successor to Borrower and shall extend to
any holder hereof.
BORROWER SB OPERATING CO.
By: /s/ illegible
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