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As filed with the Securities and Exchange Commission on September 23, 1996
Registration No. 333-10919
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE TITAN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3033 Science Park Road 95-2588754
(State or other jurisdiction of San Diego, California 92121 (I.R.S. Employer
incorporation or organization) (Address of Principal Executive Identification No.)
Offices and Zip Code)
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Copies to:
BERNARD M. HIRL DAVID A. HAHN, ESQ.
The Titan Corporation Latham & Watkins
3033 Science Park Road 701 B Street
San Diego, California 92121 San Diego, California 92101
(Name and address of agent for service) (619) 236-1234
(619) 552-9500
(Telephone number, including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time to time
after the effective date of this Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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PROSPECTUS
THE TITAN CORPORATION
2,249,867 shares of Common Stock, $.01 par value per share
This Prospectus relates to 2,249,867 shares of Common Stock, $.01
par value per share (the "Common Stock"), of The Titan Corporation (the
"Company") which may be offered from time to time by Jack D. Witt, Robert
Johnson, Prabhav V. Maniyar, The Pelot Family Trust, Clyde E. Gartley, Robert
Barnhart, Horace P. Jones and Madeline N. Jones, John W. Smith and Barbara K.
Smith, Edmund P. Krauklin Trust 4/27/93, The Alvin and Choko Mendis Family
Trust, David R. Conner or Sandra H. Conner, Mary Campbell, Joretta L. Slack,
Joretta A. Watts, Joseph A. Whitam and Martha J. Whitam, John and Rae
Spruill, and Edward J. and Bernice J. Brown (the "Selling Stockholders").
Such shares of Common Stock are hereinafter referred to as the "Securities."
All of the Securities are to be offered for the account of the Selling
Stockholders. The Securities may be offered and sold from time to time by the
Selling Stockholders, in each case in open market transactions, in private or
negotiated transactions or in a combination of such methods of sale, at fixed
prices, at prices then prevailing on the New York Stock Exchange (the "NYSE") at
the time of sale, at prices related to such prevailing market prices, or at
negotiated prices. To the extent required, the amounts of the Securities to be
sold, purchase prices, public offering prices, the names of any agents, dealers
or underwriters, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying Prospectus Supplement or,
if appropriate, a post effective amendment to the Registration Statement. The
Selling Stockholders reserve the sole right to accept and, together with any
agent of the Selling Stockholder, to reject in whole or in part any proposed
purchase of the Securities. The Selling Stockholders will pay any sales
commissions or other seller's compensation applicable to such transactions.
The Company will not receive any of the proceeds from the sale of the
Securities by the Selling Stockholders. The Company issued the Securities in
May 1996 in connection with the acquisition of Eldyne, Inc. and Unidyne
Corporation. The Company has agreed to pay all costs of the registration of the
Securities. Such costs, fees and disbursements are estimated to be
approximately $25,000.
SEE "RISK FACTORS" BEGINNING AT PAGE 6 OF THIS PROSPECTUS FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
The Common Stock to be registered hereunder is listed for trading on
the NYSE (Symbol: TTN).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS.ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September __, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and at 7 World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Additional information with
respect to this offering may be provided in the future by means of supplements
or "stickers" to the Prospectus. The Commission maintains a web site on the
World Wide Web that contains reports, proxy statements and other information
filed by registrants under the Exchange Act, including the Company, at
"http://www.sec.gov."
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act of 1933,
as amended, covering the shares of Common Stock covered by this Prospectus. This
Prospectus omits certain information and exhibits included in that Registration
Statement, copies of which may be obtained upon payment of a fee prescribed by
the Commission or may be examined free of charge at the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is traded on the NYSE (Symbol: TTN), and
reports, proxy statements and other information concerning the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference and shall be
deemed a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 and June 30, 1996;
(c) The description of the Company's Common Stock included in the
Company's Registration Statement on Form 8-B under the Securities
Exchange Act of 1934, file no. 0-2641;
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(d) Proxy Statement for the Annual Meeting of Stockholders held on
May 16, 1996; and
(e) The Company's Current Reports on Form 8-K, dated March 6, 1996,
April 25, 1996 and June 6, 1996 (as amended by Form 8-K/A dated
August 7, 1996).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date this Prospectus is filed with the
Commission and prior to the filing of a post effective amendment which indicates
that all securities offered have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be a part of it from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Titan undertakes to provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of any such
person, a copy of its Annual Report to Stockholders for the last fiscal year and
any or all of the information that has been incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the foregoing documents). Requests for such
information should be directed to The Titan Corporation, Attention: General
Counsel, 3033 Science Park Road, San Diego, California 92121, (619) 552-9500.
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TABLE OF CONTENTS
PAGE
The Company 5
Recent Acquisition 6
Risk Factors 6
Entry Into Commercial Business 7
Recent Losses 7
Non-Compliance with Bank Covenants; Need
for Additional Liquidity 8
1995 Restructuring 8
Reliance on Major Software Customer 9
Dependence on Government Contracts 9
Integration of Eldyne/Unidyne/DCS Operations 10
Reliance on Key Personnel 10
Fluctuations in Quarterly Results 10
Possible Volatility of Stock Price 11
Competition 11
Use of Proceeds 11
Selling Stockholders and Plan of Distribution 11
Experts 14
Legal Matters 14
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THE COMPANY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE
NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY
REFERENCE. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "TITAN" OR THE
"COMPANY" INCLUDE THE TITAN CORPORATION AND ITS SUBSIDIARIES.
Titan provides sophisticated communications and information systems
products and services to large commercial and government customers. Titan
utilizes its core satellite and wireless communications and large-scale software
applications technology and expertise to target rapidly growing markets.
In its communications business, Titan specializes in the development and
production of advanced satellite terminals, voice/data modems, networking
systems and other products used to provide reliable and secure communications
for a variety of voice, data and video applications. In the commercial
marketplace, Titan applies its technology and expertise to provide bandwidth
efficient and cost-effective satellite earth stations for telephony services in
locations with little or no wired telephony infrastructure. Titan also offers a
conditional access system which provides secure distribution of satellite,
wireless or cable TV video programming. In the government area, as a result of
its proprietary technology the Company is a leading provider of secure ultra
high frequency ("UHF") communications systems to the U.S. military community.
In the current environment of limited resources and multiplying defense
requirements, the government is placing increasing reliance on secure
communications systems that allow forces to collect and assimilate information
and rapidly respond to hostile situations.
The Company's information systems business provides systems design
and object-oriented software development services to assist commercial and
government customers engineer new information systems or re-engineer existing
information systems to facilitate the migration from legacy systems to
distributed computing environments often utilizing the Internet and/or an
intranet. These design activities involve implementing a distributed network
systems architecture that satisfies a customer's specific requirements while
taking into account existing hardware and software systems. Titan provides a
complete integrated system solution to a client's requirements using both
commercial hardware and software as well as custom or semi-custom
Titan-developed software. Titan's commercial business focuses on the
telecommunications and, to a lesser extent, financial services industries.
The Company's government funded efforts include developing and implementing
enterprise-wide information networks for intelligence agencies, NATO and the
Federal Aviation Administration where it can capitalize on its extensive
knowledge of such customers' operations and needs.
In addition to the Company's core communications and information
systems businesses, Titan's technology and expertise permit it to bid for
externally-funded research and development projects in selected areas. These
projects generate technologies that Titan believes can create additional
value for the Company. Titan is exploiting these projects and its
technologies by developing new businesses and through licensing, joint
venturing or sales to third parties. For
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example, Titan has developed new businesses in medical product sterilization
and environmental services.
The Company operates through four business segments: Defense Systems,
which includes defense communications and government information systems;
Software Systems, the commercial information systems business; Communications
Systems, the commercial satellite and broadband communications business; and
Emerging Technologies. The Defense Systems, Software Systems and
Communications Systems segments represent the Company's core information and
communications systems and service businesses.
The Company's principal offices are located at 3033 Science Park Road,
San Diego, California 92121, and the Company's phone number is (619) 552-9500.
The Company's internet address on the world-wide web is "http://www.titan.com".
RECENT ACQUISITION
On May 24, 1996, the Company consummated the acquisition of three
privately-held affiliated businesses: Eldyne, Inc., a California corporation
("Eldyne"); Unidyne Corporation, a Virginia corporation ("Unidyne"); and
Diversified Control Systems, LLC, a Nevada limited liability company ("DCS").
Eldyne, Unidyne and DCS are information technology businesses that provide the
Department of Defense and other government customers with systems research,
development and prototyping, fleet integration, insertion of technology into
existing systems, control systems and life cycle support. Further information
is provided in the Company's current reports on Form 8-K filed April 25, 1996
and June 6, 1996 (as amended by Form 8-K/A dated August 7, 1996).
RISK FACTORS
Prospective investors should carefully consider the specific risk
factors set forth below as well as the other information in this Prospectus or
incorporated by reference before deciding to purchase the Common Stock offered
hereby. Certain statements in this Prospectus or incorporated by reference that
are not historical fact constitute "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results of the Company to be materially different
from results expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, but are not limited to, the
following risks:
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ENTRY INTO COMMERCIAL BUSINESS
The Company's revenues historically have been derived principally
from business with the Department of Defense and other government agencies.
Since 1991, the Company has pursued a strategy that includes leveraging the
technology from its defense business to build commercial businesses. This
strategy presents certain significant risks for the Company. Many of the
Company's commercial businesses, such as broadband communications (secure
television), satellite communications and medical sterilization, remain in an
early stage. As such, the Company is subject to all the risks inherent in the
operation of a start-up venture, including the need to develop and maintain
marketing, sales and customer support capabilities, to secure appropriate
third party manufacturing arrangements, to respond to the rapid technological
advances inherent in these markets, to secure the necessary financing to
support these activities and, ultimately, to design and manufacture products
acceptable to buyers in its target markets. In addition, many of the
opportunities in the broadband communications and satellite communications
businesses are large, international projects which involve lengthy sales
cycles. The Company's efforts to address these risks have required, and will
continue to require, significant expenditures and dedicated management time
and other resources. There can be no assurance that the Company will be
successful in addressing these risks or in developing these commercial
businesses.
Certain investments in the Company's start-up commercial ventures
have been capitalized and are included in the Company's balance sheet,
primarily within the captions of Property and Equipment, Other Assets and
Inventory. At June 30, 1996, these capitalized investments aggregated
approximately $15.4 million, and consisted of approximately $9.0 million net
book value of the Company's two medical sterilization facilities,
approximately $4.3 million of capitalized software costs in the Company's
broadband communications unit and approximately $2.1 million of non-recurring
engineering costs related to the commercial satellite communications
business. None of these businesses has yet achieved profitability and there
can be no assurance that any of them will do so.
RECENT LOSSES
The Company reported net losses of $3.8 million and $1.6 million for
the year ended December 31, 1995 and the six months ended June 30, 1996,
respectively. The Company's net loss for the six months ended June 30,
1996 was due primarily to continuing planned investment in the commercial
Communications Systems segment. The Company plans to continue to make
substantial investments in the Communications Systems segment, principally in
the broadband communications business, and expects that the Communications
Systems Segment will incur significant losses during the remainder of 1996.
There can be no assurance that the Company will achieve profitability in the
future.
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NON-COMPLIANCE WITH BANK COVENANTS; NEED FOR ADDITIONAL LIQUIDITY
The Company's continued investment in its emerging commercial
businesses, particularly within the Communications Systems segment, has
placed significant demands on the Company's capital resources. During the six
months ended June 30, 1996, the Company used $3.2 million in cash for
operating requirements. Borrowings under the Company's bank line of credit
have been a principal source of funding these operating requirements. As of
June 30, 1996, the Company was not in compliance with covenants under the
line of credit which prohibited consecutive quarterly losses and required the
Company to maintain stipulated ratios of total liabilities to tangible net
worth and minimum interest coverage. The Company obtained a waiver from the
bank for these conditions as of June 30, 1996, subject to the bank's right to
secure the outstanding obligations under the line of credit with the
Company's assets. In September 1996, the Company entered into an amendment to
the line of credit which increased the maximum borrowing availability from
$17 million to $22 million. The borrowing availability will decrease,
however, to $14 million on the earlier of (a) January 1, 1997 or (b) the
receipt by the Company of an aggregate of $20.0 million of new capital from
the sale of assets or issuance of subordinated debt or capital stock which
would add to the Company's net worth. Under the amendment, Titan and its
wholly-owned subsidiary, Titan Information Systems Corporation ("TIS"),
granted the bank a security interest in substantially all of their non-real
property assets, including accounts receivable, inventory, equipment and
patents. In addition, the Company pledged the stock of TIS, Eldyne and
Unidyne to the bank and agreed that if it has not received $20 million in new
capital by November 15, 1996 the Company would assign to the bank all rights
to payment of monies under its government contracts. The amendment also
deleted or revised certain financial covenants. The amended line of credit
does, however, contain financial covenants which require the Company to
maintain stipulated levels of net worth, a specified ratio of total
liabilities to tangible net worth and a specified quick ratio. The maturity
date of the line of credit is May 30, 1997. There can be no assurance that
the Company will achieve compliance in the future with the covenants of its
line of credit as amended or other financing agreements or that future
waivers of non-compliance may be obtained from its bank or other relevant
parties.
The Company's Eldyne and Unidyne subsidiaries also have a bank line
of credit, which is secured by the assets of those entities and Diversified
Control Systems. The line of credit agreement contains certain financial
covenants that require each of Eldyne and Unidyne to maintain stipulated
levels of tangible net worth, working capital and leverage. At June 30, 1996,
Eldyne and Unidyne were not in compliance with certain of these financial
covenants and obtained a waiver from the bank for these conditions as of June
30, 1996. There can be no assurance that Eldyne or Unidyne will achieve
compliance in the future with the covenants of their line of credit agreement
or other financing agreements or that future waivers of non-compliance may be
obtained from their bank or other relevant parties.
Cash requirements for the remainder of 1996 will continue to be
significant. The Company intends to continue its investment in the further
development of business ventures within the Communications Systems segment.
To finance this investment the Company is investigating a combination of
alternatives that include continued working capital management, utilization
of the remaining availability under the Company's bank line of credit as
amended ($4.0 million of the current $22 million of availability existed at
September 23, 1996), and new debt and equity sources. In August 1996, the
Company filed with the Commission a registration statement on Form S-3
(Registration No. 333-10965) with respect to a public offering of $30,000,000
of Convertible Subordinated Debentures due 2003. Dillion Read & Co. Inc. is
the underwriter for the proposed offering. There can be no assurance,
however, that the Company will be able to consummate the proposed offering
or, if so, on what terms or that the Company will be successful in obtaining
additional funding from other sources. In such event, the Company would have
to reassess its investment in its commercial businesses.
1995 RESTRUCTURING
The Company recorded a charge of approximately $5.4 million in 1995
relating to a plan of restructuring designed to focus the Company on its core
businesses and better position the Company for growth and strategic
transactions. As part of the restructuring, the Company redefined its
business into four segments: Defense Systems, Software Systems,
Communications Systems and Emerging Technologies. The restructuring also
involves the dispositions of certain businesses not central to the Company's
long-term strategy, significant reorganizations of its Software Systems
segment and medical products sterilization business, personnel reductions and
other actions associated with reorganizing the structure of the
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Company. There can be no assurance that the Company will be able to implement
these restructuring activities as initially planned or that there will not be
further restructurings.
RELIANCE ON MAJOR SOFTWARE CUSTOMER
The Company's Software Systems business is substantially dependent on
business from a major telecommunications company. Revenues from this customer
totalled approximately $9.7 million, $24.3 million, $24.5 million and $4.9
million, or 7%, 18%, 18% and 8% of total Company revenues, in the years ended
1993, 1994 and 1995 and in the six months ended June 30, 1996, respectively.
In the second half of 1995, the Company began to experience reduced demand
from this customer and this trend continued during the first six months of
1996. The Company believes that this reduced demand resulted primarily from
the customer's reassessment of its overall business process reengineering
program. In addition, the Company has now completed major portions of
existing work for this customer which contributed to the trend of declining
revenues, and in the second quarter of 1996, the Company incurred additional
costs in connection with a negotiated conclusion of certain programs with
this customer. The loss of this customer, or a substantial delay or further
decrease in the amount of its business, would have a material adverse effect
on the Company's results of operations and financial condition.
DEPENDENCE ON GOVERNMENT CONTRACTS
Titan's U.S. Government customers include the Navy, Army, Air Force,
Federal Emergency Management Agency, Federal Aviation Administration, Defense
Special Weapons Agency, and other U.S. and allied government agencies. The
Company's business is dependent to a large extent upon continued funding from
these sources. U.S. defense budgets and the budgets of other government
agencies have been declining in real terms since the mid-1980's and may
continue to do so in the future. Further significant reductions in defense
expenditures could adversely affect the Company's results of operations and
financial condition. For the years ended December 31, 1993, 1994, and 1995,
and the six months ended June 30, 1996, direct and indirect government
business represented approximately 75%, 68%, 61% and 68%, respectively, of
the Company's revenues. These percentages will be impacted going forward by
the Company's acquisition in May 1996 of Eldyne, Inc., Unidyne Corporation
and Diversified Control Systems, substantially all of the revenues of which
are derived from direct and indirect U.S. Government business.
The Company's contracts with the government and its subcontracts with
government prime contractors are subject to termination for the convenience
of the government, and termination, reduction, or modification in the event
of change in the government's requirements or budgetary constraints. When the
Company participates as a subcontractor, such contracts are also subject to
the failure or inability of the prime contractor to perform its prime
contract. In addition, the Company's contract-related costs and fees,
including allocated indirect costs, are subject to audits and adjustments by
negotiation between the Company and the U.S. Government.
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In addition to the right to terminate, U.S. Government contracts are
conditioned upon the continuing availability of Congressional appropriations.
Congress usually appropriates funds on a fiscal year basis even though contract
performance may take several years. Consequently, at the outset of a major
program, the contract is usually incrementally funded and additional funds are
normally committed to the contract by the procuring agency as appropriations are
made by Congress for future fiscal years.
INTEGRATION OF ELDYNE/UNIDYNE/DCS OPERATIONS
In May 1996, the Company acquired Eldyne, Inc., Unidyne Corporation
and Diversified Control Systems, LLC. These companies provide the Department
of Defense and other government customers with systems research, development
and prototyping, fleet integration, insertion of technology into existing
systems, control systems and life cycle support. The integration of these
businesses requires the dedication of management resources which may detract
from attention to the day-to-day business of the remainder of the Company. In
addition, the Company intends to seek to reduce expenses of the combined
operations through consolidation of facilities and other expense reductions.
There can be no assurance, however, that the Company will be able to reduce
expenses or that there will not be material adverse effects relating to the
integration of these operations into the Company.
RELIANCE ON KEY PERSONNEL
The Company's success depends in large part upon its ability to attract
and retain highly qualified technical and management personnel, including
without limitation, computer programmers proficient in the C++ language,
telecommunications engineers and technical and management personnel with the
high-level security clearances required for much of the Company's classified
work. Most of the Company's key personnel are not subject to employment or
noncompetition agreements. Competition for such personnel from other companies,
academic institutions, government entities and other organizations is intense.
There can be no assurance that the Company will be successful in hiring or
retaining such key personnel.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's results of operations are subject to considerable
fluctuations from quarter to quarter due to changes in demand for the Company's
products or services and other factors, and there can be no assurance that the
Company will be profitable in any particular quarter. Demand for the Company's
products and services in each of the markets it serves can vary significantly
from quarter to quarter due to revisions in budgets or schedules for customer
projects requiring the Company's products or services, changes in demand for the
customers' products which incorporate or utilize the Company's products or
services and other factors beyond the Company's control. In addition, demand
for products in the emerging broadband communications and commercial satellite
businesses is highly uncertain given the emerging nature of the Company's
technology and other established competing products and technologies.
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POSSIBLE VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has from time to time
fluctuated widely and in the future may be subject to similar fluctuations in
response to quarter-to-quarter variations in the Company's operating results,
announcements of technological innovations or new products by the Company or its
competitors, general conditions in the industries in which the Company competes
and other events or factors. In addition, in recent years broad stock market
indices, in general, and the securities of companies with emerging businesses,
in particular, have experienced substantial price fluctuations. Such broad
market fluctuations also may adversely affect the future trading price of the
Common Stock. In addition, sales of substantial amounts of Common Stock in the
public market during or following this offering could adversely affect the
trading price of the Common Stock.
COMPETITION
The industries and markets in which the Company competes are highly
competitive. The Company encounters intense competition in most of its
business areas from numerous other companies, many of which have far greater
name recognition and financial, technological, marketing and customer service
resources than the Company. The Company's ability to compete in its markets
depends to a large extent on its ability to provide technologically advanced
products and services with shorter lead times at lower prices than its
competitors.
USE OF PROCEEDS
All of the Securities offered hereby will be sold for the account of the
Selling Stockholders. The Company will not receive any part of the proceeds.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the Securities offered hereby will be sold for the account of the
Selling Stockholders. Except as set forth below, the Selling Stockholders' plan
of distribution is set forth on the cover page of this Prospectus. Additional
information regarding the Selling Stockholders is as set forth below.
NAME OF SELLING STOCKHOLDER NUMBER OF SECURITIES OWNED
Jack D. Witt (1) 1,510,917 (2)
David R. Conner or Sandra H. Conner 151,949
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Joretta L. Slack 116,792
Robert Johnson 8,333
Prabhav V. Maniyar 45,000
The Pelot Family Trust 66,667
Clyde E. Gartley 66,667
Joretta A. Watts 27,695
Robert Barnhart 22,605
Horace P. Jones and Madeline N. Jones 68,500
John W. Smith and Barbara K. Smith 50,005
Edmund P. Krauklin Trust 04/27/93 10,960
Alvin M. Mendis and Choko Mendis, Trustees, 47,265
U.D.T. Dated April 3, 1989, the Alvin and
Choko Mendis Family Trust
Mary Campbell 4,110
Joseph A. Whitam and Martha J. Whitam 7,192
John and Rae Spruill 34,250
Edward J. and Bernice J. Brown 10,960
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Total 2,249,867
(1) Mr. Witt also received 500,000 shares of a newly created Series B
Cumulative Convertible Redeemable Preferred Stock of Titan with an
aggregate liquidation preference of $3,000,000 (the "Series B
Preferred Stock") in connection with Titan's acquisition of Eldyne,
Inc. The Series B Preferred Stock accrues dividends at a rate of 6%
per annum payable quarterly in arrears, has a liquidation preference
of $6.00 per share plus accrued and unpaid dividends (the
"Liquidation Preference") and is entitled to one vote per
outstanding share, voting together with the holders of outstanding
Titan Common Stock on all matters submitted for a stockholder vote.
The Series B Preferred Stock is convertible at the
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holder's option into shares of Titan Common Stock at a conversion
price of $9.00 per share (subject to customary anti-dilution
adjustments) after six months and prior to eighteen months after the
date of issuance. The Series B Preferred Stock also is redeemable
at the Liquidation Preference (i) at the holder's option, from the
second and until the fifth anniversaries of the date of issuance,
and (ii) at Titan's option, after the fifth anniversary of the date
of issuance through the tenth anniversary of issuance. In addition,
208,333 shares of the Series B Preferred Stock issued to Witt have
been deposited into an escrow account for a period of up to twenty-
four months (subject to extension in certain circumstances) to
provide indemnification to Titan for breaches of the acquisition
agreements and certain other defined matters.
Also in connection with the acquisitions, Titan and Witt entered
into a retainer agreement, pursuant to which Witt was retained as a
consultant of Titan for six years following the closing in exchange
for an aggregate consulting fee of approximately $1,900,000, payable
over the six-year term of the retainer agreement.
Titan and Witt also entered into a stockholder's agreement pursuant
to which Witt has agreed for a period of two years to cause all
shares of Titan Common Stock and Series B Preferred Stock which Witt
has the right to vote to be voted in proportion to the vote of the
other outstanding voting securities of the Company in respect of
each proposal submitted for a stockholder vote. In addition, the
shares received by Witt are subject to certain transfer
restrictions. Titan also granted Witt observation rights at its
Board of Director meetings for a period of two years as long as he
continues to own at least 5% of the outstanding Titan Common Stock.
(2) Includes 333,333 shares of Common Stock issuable upon conversion of
Series B Preferred Stock. As of August 21, 1996, the number of
Securities owned by Mr. Witt represented 7.33% of the outstanding
shares of the Company's common stock (9.22% assuming conversion of
the Series B Preferred Stock). Each other Selling Stockholder owns
less than 1% of the Company's Common Stock.
Prabhav V. Maniyar is Senior Vice President, Corporate Development of
the Company. Also, David R. Conner, Joretta L. Slack, John W. Smith, Bernice J.
Brown and Robert Johnson are employees of the Company. Except as set forth
above, the Selling Stockholders have had no positions, offices or other material
relationships with the Company (or had any such positions, offices or material
relationships within the past three years), and do not own greater than one
percent of the Common Stock of the Company.
13
<PAGE>
EXPERTS
The audited financial statements incorporated by reference in
this registration statement, to the extent and for the periods indicated in
their report, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
LEGAL MATTERS
David A. Hahn, Esq., former Senior Vice President, General Counsel
and Secretary of the Company, has rendered an opinion as to the legality of
the Securities offered hereby.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of expenses incurred in
connection with this Registration Statement. All such expenses will be paid by
the Company.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee . . . . . $2,909
Accounting fees . . . . . . . . . . . . . . . . . . . . . . . $5,000
Company legal fees and expenses . . . . . . . . . . . . . . . . $12,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . $1,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . $4,091
--------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000
</TABLE>
All of the above items except the registration fee are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware Law") empowers a Delaware corporation to indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement of such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation's best interest,
and, for criminal proceedings, had no reasonable cause to believe his or her
conduct was illegal. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director
actually and reasonably incurred.
II-1
<PAGE>
The Restated Certificate of Incorporation of Titan contains a
provision to limit the personal liability of the directors of Titan for
violations of their fiduciary duty, except to the extent such limitation of
liability is prohibited by the Delaware Law. This provision eliminates each
director's liability to Titan or its stockholders for monetary damages except
(i) for any breach of the director's duty of loyalty to Titan or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors for
monetary damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
In addition, Titan has entered into indemnity agreements with its
executive officers and directors whereby the Company obligates itself to
indemnify such officers and directors from any amounts which the officer or
director becomes obligated to pay because of any claim made against him or her
arising out of any act or omission committed while he or she is acting in his or
her capacity as a director and/or officer of the Corporation.
Titan maintains directors and officers liability insurance coverage
that insures its officers and directors against certain losses that may arise
out of their positions with the Corporation and insures the Corporation for
liabilities it may incur to indemnify its officers and directors.
ITEM 16. EXHIBITS
See Index to Exhibits, attached hereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file during any period in which offers or sales are being
made, a post effective amendment to this registration statement;
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which
II-2
<PAGE>
was offered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply to
information required to be included in a post-effective amendment by those
paragraphs which are contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on September 23, 1996.
THE TITAN CORPORATION
By: /s/ GENE W. RAY
-------------------------
Gene W. Ray, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Director and
* Chairman of the Board September 23, 1996
- -----------------------
J. Sidney Webb
Director, President and
/s/ GENE W. RAY Chief Executive Officer September 23, 1996
- -----------------------
Gene W. Ray
Chief Financial and
* Accounting Officer September 23, 1996
- -----------------------
Bernard M. Hirl
* Director September 23, 1996
- -----------------------
Charles R. Allen
Director September , 1996
- -----------------------
Joseph F. Caligiuri
* Director September 23, 1996
- -----------------------
Daniel J. Fink
* Director September 23, 1996
- -----------------------
Robert E. La Blanc
* Director September 23, 1996
- -----------------------
Thomas G. Pownall
*By: /s/ GENE W. RAY
------------------
Gene W. Ray
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
2.1 Agreement and Plan of Reorganization of Eldyne, Inc. dated
as of April 19, 1996 by and among Eldyne, Inc., Jack Witt,
ELD Acquisition Sub, Inc. and The Titan Corporation, which
was exhibit 2.1 to Registrant's Form 8-K dated May 24, 1996,
is incorporated herein by this reference.
2.2 Agreement and Plan of Reorganization of Unidyne Corporation
dated as of April 19, 1996 by and among Unidyne Corporation,
Jack Witt, UNI Acquisition Sub, Inc. and The Titan Corporation,
which was exhibit 2.2 to Registrant's Form 8-K dated May 24,
1996, is incorporated herein by this reference.
4.1 Certificate of Designations of Series B Cumulative Convertible
Redeemable Preferred Stock*
4.2 Registration Rights Agreement, dated May 24, 1996, which
was exhibit 2 to Schedule 13D filed on behalf of Mr. Jack D.
Witt on June 5, 1996, is incorporated herein by this
reference.
4.3 Stockholders Agreement, dated May 24, 1996, which
was exhibit 1 to Schedule 13D filed on behalf of Mr. Jack D.
Witt on June 5, 1996, is incorporated herein by this
reference.
5 Opinion and Consent of David A. Hahn*
10.1 Form of Fourth Amendment to the Commercial Loan Agreement
entered into as of September 6, 1996 by and between
The Sumitomo Bank of California and The Titan Corporation.
10.2 Form of Security Agreement dated as of September 6, 1996
made by The Titan Corporation in favor of The Sumitomo
Bank of California.
10.3 Form of Pledge Agreement executed as of September 6, 1996 by The
Titan Corporation in favor of The Sumitomo Bank of California.
10.4 Form of Patent Collateral Assignment made and entered into as of
September 6, 1996 by The Titan Corporation in favor of The
Sumitomo Bank of California.
10.5 Form of Security Agreement dated as of September 6, 1996 made by
Titan Information Systems Corporation in favor of The Sumitomo
Bank of California.
10.6 Form of Patent Collateral Assignment made and entered into as of
September 6, 1996 by Titan Information Systems Corporation
in favor of The Sumitomo Bank of California.
10.7 Form of Continuing Guaranty executed as of September 6, 1996
by Titan Information Systems Corporation in favor of The
Sumitomo Bank of California.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of David A. Hahn (Included in Exhibit 5)
24 Power of Attorney*
- --------------
(*) Previously Filed.
<PAGE>
EXHIBIT 10.1
FORM OF
FOURTH AMENDMENT TO
COMMERCIAL LOAN AGREEMENT
This Fourth Amendment to the Commercial Loan Agreement ("Amendment") is
entered into as of September 6, 1996 by and between SUMITOMO BANK OF CALIFORNIA
("Bank") and THE TITAN CORPORATION, a Delaware Corporation ("Borrower"), with
reference to the following:
RECITALS
A. Borrower and Bank entered into that certain Commercial Loan Agreement
dated August 8, 1994, which was subsequently amended pursuant to Amendments
dated May 25, 1995, December 29, 1995 and May 9, 1996 (collectively, the
"Agreement").
B. Borrower and Bank desire to amend the Agreement on the terms and
conditions set forth herein.
AMENDMENT
NOW THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings given such terms in the
Agreement.
2. AMENDMENTS. The Agreement is hereby amended as follows:
A. 1.1 LINE OF CREDIT AMOUNT. Section 1.1 is hereby amended in its
entirety and replaced with the following:
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<PAGE>
"(a) SECURED LINE OF CREDIT. During the Availability Period,
Bank will provide a secured line of credit (the "Revolving Line of Credit')
to Borrower. The maximum amount of this Revolving Line of Credit (the
"Commitment") shall be (i) Twenty-Two Million Dollars ($22,000,000) prior
to and including December 31, 1996, and (ii) Fourteen Million Dollars
($14,000,000) from and after the earlier of (A) January 1, 1997, or (B) the
date Borrower has received (from and after September 1, 1996) New Capital
in an aggregate amount of $20,000,000. Borrower's obligation to repay this
Revolving Line of Credit is evidenced by a promissory note substantially in
the form of Exhibit A attached hereto (the "Revolving Line Note").
(b) REVOLVING/SUBLINE FACILITIES. This is a revolving line of
credit with a subline facility for letters of credit. The subline is not
to exceed Five Million Dollars ($5,000,000). During the Availability
Period, Borrower may repay principal amounts and reborrow them.
(c) MAXIMUM LOAN BALANCE. Borrower agrees not to permit the
outstanding principal balance of the Revolving Line of Credit plus the
outstanding amounts of any letters of credit, including amounts drawn on
letters of credit and not yet reimbursed (such sum is the "Loan Balance")
to exceed the Commitment."
B. 1.3 INTEREST RATE. Notwithstanding anything contained in
Section 1.3 of the Agreement which may be construed to the contrary, Borrower
shall have no ability to elect or continue an "Optional Interest Rate", other
than allowing for the expiration of any Optional Interest Rates which are
currently in effect as of the date of this Amendment with respect to any portion
of the principal balance of the Revolving Line of Credit currently bearing
interest at the Offshore Rate plus 2%, until such time as Borrower has received,
from and after the date of this Amendment, an additional Twenty Million Dollars
($20,000,000) in New Capital (as that term is defined in Section 6.5 of the
Agreement as amended by this Amendment).
C. 6.5 NET WORTH. Section 6.5 of the Agreement is hereby amended
and restated in its entirety to read as follows:
"6.5 MINIMUM NET WORTH. To maintain on a consolidated basis as of the
last day of each calendar quarter (March, June, September, and
December) a Net Worth in an amount at least equal to the sum of Forty-
Eight Million Five Hundred Thousand Dollars ($48,500,000)
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<PAGE>
PLUS all New Capital (as defined below), exclusive of net proceeds from the
sale of assets, received from and after September 1, 1996."
"New Capital" means all net proceeds from the sale of assets and the
issuance of subordinated debt, preferred stock, common stock or other securities
which would qualify as and add to the "Net Worth" of the Borrower.
"Net Worth" means the gross book value of Borrower's assets PLUS debt
subordinated to Bank in a manner acceptable to Bank LESS total liabilities,
including, without limitation, accrued and deferred income taxes, and any
reserves against assets.
D. 6.3 QUICK RATIO. The first sentence of Section 6.3 of the
Agreement is hereby amended to read as follows:
"To maintain on a consolidated basis as of the last day of
each quarter, a ratio of quick assets to current liabilities
of at least .80:1.00."
E. 6.6 TOTAL LIABILITIES TO TANGIBLE NET WORTH. The first sentence
of Section 6.6 is hereby amended to read as follows:
"To maintain on a consolidated basis as of the last day of
each quarter, a ratio of Total Liabilities to Tangible Net
Worth not exceeding 3.75:1.00."
"Tangible Net Worth" means book net worth minus intangible assets
(such as goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, capitalized software costs, license fees, deferred marketing
expenses, and other like intangibles, and monies due from affiliates, officers,
directors or shareholders of Borrower) plus liabilities subordinated to Bank in
a manner acceptable to Bank. Deferred income taxes shall not be deemed
intangible assets.
F. 6.4 MINIMUM DEBT SERVICE COVERAGE RATIO, 6.7 PROFITABILITY, AND
6.24 INTEREST COVERAGE RATIO. Sections 6.4 (Minimum Debt Service Coverage
Ratio), 6.7 (Profitability) and 6.24 (Interest Coverage Ratio) shall no longer
be applicable, and the Borrower need not observe the financial covenants set
forth in those three sections.
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<PAGE>
G. CLOSING FEE. Borrower shall pay to Bank substantially
concurrently with the execution of this Amendment, a closing fee in the amount
of Fifty Thousand Dollars ($50,000).
H. EXPENSES. Borrower agrees to immediately repay Bank for its
reasonable costs and expenses incurred in connection with this Amendment,
including without limitation, filing, recording and search fees and
documentation fees, attorneys fees and expenses, and any other costs and
expenses related to this Amendment or the security taken for the Revolving Line
of Credit.
I. SECURITY. Borrower shall execute and deliver to Bank, and shall
cause each of the entities described in paragraph "J" below, to execute and
deliver to Bank, each of the security documents described in paragraph "J"
below, and shall cooperate with Bank in executing any and all additional
documents and agreements which the Bank or its counsel shall request or require
in order to properly perfect and maintain a first priority security interest in
all of the collateral described in each of such security documents. In
addition, if Borrower has not received, from and after the date of this
Amendment, an additional Twenty Million Dollars ($20,000,000) in New Capital by
no later than November 15, 1996, Borrower agrees to forthwith execute and
deliver all notices of assignment and file all documents, and otherwise
cooperate in executing all such documents and instruments as Bank shall require,
to properly assign and perfect the assignment of all rights to the payment of
monies due under all government contracts and agreements, including without
limitation all notices and filings and documentation which may be required (in
the total discretion of the Bank or its counsel) under 41 United States Code
Section 15.
J. CONDITIONS. Bank may condition the effectiveness of this
Amendment and its obligations hereunder, including without limitation the
increase in the commitment specified herein, upon Borrower satisfying ALL of the
following conditions precedent (any of which may be waived in writing by the
Bank in its sole and absolute discretion):
(a) Borrower shall execute and deliver to Bank, or cause to be
executed and delivered to Bank (as to the non-Borrower entities which are
to execute the documents described below), in form an substance
satisfactory to Bank, the following security documents (the "Security
Documents"):
(i) A blanket Security Agreement covering all of the
non-real estate assets of the Borrower, including without limitation
-4-
<PAGE>
all accounts receivable, inventory, equipment, general intangibles and
other personal property of the Borrower;
(ii) A blanket Security Agreement executed by
Borrower's subsidiary, Titan Information Systems Corporation ("TISC"),
covering all of the non-real estate assets and property of TISC,
including without limitation all accounts receivable, inventory,
equipment, general intangibles and other personal property of TISC;
(iii) Without limiting the generality of the general
Security Agreement described above, an additional Security Agreement
executed by Borrower specifically covering all of the patents of the
Borrower specified by the Bank;
(iv) Security Agreements executed by such of the
Borrower's subsidiaries or affiliates as Lender designates granting
specific security interests in such of the patents of such entities as
the Bank requires;
(v) A Stock Pledge Agreement executed by the Borrower
pledging to the Bank all of the stock of Titan Information Systems
Corporation, Eldyne, Inc. and Unidyne Corporation; and
(vi) Appropriate financing statements and any other
applicable documentation to file with the California Secretary of
State, the appropriate authorities in Virginia, and with the United
States Patent and Trademark Office;
(b) Borrower shall cause TISC to execute and deliver to Bank a
Continuing Guaranty in form and substance satisfactory to Bank;
(c) The closing fee described in paragraph "G" above shall
have been paid; and
(d) All expenses identified in paragraph "H" above shall have
been paid.
K. EVENTS OF DEFAULT. Failure of the Borrower to perform or observe
any of the additional terms and conditions set forth in this Amendment or the
Security Documents shall constitute an Event of Default under the Agreement.
The occurrence of any Event of Default, whether for failure to perform or
observe any of the terms or conditions contained in this Amendment or the
Security
-5-
<PAGE>
Documents or any of the Events of Default described in the Agreement (all of
which shall constitute "Events of Default" under the Agreement), shall permit
the Bank to exercise all of its rights and remedies set forth in the Agreement,
in any of the security documents to be executed in connection herewith, or which
the Bank may otherwise have under applicable law. Failure of Borrower to
provide Bank with a resolution of TISC authorizing TISC to execute the
Continuing Guaranty, and all Security Documents to be executed by TISC, within
30 days from the date of this Amendment shall also constitute an Event of
Default.
L. AGREEMENT IN FULL FORCE AND EFFECT. Except as specifically
amended or modified by this Amendment (and any prior amendments thereto), the
Agreement shall remain unmodified and in full force and effect.
M. AMENDMENT TO REVOLVING LINE NOTE. To reflect the foregoing
increase in the Commitment, the face amount of the Revolving Line Note, and each
reference within the Revolving Line Note to the amount evidenced thereby, shall
be increased to Twenty-Two Million Dollars ($22,000,000).
"Bank":
SUMITOMO BANK OF CALIFORNIA
By
------------------------------------
-
------------------------------------
-
[Printed Name and Title]
-6-
<PAGE>
"Borrower":
THE TITAN CORPORATION
By
------------------------------------
-
------------------------------------
-
[Printed Name and Title]
By
------------------------------------
-
------------------------------------
-
[Printed Name and Title]
-7-
<PAGE>
EXHIBIT 10.2
FORM OF
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of September 6, 1996,
is made by THE TITAN CORPORATION, a Delaware corporation ("GRANTOR"), in favor
of THE SUMITOMO BANK OF CALIFORNIA ("SECURED PARTY"), with reference to the
following facts:
RECITALS
A. Pursuant to that certain Commercial Loan Agreement dated August 8,
1994 by and between Grantor, as Borrower, and Secured Party, as subsequently
amended pursuant to Amendments dated May 25, 1995, December 29, 1995, May 9,
1996, and of even date herewith (and as such agreement may from time to time be
further supplemented, modified, amended, renewed, extended or supplanted, the
"LOAN AGREEMENT"), Secured Party has agreed to extend certain credit facilities
to Grantor.
B. The Loan Agreement provides, as a condition precedent to Secured
Party's obligation to extend additional credit facilities to Grantor, that
Grantor shall grant to Secured Party a security interest in certain of its
assets under the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to continue to extend
credit facilities to Grantor under the Loan Agreement, and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Grantor hereby represents, warrants, covenants, agrees, assigns
and grants as follows:
1. DEFINITIONS. This Agreement is one of the Security Agreements
referred to in the Loan Agreement and is one of the loan documents referred to
therein. Terms defined in the Loan Agreement and not otherwise defined in this
Agreement shall have the meanings given those terms in the Loan Agreement.
Terms defined in the California Commercial Code and not otherwise defined in the
Agreement or in the Loan Agreement shall have the meanings defined for those
terms in the California Commercial Code. The following terms shall have the
meanings respectively set forth after each:
"AGREEMENT" means this Security Agreement and any extensions,
modifications, renewals, restatements, supplements or amendments hereof.
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<PAGE>
"COLLATERAL" means all present and future right, title and
interest of Grantor in or to any property or assets whatsoever, and all
rights and powers of Grantor to transfer any interest in or to any property
or assets whatsoever, INCLUDING, without limitation, any and all of the
following property:
(1) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements,
guaranties, undertakings, surety bonds, insurance policies, notes and
drafts, and all forms of obligations owing to Grantor or in which
Grantor may have any interest, however created or arising;
(2) All present and future general intangibles, all tax
refunds of every kind and nature to which Grantor now or hereafter may
become entitled, however arising, all other refunds, and all deposits,
goodwill, choses in action, trade secrets, computer programs,
software, customer lists, trademarks, trade names, patents, licenses,
copyrights, technology, processes, proprietary information, franchises
and insurance proceeds;
(3) All present and future deposit accounts of Grantor,
INCLUDING, without limitation, any demand, time, savings, passbook or
like account maintained by Grantor with any bank, savings and loan
association, credit union or like organization, and all money, cash
and cash equivalents of Grantor, whether or not deposited in any such
deposit account;
(4) All present and future books and records, INCLUDING,
without limitation, books of account and ledgers of every kind and
nature, all electronically recorded data relating to Grantor or the
business thereof, all receptacles and containers for such records, and
all files and correspondence;
(5) All present and future goods, INCLUDING, without
limitation, all consumer goods, farm products, inventory, equipment,
machinery, tools, molds, dies, furniture, furnishings, fixtures, trade
fixtures, motor vehicles and all other goods used in connection with
or in the conduct of Grantor's business, INCLUDING without limitation,
all goods as defined in Section 9109(2) of the California Commercial
Code;
(6) All present and future inventory and merchandise,
INCLUDING, without limitation, all
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<PAGE>
present and future goods held for sale or lease or to be furnished
under a contract of service, all raw materials, work in process and
finished goods, all packing materials, supplies and containers
relating to or used in connection with any of the foregoing, and all
bills of lading, warehouse receipts or documents of title relating to
any of the foregoing;
(7) All presently existing and filed, or hereafter acquired
patents and pending patent applications and United States and
international registrations thereof, the right to sue for past,
present, and future infringements, all rights corresponding thereto
throughout the world, and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof and all
improvements thereon and inventions relating thereto and all proceeds
of the foregoing, including but not limited to, proceeds of licensing;
(b) all applications, registrations, and recordings relating to the
foregoing in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, or
any political subdivision thereof, or in any other countries, and all
reissues, extensions, and renewals thereof;
(8) All present and future accessions, appurtenances,
components, repairs, repair parts, spare parts, replacements,
substitutions, additions, issue and/or improvements to or of or with
respect to any of the foregoing;
(9) All other tangible and intangible property of Grantor;
(10) All rights, remedies, powers and/or privileges of
Grantor with respect to any of the foregoing; and
(11) Any and all proceeds and products of any of the
foregoing, INCLUDING, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible
property received upon the sale or disposition of any of the
foregoing.
"LOAN DOCUMENTS" means collectively, the Loan Agreement, the
Revolving Line Note, this Agreement, and any other certificates, documents
or agreements of any type or nature heretofore or hereafter executed and
delivered by Grantor (or by TISC or other subsidiaries or
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affiliates of Grantor) to Bank in any way relating to or in furtherance of
the Loan Agreement, in each case either as originally executed or as the
same may from time to time be supplemented, modified, amended, restated,
extended or supplanted.
"NOTE" means the Revolving Line Note.
"PERSON" means and includes any natural person, corporation,
firm, association, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
2. SECURITY AGREEMENT. For valuable consideration, Grantor hereby
grants and assigns to Secured Party a security interest in all of the Collateral
now or hereafter owned by Grantor as security for the timely payment and
performance of the obligations of Grantor under the Loan Agreement and other
Loan Documents, including but not limited to the Note (collectively, the
"OBLIGATIONS"). This Agreement is a continuing agreement and all the rights,
powers and remedies hereunder shall apply to any and all Obligations, including
those arising under successive transactions which shall either continue the
Obligations, increase or decrease them, or from time to time create new
Obligations after all or any prior Obligations have been satisfied, and
notwithstanding the bankruptcy of Grantor or any other party to the Loan
Agreement and related documents or any other event or proceeding affecting any
of the aforementioned persons.
3. FURTHER ASSURANCES. At any time and from time to time at the
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance reasonably satisfactory to Secured Party, as shall be necessary or
reasonably desirable to fully perfect, when filed and/or recorded, Secured
Party's security interest granted pursuant to Section 2 of this Agreement. At
any time and from time to time, Secured Party shall be entitled to file and/or
record any or all such financing statements, instruments and documents held by
it, and any or all such further financing statements, documents and instruments,
and to take all such other actions, as Secured Party may deem appropriate to
perfect and to maintain perfected the security interest granted in Section 2 of
this Agreement. Before and after the occurrence of any Event of Default, at
Secured Party's request, Grantor shall execute all such further financing
statements, instruments and documents, and shall do all such further acts and
things, as may be deemed necessary or reasonably desirable by Secured Party to
create and perfect, and to continue and preserve, the security interest in the
Collateral in favor of Secured Party, or the priority thereof. With respect to
any Collateral consisting of instruments, documents, certificates of title or
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the like, as to which Secured Party's security interest is required to be
perfected by, or the priority thereof is required to be assured by, possession
of or notation on the certificate of title pertaining to such Collateral,
Grantor will upon demand of Secured Party deliver possession of same in pledge
to Secured Party, or note the lien on such certificate of title in favor of
Secured Party for the benefit of Secured Party.
4. GRANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Except as
otherwise disclosed to Secured Party in the UCC search attached hereto as
Exhibit A, Grantor represents, warrants and agrees that: (a) the security
interests granted in Section 2 of this Agreement are first priority security
interests in the Collateral indefeasible by any third party; (b) EXCEPT for
financing statements in favor of Secured Party and as otherwise disclosed to
Secured Party in writing, no financing statement covering any of the Collateral
or the proceeds thereof is on file in any public office or held by any person;
(c) Grantor has and will continue to have, except for security interests granted
pursuant to the Loan Agreement and related documents in favor of Secured Party
and except for such other liens as are permitted pursuant to the Loan Agreement,
full title to the Collateral, free from any lien, security interest, encumbrance
or claim, and full power and authority to grant to Secured Party the security
interest in the Collateral as provided herein subject to the Permitted
Encumbrances, and will, at its sole cost and expense, defend any action which
might materially affect the Collateral or Secured Party's security interest in
the Collateral; (d) Grantor will pay, prior to delinquency, all taxes, charges,
liens and assessments against the Collateral, unless such taxes, charges, liens
or assessments are not yet required to be paid, and upon its failure to pay or
so contest such taxes, charges, liens and assessments, Secured Party at its
option may pay any of them, and Secured Party shall be the sole judge of the
legality or validity thereof and the amount necessary to discharge the same;
(e) the Collateral will not be used for any unlawful purpose or in violation of
any law, regulation or ordinance, nor used in any way that will void or impair
any insurance required to be carried in connection therewith; (f) Grantor will,
to the extent consistent with good business practice, keep the Collateral in
reasonably good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements, additions and
improvements thereto and, as appropriate and applicable, will otherwise deal
with such portion of the Collateral in all such ways as are considered good
practice by owners of like property; (g) Grantor will take all reasonable steps
to preserve and protect the Collateral; (h) Grantor will maintain, with
responsible insurance companies, insurance covering the Collateral against such
insurable losses as is required by the Loan Agreement and will cause Secured
Party to be designated as
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loss payee with respect to such insurance, will obtain the written agreement of
the insurers that such insurance shall not be cancelled without at least ten
(10) days prior written notice to Secured Party, and will furnish copies of such
insurance policies or certificates to Secured Party promptly upon request
therefor; (i) Grantor will promptly notify Secured Party in writing in the event
of any substantial or material damage to the Collateral from any source
whatsoever, and, except for the disposition of collections and other proceeds of
the Collateral permitted by Section 6 hereof, Grantor will not remove or permit
to be removed any part of the Collateral from its places of business without the
prior written consent of Secured Party, except for such items of the Collateral
as are removed in the ordinary course of business or in connection with any
transaction or disposition otherwise permitted by the Loan Agreement; and
(j) Grantor will not move its principal place of business without giving at
least ten (10) days' notice to Secured Party.
5. SECURED PARTY'S RIGHTS REGARDING COLLATERAL. At any time
(whether or not an Event of Default has occurred, EXCEPT as provided in
clause (b) below), without notice or demand and at the expense of Grantor (if an
Event of Default has occurred), Secured Party may, to the extent it may be
necessary or desirable to protect the security hereunder, but Secured Party
shall not be obligated to: (a) enter upon any premises on which Collateral is
situated and examine the same (other than areas subject to government security
restrictions) or (b) after an Event of Default has occurred and is
continuing, perform any obligation of Grantor under this Agreement or any
obligation of any other party under the Loan Documents. At any time and from
time to time (except as provided in clause (iii) below), at the expense of
Grantor (if an Event of Default has occurred), Secured Party may to the extent
it may be necessary or desirable to protect the security hereunder, but Secured
Party shall not be obligated to: (i) notify obligors on the Collateral that the
Collateral has been assigned to Secured Party; (ii) at any time and from time to
time request from obligors on the Collateral, in the name of Grantor or in the
name of Secured Party, information concerning the Collateral and the amounts
owing thereon; and (iii) after an Event of Default has occurred and is
continuing, cause the Collateral to be registered in the name of Secured Party,
as legal owner. Grantor shall maintain books and records pertaining to the
Collateral in such detail, form and scope as Secured Party shall reasonably
require consistent with Secured Party's interests hereunder. Grantor will at
any time at Secured Party's request mark the Collateral and/or Grantor's ledger
cards, books of account, and other records relating to the Collateral with
appropriate notations satisfactory to Secured Party disclosing that they are
subject to Secured Party's security interests. Secured Party shall at all times
on notice have full access to and the right to audit any and
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all of Grantor's books and records pertaining to the Collateral, and to confirm
and verify the value of the Collateral and to do whatever else Secured Party may
deem necessary or desirable to protect its interests. Secured Party shall be
under no duty or obligation whatsoever to take any action to preserve any rights
of or against any prior or other parties in connection with the Collateral, or
make or give any presentments, demands for performance, notices of non-
performance, protests, notices of protests, notices of dishonor, or notices of
any other nature whatsoever in connection with the Collateral or the
Obligations. Secured Party shall be under no duty or obligation whatsoever to
take any action to protect or preserve the Collateral or any rights of Grantor
therein, or to make collections or enforce payment thereon, or to participate in
any foreclosure or other proceeding in connection therewith.
6. COLLECTIONS ON THE COLLATERAL. Grantor shall have the right to
use and to continue to make collections on and receive other proceeds of all of
the Collateral in the ordinary course of business so long as no Event of Default
shall have occurred and be continuing. Upon the occurrence and during the
continuance of an Event of Default, at the option of Secured Party, Grantor's
right to make collections on and receive proceeds of the Collateral and to use
or dispose of such collections and proceeds shall terminate, and any and all
proceeds and collections, including all partial or total prepayments, then held
or thereafter received on or on account of the Collateral will be held or
received by Grantor in trust for Secured Party and immediately delivered to
same. Any remittance received by Grantor from customers shall be presumed to
relate to the Collateral and to be subject to the Secured Party's security
interests. Upon the occurrence of an Event of Default, Secured Party shall have
the right at all times to receive, receipt for, endorse, assign, deposit and
deliver, in the name of Secured Party or in the name of Grantor, any and all
checks, notes, drafts and other instruments for the payment of money
constituting proceeds of or otherwise relating to the Collateral; and Grantor
hereby authorizes Secured Party to affix, by facsimile signature or otherwise,
the general or special endorsement of it, in such manner as Secured Party shall
deem advisable, to any such instrument in the event the same has been delivered
to or obtained by Secured Party without appropriate endorsement, and Secured
Party and any collecting bank are hereby authorized to consider such endorsement
to be a sufficient, valid and effective endorsement by Grantor, to the same
extent as though it were manually executed by the duly authorized officer of
Grantor, regardless of by whom or under what circumstances or by what authority
such facsimile signature or other endorsement actually is affixed, without duty
of inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest
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and notice of protest or dishonor and all other notices of every kind and nature
with respect to any such instrument.
7. POSSESSION OF COLLATERAL BY SECURED PARTY. All the Collateral
now, heretofore or hereafter delivered to Secured Party shall be held by Secured
Party in its possession, custody and control. Any or all of the Collateral
consisting of money delivered to Secured Party shall be held in an interest
bearing account, and prior to an Event of Default, interest thereon shall accrue
to Grantor; however, Grantor shall not be entitled to any other compensation
thereon or by reason of Secured Party's possession and/or use thereof. Upon the
occurrence of an Event of Default, whenever any of the Collateral is in Secured
Party's possession, Secured Party may use, operate and consume the Collateral,
whether for the purpose of preserving and/or protecting the Collateral, or for
the purpose of performing any of Grantor's obligations with respect thereto, or
otherwise. Secured Party may at any time deliver or redeliver the Collateral or
any part thereof to Grantor, and the receipt of any of the same by Grantor shall
be complete and full acquittance for the Collateral so delivered, and Secured
Party thereafter shall be discharged from any liability or responsibility
therefor. So long as Secured Party exercises reasonable care with respect to
any Collateral in its possession, custody or control, Secured Party shall have
no liability for any loss of or damage to such Collateral, and in no event shall
Secured Party have liability for any diminution in value of Collateral
occasioned by economic or market conditions or events. Secured Party shall be
deemed to have exercised reasonable care within the meaning of the preceding
sentence if the Collateral in the possession, custody or control of Secured
Party is accorded treatment substantially equal to that which Secured Party
accords its own similar property, it being understood that Secured Party shall
not have any responsibility for taking any necessary steps to preserve rights
against any Person with respect to any Collateral.
8. EVENTS OF DEFAULT. Any one of the following events shall
constitute an Event of Default hereunder:
(a) any default under the Loan Agreement or any other Loan
Document shall have occurred and be continuing;
(b) any failure by Grantor to observe or perform any covenant or
agreement contained in this Assignment for more than ten (10) calendar days
after receipt from Secured Party of notice of such default; or
(c) any representation or warranty made by Grantor in this
Assignment shall prove to have been false or incorrect in any material
respect when made.
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9. REMEDIES.
9.1 RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and
during the continuance and during the continuance of an Event of Default,
Secured Party shall have in any jurisdiction where enforcement hereof is sought,
in addition to all other rights and remedies which Secured Party may have under
applicable law or in equity or under this Agreement (including, without
limitation, all rights set forth in Section 6 hereof) or under any other Loan
Document, all of its rights and remedies as a secured party under the Uniform
Commercial Code as enacted in any jurisdiction, and in addition the following
rights and remedies, all of which may be exercised to the maximum extent
permitted by law with or without further notice to Grantor and without affecting
the liability of Grantor hereunder or the enforceability of the security
interests created hereby: (a) to foreclose the liens and security interests
created hereunder or under any other agreement relating to any Collateral by any
available judicial procedure or without judicial process; (b) to enter any
premises where any Collateral may be located for the purpose of taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly and exclusively to Secured Party; (e) to collect by legal
proceedings or otherwise all interest, principal or other sums now or hereafter
payable upon or on account of the Collateral; (f) to enter into any extension,
reorganization, deposit, merger or consolidation agreement, or any other
agreement relating to or affecting the Collateral, and in connection therewith,
Secured Party may deposit or surrender control of the Collateral and/or accept
other property in exchange for the Collateral; (g) to settle, compromise or
release, on terms acceptable to Secured Party, in whole or in part, any amounts
owing on the Collateral; (h) to extend the time of payment, make allowances and
adjustments and issue credits in connection with the Collateral in the name of
Secured Party or in the name of Grantor; (i) to enforce payment and prosecute
any action or proceeding with respect to any or all of the Collateral and take
or bring, in the name of Secured Party or in the name of Grantor, steps,
actions, suits or proceedings deemed by Secured Party necessary or desirable to
effect collection of or to realize upon the Collateral, including any judicial
or nonjudicial foreclosure thereof or thereon, and Grantor specifically consents
to any nonjudicial foreclosure of any or all of the Collateral or any other
action taken by Secured Party which may release any obligor from personal
liability on any of the Collateral, and Grantor waives
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any right not expressly provided for in this Agreement to receive notice of any
public or private judicial or nonjudicial sale or foreclosure of any security or
any of the Collateral; and any money or other property received by Secured Party
in exchange for or on account of the Collateral, whether representing
collections or proceeds of Collateral, and whether resulting from voluntary
payments or foreclosure proceedings or other legal action taken by Secured Party
or Grantor shall be applied by Secured Party without notice to Grantor to the
Obligation(s) in the order and manner as is provided for in the Loan Agreement
or, if no such provision is applicable, in such order and manner as Secured
Party in its sole discretion shall determine; (j) to insure, process and
preserve the Collateral; (k) to exercise all rights under any of the Loan
Documents; (l) to remove from any premises where the same may be located, the
Collateral and any and all documents, instruments, files and records, and any
receptacles and cabinets containing the same, relating to the Collateral, and
Secured Party may, at the cost and expense of Grantor, use such of its supplies
and space at its places of business as may be necessary to properly administer
and control the portion of the Collateral owned by it or the handling of
collections and realizations thereon; (m) to receive, open and dispose of all
mail addressed to Grantor and notify postal authorities to change the address
for delivery thereof to such address as Secured Party may designate; provided
that Secured Party agrees that it will promptly deliver over to Grantor such
opened mail as does not relate to the Collateral; and (n) to exercise all other
rights, powers and remedies of an owner of the Collateral; all at Secured
Party's sole option and as Secured Party in its sole discretion may deem
advisable. Grantor will, at Secured Party's request, assemble all Collateral
and make it available to Secured Party at places which Secured Party may
designate, whether at the premises of Grantor or elsewhere, and will make
available to Secured Party all premises and facilities of Grantor for the
purpose of Secured Party's taking possession of the Collateral or removing or
putting the Collateral in salable form.
9.2 POSSESSION BY SECURED PARTY. Upon the occurrence of an
Event of Default, Secured Party also shall have the right, without notice or
demand, either in person, by agent or by a receiver to be appointed by a court
(and Grantor hereby expressly consents to the appointment of such a receiver),
and without regard to the adequacy of any security for the Obligations, to take
possession of the Collateral or any part thereof and to collect and receive the
rents, issues, profits, income and proceeds thereof. Taking possession of the
Collateral shall not cure or waive any Event of Default or notice thereof or
invalidate any act done pursuant to such notice. The rights, remedies and
powers of any receiver appointed by a court shall be as ordered by said court.
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9.3 SALE OF COLLATERAL. Any public or private sale or other
disposition of the Collateral may be held at any office of Secured Party, or at
Grantor's places of business, or at any other place permitted by applicable law,
and without the necessity of the Collateral's being within the view of
prospective purchasers. Secured Party may direct the order and manner of sale
of the Collateral, or portions thereof, as it in its sole and absolute
discretion may determine. Secured Party or any Person on Secured Party's behalf
may bid and purchase at any such sale or other disposition.
9.4 NOTICE OF SALE. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will send or otherwise make available to
Grantor reasonable notice of the time and place of any public sale thereof or of
the time on or after which any private sale or other disposition thereof is to
be made. The requirement of sending reasonable notice conclusively shall be met
if such notice is mailed, first class mail, postage prepaid, to Grantor at its
address set forth in the Loan Agreement at least five (5) days before the time
of the sale or disposition. Grantor expressly waives any right to receive
notice of any public or private sale of any Collateral or other security for the
Obligation(s) except as expressly provided for in the preceding sentence.
9.5 TITLE OF PURCHASERS. Upon consummation of any sale of
Collateral hereunder, Secured Party shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the Collateral so sold absolutely
free from any claim or right upon the part of Grantor or any other person
claiming through Grantor, and Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. If the sale of all or any part of the Collateral is made on
credit or for future delivery, Secured Party shall not be required to apply any
portion of the sale price to the Obligations until such amount is actually
received by Secured Party, and any Collateral so sold may be retained by Secured
Party until the sale price is paid in full by the purchaser or purchasers
thereof. Secured Party shall not incur any liability in case any such purchaser
or purchasers shall fail to pay for the Collateral so sold, and, in case of any
such failure, the Collateral may be sold again.
10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably nominates and appoints Secured Party as its attorney-in-fact for the
following purposes: (a) to do all acts and things which Secured Party may deem
necessary or advisable to perfect and continue perfected the security interests
created by this Agreement and, upon the occurrence of
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an Event of Default, to preserve, process, develop, maintain and protect the
Collateral; (b) to prepare, sign, file and/or record, for Grantor in the name of
Grantor, any financing statement, application for registration, and like papers
and to take any other action deemed by Secured Party necessary or desirable in
order to perfect the security interests granted hereby; (c) to execute any and
all papers and instruments and do all other things necessary or desirable to
preserve and protect the Collateral and to protect Secured Party's security
interests therein; and (d) upon the occurrence of an Event of Default, to do any
and every act which Grantor is obligated to do under this Agreement, at the
expense of Grantor; PROVIDED, HOWEVER, that Secured Party shall be under no
obligation whatsoever to take any of the foregoing actions, and absent bad faith
or actual malice, Secured Party shall have no liability or responsibility for
any act or omission taken with respect thereto.
11. COSTS AND EXPENSES. Grantor agrees to pay to Secured Party all
reasonable costs and expenses (including without limitation reasonable
attorneys' fees and disbursements, including the allocated costs of in-house
counsel) incurred by Secured Party in the enforcement of this Agreement with
regard to the Collateral owned by it, whether or not an action is filed in
connection therewith, and in connection with any waiver or amendment of any term
or provision hereof. All advances, charges, costs and expenses, including
reasonable attorneys' fees, incurred or paid by Secured Party in exercising any
right, power or remedy conferred by this Agreement (including without limitation
the right to perform any Obligation of Grantor under the Loan Documents), or in
the enforcement thereof, shall be secured hereby and shall become a part of the
Obligations and shall be paid to Secured Party by Grantor, immediately upon
demand, together with interest thereon at the rate(s) provided for under the
Loan Agreement.
12. STATUTE OF LIMITATIONS AND OTHER LAWS. Until the Obligations
shall have been paid and performed in full, the power of sale and all other
rights, powers and remedies granted to Secured Party hereunder shall continue to
exist and may be exercised by Secured Party at any time and from time to time
irrespective of the fact that any of the Obligations may have become barred by
any statute of limitations. Grantor expressly waives the benefit of any and all
statutes of limitation, laws providing for exemption of property from execution
or for valuation and appraisal upon foreclosure to the maximum extent permitted
by applicable law.
13. OTHER AGREEMENTS. Nothing herein shall in any way modify or
limit the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or
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in connection with the Obligations, but each and every term and condition hereof
shall be in addition thereto.
14. LIENS ON REAL PROPERTY. In the event that all or any part of the
Obligations at any time are secured by any one or more deeds of trust or
mortgages or other instruments creating or granting liens on any interest in
real property, Grantor authorizes Secured Party, upon the occurrence of any
Event of Default, at the sole option of Secured Party, without notice or demand
and without affecting any Obligations of Grantor, the enforceability of this
Agreement, or the validity or enforceability of any liens of Secured Party on
any Collateral, to foreclose any or all of such deeds of trust or mortgages or
other instruments by judicial or nonjudicial sale. Grantor expressly waives any
defenses to the enforcement of this Agreement or any liens created or granted
hereby or to the recovery by Secured Party against any guarantor or any other
Person liable therefor of any deficiency after a judicial or nonjudicial
foreclosure or sale. Grantor expressly waives any defenses or benefits that may
be derived from California Code of Civil Procedure Sections 580a, 580b, 580d
or 726, or comparable provisions of the laws of any other jurisdiction, and all
other suretyship defenses it otherwise might or would have under California law
or other applicable law.
15. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS. Grantor
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Grantor otherwise
may have against Secured Party or others, or against any Collateral. If any of
the waivers or consents herein are determined to be unenforceable under
applicable law, such waivers and consents shall be effective to the maximum
extent permitted by law.
16. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the Laws of the State of California.
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IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officers as of the date first written above.
"Grantor":
THE TITAN CORPORATION,
a Delaware corporation
By
---------------------------
---------------------------
[Printed Name & Title]
By
---------------------------
---------------------------
[Printed Name & Title]
Acknowledged:
THE SUMITOMO BANK OF CALIFORNIA
By
---------------------------
---------------------------
[Printed Name & Title]
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Exhibit 10.3
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FORM OF
PLEDGE AGREEMENT
Reference is hereby made to that certain Revolving Line Note executed by
THE TITAN CORPORATION, a Delaware corporation ("Debtor"), as maker, in favor of
THE SUMITOMO BANK OF CALIFORNIA ("Secured Party"), as holder, dated August 8,
1994 in the original principal amount of $10,000,000, and later increased to
$22,000,000 (the "Note"). The Note evidences a loan (the "Loan") made by
Secured Party to Debtor in the principal amount of $22,000,000 pursuant to that
certain Commercial Loan Agreement between Debtor and Secured Party dated
August 8, 1994, as amended pursuant to amendments dated May 25, 1995,
December 29, 1995, May 9, 1996 and of even date herewith (collectively, the
"Loan Agreement").
To induce Secured Party to enter into the Fourth Amendment to Commercial
Loan Agreement of even date herewith, Debtor hereby agrees as follows:
1. PLEDGE OF COLLATERAL. For valuable consideration, Debtor hereby
pledges to Secured Party, and grants to Secured Party a security interest in,
the following property now or hereafter owned by Debtor or in which Debtor now
or hereafter has any interest (herein collectively, "collateral"):
(a) the shares of stock represented by the stock certificate(s)
described in Schedule 1 to this Pledge Agreement and in any supplemental
Schedules hereinafter prepared with respect to this Pledge Agreement, all
other stock and securities of Titan Information Systems Corporation
("TISC") (owned by Debtor), Eldyne, Inc. ("Eldyne"), and Unidyne
Corporation ("Unidyne"), if any, and all other common stock, preferred
stock, convertible preferred stock and other stock, security and all other
money or property of TISC, Eldyne or Unidyne which is hereafter delivered
to or which hereafter comes into the possession, control or custody of
Secured Party during the existence of this Pledge Agreement, together with
any stock rights, rights to subscribe, stock splits, cash and non-cash
dividends, liquidating dividends, stock dividends, dividends paid in stock,
new securities or other property at any time and from time to time
received, receivable, or otherwise distributed in respect of or in exchange
or substitution for any of the collateral, including without limitation
stock
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received by Debtor due to stock splits or dividends paid in stock or sums
paid upon or in respect of any securities pledged hereunder upon the
liquidation or dissolution of the issuer thereof, and in the event that
Debtor receives any such collateral, Debtor will hold the same in trust on
behalf of and for the benefit of Secured Party and will immediately deliver
it to Secured Party to be held by Secured Party hereunder; and
(b) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and references
appertaining or incident to the foregoing property.
2. INDEBTEDNESS SECURED. This Pledge Agreement and the security interest
created hereby are given for the purpose of securing: (a) payment and
performance of each agreement of Debtor contained herein; (b) payment and
performance of all indebtedness and obligations of Debtor under the Note, Loan
Agreement and other loan documents described therein; and (c) any and all
amendments, modifications, supplements, renewals or extensions of any of the
foregoing, whether such amendments, modifications, supplements, renewals or
extensions are evidenced by new or additional instruments, documents or
agreements or change the rate of interest on any indebtedness secured hereby or
the maturity thereof, or otherwise. All indebtedness and obligations secured
hereby are hereinafter collectively referred to as "the indebtedness." The term
"indebtedness" shall also include, without limitation on the foregoing, all
interest that accrues on all or any part of the indebtedness after the filing of
any petition or pleading by or against Debtor for a proceeding under any chapter
or provision of any present or future federal bankruptcy legislation or
amendments thereto.
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor represents, warrants
and agrees that: (a) the existing collateral is, and all future collateral will
be, genuine, valid and in all respects what it appears or purports to be;
(b) all existing and future collateral constituting stock or other securities
are and will be duly authorized, validly issued, fully paid, non-assessable and
issued in compliance with all applicable state and federal securities and other
laws; (c) all existing and future collateral is and will be owned by Debtor free
and clear of all liens and rights of others, other than the security interest
created under this Pledge Agreement; (d) none of the existing collateral is, and
none of the future collateral will be, subject to any legend condition or
similar restriction affecting the transferability or marketability thereof,
EXCEPT any legend condition or similar restriction imposed pursuant to the
exemptions, under applicable state and federal securities laws, under which the
same have been or will be issued, and subject to any such legend condition or
similar restriction, Debtor has and will continue to
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have the full right to transfer the same to Secured Party without restriction;
(e) the issuer of the stock described in Schedule 1 to this Pledge Agreement
does not currently have outstanding any securities which are senior to the stock
described in Schedule 1 or which otherwise are entitled to any distribution from
the issuer in preference to that payable with respect to any return available to
the stock described in Schedule 1, whether as a dividend, in liquidation or
dissolution, or otherwise; (f) Debtor has all requisite power and authority to
execute and deliver, and to perform all of its obligations under, this Pledge
Agreement, and the execution and delivery by Debtor of, and the performance by
Debtor of all of its obligations under, this Pledge Agreement have been duly
authorized by all necessary action and do not and will not require any
authorization, consent, approval, order, license or permit from, or filing,
registration or qualification with, or exemption from any of the foregoing from,
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or securities exchange; (g) Debtor has
granted no other security interest in any collateral, and no financing statement
covering the collateral, or any part thereof, or any proceeds thereof, is on
file in any public office except in favor of Secured Party; (h) Debtor has read,
is familiar with and approves the Note, Loan Agreement and all other
instruments, documents and agreements which evidence or were otherwise executed
in connection with the Loan or any of the other indebtedness; (i) the total
authorized capital stock of TISC consists of ____________ common shares, of
which __________ shares are validly issued as fully paid and non-assessable
shares, and of which _________ shares (which are being pledged to Secured Party
pursuant to this Pledge Agreement) are owned beneficially and of record by
Debtor; the total authorized capital stock of Eldyne consists of __________
common shares, of which __________ shares are validly issued as fully paid and
non-assessable shares, and of which _________ shares (which are being pledged to
Secured Party pursuant to this Pledge Agreement) are owned beneficially and of
record by Debtor; and the total authorized capital stock of Unidyne consists of
__________ common shares, of which __________ shares are validly issued as fully
paid and non-assessable shares, and of which _________ shares (which are being
pledged to Secured Party pursuant to this Pledge Agreement) are owned
beneficially and of record by Debtor; and (j) all of the capital stock of TISC,
Eldyne and Unidyne is in certificated form, and the originals of the stock
certificates representing one hundred percent (100%) of the total outstanding
shares have been or concurrently with the execution of this Pledge Agreement
will be delivered to Secured Party. No person or entity has any agreement or
option, preemptive or other rights, whether fixed or contingent, present or
future, presently outstanding, whether or not exercisable, (i) to require the
issuer to issue any further or other shares or any other security convertible
into or exchangeable for shares in its capital stock or to convert or exchange
any
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securities into or for shares in the capital stock of the issuer, or (ii) to
purchase other or otherwise acquire any shares in the capital of the issuer,
EXCEPT that certain employees of, or individuals associated with, TISC may have
certain stock options with respect to the stock of TISC which may be exercised
from time to time in accordance with their terms.
4. COVENANTS OF DEBTOR. As long as any of the indebtedness remains owing
to Secured Party, unless Secured Party otherwise consents in writing:
(a) Debtor shall (i) immediately deliver all collateral capable
of delivery, whether now or hereafter held or acquired, to the Secured
Party or its agent, (ii) at the request of Secured Party at any time and
from time to time, execute all financing statements and other documents
reasonably deemed necessary or advisable by Secured Party to create and
perfect a security interest in, or otherwise relating to, the collateral,
(iii) at its sole cost and expense, defend any claims against the
collateral or any action that might affect the collateral or any interests
therein, (iv) do all acts which may be necessary to preserve, process,
develop, maintain and protect the collateral and the value thereof and
Debtor's rights and interests therein, (v) pay all taxes, assessments and
other charges imposed on or relating to the collateral, and all reasonable
costs and expenses, including reasonable attorneys' fees, incurred by
Secured Party in connection with the enforcement of this Pledge Agreement,
and (vi) if not delivered to Secured Party or its agent upon the execution
hereof, from time to time deliver to Secured Party or its agent, in form
and substance satisfactory to Secured Party, stock powers endorsed in blank
with respect to, and irrevocable proxies in favor of Secured Party to vote,
upon the occurrence and during the continuance of a default hereunder, all
collateral now or hereafter consisting of stock or other securities; and
(b) Debtor shall not (i) sell, assign, exchange, transfer,
encumber or otherwise dispose of, or contract to sell, assign, exchange,
transfer, encumber or otherwise dispose of, any of the collateral or any
part thereof or any interest therein, (ii) abandon, alter, amend, cancel,
modify, release, relinquish, supplement, terminate or waive, or enter into
or give any agreement, approval or consent with respect to, any of the
collateral or any part thereof or any interest therein (other than the
exercise of voting rights to the extent permitted by Section 6),
(iii) permit any issuer of any stock described in Schedule 1 to issue any
further or other shares (other than upon exercise of Stock options referred
to in paragraph 3 above), or
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any other security convertible into or exchangeable for shares in its
capital stock, or to convert or exchange any securities into or for shares
in the capital stock of the Debtor, including without limitation any
securities which are senior to or are on a par with the stock described in
Schedule 1 or which otherwise are entitled to any distribution in
preference to or of equal priority with that payable with respect to any
return available to the stock described in Schedule 1, whether as a
dividend, in liquidation or dissolution, or otherwise; or (iv) take any
action with respect to the collateral which is inconsistent with the
provisions or purposes of this Pledge Agreement or which would adversely
affect the rights of Secured Party hereunder. Without limiting the
foregoing, Debtor shall not permit the TISC, Eldyne or Unidyne to issue any
capital stock in uncertificated form or seek to convert all or any part of
their existing stock to uncertificated form, or to otherwise permit these
corporations to dilute in any way the interests of Secured Party in the
collateral (other than through the exercise of the stock options referred
to in paragraph 3 above) or in any corporation whose securities constitute
part of the collateral.
5. POSSESSION OF COLLATERAL AND DIVIDENDS. So long as no default has
occurred and is continuing hereunder, Debtor shall be entitled to receive and
retain any and all dividends and other distributions attributable to the
collateral. Upon the occurrence and during the continuance of a default
hereunder, or an event that with the giving of notice or passage of time would
constitute a default hereunder, Debtor agrees to cause all dividends and other
distributions attributable to the collateral to be paid directly to Secured
Party and may be applied by Secured Party to the indebtedness in such order and
manner as Secured Party deems appropriate. Any collateral in the possession of
Debtor shall be held in trust for the benefit of, and immediately delivered to,
Secured Party.
6. VOTING RIGHTS.
(a) Subject to paragraph (b) of this Section 6 and to the
provisions of Section 4(b)(iii), Debtor shall be entitled to exercise any
voting rights incident to the collateral unless the exercise of such rights
or any action taken in connection therewith would result in the occurrence
of a default hereunder.
(b) Upon the occurrence and during the continuance of a default
hereunder, Debtor's right to exercise voting rights with respect to the
collateral shall, at Secured Party's option, immediately cease and
terminate and such voting rights shall thereupon rest solely and
exclusively
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in Secured Party in accordance with the proxy delivered to Secured Party or its
agent under Section 4(a)(vi) of this Pledge Agreement (or otherwise at the
discretion of the Secured Party if no such proxy has been delivered).
7. ACTION BY SECURED PARTY.
(a) In the event that Debtor fails to perform any obligation on
its part to be performed hereunder, then Secured Party may, but without any
obligation to do so and without notice to or demand upon Debtor, perform
the same and take such other action as Secured Party may deem necessary to
protect the collateral or its security interest therein, Secured Party
being hereby authorized (without limiting the general nature of the
authority hereinabove conferred) to pay, purchase, contest and compromise
any encumbrance, charge or lien which in the reasonable judgment of Secured
Party appears to be prior or superior to its security interest, and in
exercising any such powers and authority to pay necessary expenses, employ
counsel and pay reasonable attorneys' fees. Debtor hereby agrees to repay
immediately and without demand all sums so expended by Secured Party,
together with interest from the date of expenditure at the highest rate
then in effect under the Note.
(b) Secured Party shall be under no duty or obligation to (i)
preserve, process, develop, maintain or protect the collateral or any of
Debtor's rights or interests therein, (ii) exercise any voting rights with
respect to the collateral, whether or not a default hereunder has occurred
or is continuing, or (iii) make or give any notices of default,
presentments, demands for performance, notices of nonperformance or
dishonor, protests, notices of protest or notices of any other nature
whatsoever in connection with the collateral on behalf of Debtor or any
other person having any interest therein; and Secured Party does not assume
and shall not be obligated to perform the obligations of Debtor, if any,
with respect to the collateral. Secured Party may, at any time and from
time to time, without notice or demand and at the expense of Debtor, make
reasonable requests for information concerning the collateral from any
officer, director, agent or employee of any corporation, governmental
agency or instrumentality or other issuer.
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8. DEFAULT. Debtor shall be in default hereunder:
(a) upon the occurrence and during the continuance of any
default under either of the Note, the Loan Agreement, or any other loan
documents pertaining thereto; or
(b) upon any failure by Debtor to observe or perform any
covenant or agreement contained in this Pledge Agreement for more than
ten (10) calendar days after receipt from Secured Party of notice of such
default; or
(c) if any representation or warranty made by Debtor in this
Pledge Agreement shall prove to have been false or incorrect in any
material respect when made.
9. REMEDIES UPON DEFAULT.
(a) Upon the occurrence and during the continuance of a default
hereunder, Secured Party shall have in any jurisdiction where enforcement
hereof is sought, in addition to all other rights and remedies that Secured
Party may have under this Pledge Agreement and by law, all rights and
remedies of a secured party under the Uniform Commercial Code and in
addition the following rights and remedies, all of which may be exercised
with or without further notice to Debtor:
(i) to notify any and all issuers of the collateral
that the same has been pledged to Secured Party and that all dividends
and other payments thereon are to be made directly and exclusively to
Secured Party; to renew, extend, modify, amend, accelerate, accept
partial payments on, make allowances and adjustments and issue credits
with respect to, release, settle, compromise, compound, collect or
otherwise liquidate, on terms acceptable to Secured Party, in whole or
in part, the collateral and any amounts owing thereon or any guaranty
or security therefor; to enter into any other agreement relating to or
affecting the collateral; and to give all consents, waivers and
ratifications in respect of the collateral and exercise all other
rights (including voting rights), powers and remedies and otherwise
act with respect thereto as if it were the owner thereof;
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(ii) to enforce payment and prosecute any action or
proceeding with respect to any and all of the collateral and take or
bring, in Secured Party's name or in the name of Debtor, all steps,
actions, suits or proceedings deemed by Secured Party necessary or
desirable to effect collection of or to realize upon the collateral;
(iii) to endorse, in the name of Debtor, all checks,
notes, drafts, money orders, instruments and other evidences of
payment relating to the collateral; to surrender the certificates
evidencing the stock collateral to the issuer thereof in exchange for
new certificates standing in the name of Secured Party or its nominee
or nominees, or to otherwise transfer any or all of the collateral
into the name of Secured Party or its nominee or nominees; and to
receive, open and dispose of all mail addressed to Debtor and notify
the postal authorities to change the address for delivery thereof to
such address as Secured Party may designate; and
(iv) to foreclose the liens and security interests
created under this Pledge Agreement or under any other agreement
relating to the collateral by any available judicial procedure or
without judicial process; to sell, assign, lease, or otherwise dispose
of the collateral or any part thereof, either at public or private
sale or at any broker's board or securities exchange, in lots or in
bulk, for cash, on credit or for future delivery, or otherwise, with
or without representations or warranties, and upon such terms as shall
be acceptable to Secured Party;
all at Secured Party's sole option and as Secured Party in its sole
discretion may deem advisable.
(b) Secured Party shall give Debtor at least five days' written
notice of sale of all or any part of the collateral or of any proposal by
Secured Party to retain the collateral or any part thereof in satisfaction
of the indebtedness. Any sale of the collateral shall be held at such time
or times and at such place or places as Secured Party may determine in the
exercise of its sole discretion. Secured Party may bid (which bid may be,
in whole or in part, in the form of cancellation of indebtedness) for and
purchase for the account of Secured Party or any nominee of Secured Party
the whole or any part of the collateral. Secured Party shall not be
obligated to make any sale of the collateral if it shall determine not to
do so
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regardless of the fact that notice of sale of the collateral may have been
given. Secured Party may, without notice or publication, adjourn the sale
from time to time by announcement at the time and place fixed for sale, and
such sale may, without further notice, be made at the time and place to
which the same was so adjourned.
(c) Regardless of whether any of the collateral has been
effectively registered under the Securities Act of 1933 or other applicable
law, Secured Party may, in its sole and absolute discretion, sell all or
any part of the collateral at private sale in such manner and under such
circumstances as Secured Party may deem necessary or advisable in order
that the sale may be lawfully conducted. Without limiting the foregoing,
Secured Party may (i) approach and negotiate with a limited number of
potential purchasers, and (ii) restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing
the collateral for their own account for investment and not with a view to
the distribution or resale thereof. In the event that any of the
collateral is sold at private sale, Debtor agrees that if the collateral is
sold for a price which Secured Party in good faith believes to be
reasonable, then (A) the sale shall be deemed to be commercially reasonable
in all respects, (B) Debtor shall not be entitled to a credit against the
indebtedness in an amount in excess of the purchase price, and (C) Secured
Party shall incur no liability or responsibility to Debtor in connection
therewith, notwithstanding the possibility that a substantially higher
price might have been realized at a public sale. Debtor recognizes that a
ready market may not exist for any collateral which is not regularly traded
on a recognized securities exchange (including unregistered shares of a
class of stock for which certain shares are publicly traded), and that a
sale by Secured Party of any such collateral for an amount substantially
less than a pro rata share of the fair market value of the issuer's assets
minus liabilities may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell a large amount
of securities or securities which are privately traded.
(d) Debtor hereby acknowledges and agrees that Secured Party
shall not be limited in any way with respect to the parties to which the
collateral may be sold, whether at a public or private sale or at any
broker's board or securities exchange, or otherwise. Debtor specifically
acknowledges and agrees that Secured Party may, without any liability
whatsoever to Debtor or the issuer of the collateral, contact one or more
competitors of Debtor or the issuer of the collateral or any other party or
parties which may desire to obtain a controlling interest in the issuer,
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regarding a sale of the collateral, and Secured Party may sell all or any
portion of the collateral to any one or more of such competitors or other
parties, as Secured Party deems appropriate in its capacity as a secured
party and without regard to the impact such a sale may have on Debtor, the
issuer or the management or operations of either.
(e) Upon consummation of any sale of the collateral, Secured
Party shall have the right to assign, transfer and deliver to the purchaser
or purchasers thereof the collateral so sold. Each such purchaser at any
such sale shall hold the collateral sold absolutely free from any claim or
right on the part of Debtor, and Debtor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which it now
has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted. If the sale of all or any part of the
collateral is made on credit or for future delivery, Secured Party shall
not be required to apply any portion of the sale price to the indebtedness
until such amount is actually received by Secured Party, and any collateral
so sold may be retained by Secured Party until the sale price is paid in
full by the purchaser or purchasers thereof. Secured Party shall not incur
any liability in case any such purchaser or purchasers shall fail to pay
for the collateral so sold and, in case of any such failure, the collateral
may be sold again upon like notice.
(f) The net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of the collateral shall be
applied FIRST, to the reasonable costs and expenses (including reasonable
attorneys' fees) of retaking, holding, storing, processing and preparing
for sale, selling, collecting, liquidating and the like; SECOND, to the
satisfaction of all indebtedness and obligations secured hereby in such
order and manner as Secured Party in its sole and absolute discretion may
determine. Debtor shall be liable to Secured Party and shall pay to
Secured Party on demand any deficiency which may remain after any such
sale, disposition, collection or liquidation of the collateral.
10. RIGHTS INDEPENDENT. The security interest created hereunder is
independent of any other security for the indebtedness given by Debtor or any
other person or any guaranty, and upon the occurrence of a default hereunder
Secured Party may proceed in the enforcement hereof independently of any other
right or remedy that Secured Party may at any time hold with respect to the
indebtedness or any other security or guaranty therefor. Secured Party may file
a separate action or actions against Debtor hereunder, whether action is brought
and
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prosecuted with respect to any other security or any other person or any
guarantor, or whether any other person or any guarantor is joined in any such
action or actions. Debtor waives the benefit of any statute of limitations
affecting its liability hereunder or the enforcement of the indebtedness secured
hereby. Secured Party's rights hereunder shall be reinstated and revived, and
the enforceability of this Pledge Agreement shall continue, with respect to any
amount at any time paid on account of the indebtedness which shall thereafter be
required to be restored or returned by Secured Party upon the bankruptcy,
insolvency, or reorganization of Debtor, or otherwise, all as though such amount
had not been paid. The security interest created hereunder and the
enforceability of this Pledge Agreement shall at all times remain effective to
secure the full amount of all indebtedness, including without limitation
interest at the rates provided in the Note, even though the indebtedness or any
part thereof or any other security or guaranty therefor may be or may hereafter
become invalid or otherwise unenforceable against Debtor or any other party, and
whether or not Debtor shall have any personal liability with respect thereto.
Debtor waives notice of default, presentment, demand for payment, protest,
notice of protest, notice of nonpayment or dishonor, and all other notices and
demands of any kind whatsoever; and Debtor consents and agrees that Secured
Party may, from time to time, without notice or demand and without affecting the
enforceability or security hereof: (a) take, alter, enforce or release any
additional security for the indebtedness; (b) renew, extend, modify, amend,
accelerate, accept partial payments on, release, settle, compromise, compound,
collect or otherwise liquidate the indebtedness or any security therefor, and
bid and purchase at any sale; (c) release or substitute any guarantors or other
parties obligated with respect to the indebtedness; or (d) amend, modify or
supplement the Note or any document executed in connection with the Note.
11. ATTORNEY-IN-FACT. Debtor hereby nominates and appoints Secured Party
as attorney-in-fact for the following purposes and to perform any of the
following powers, which are coupled with an interest and are irrevocable until
termination of this Pledge Agreement: (a) to do all acts and things and execute
all documents which Secured Party may deem necessary or advisable to perfect and
continue perfected the security interest created by this Pledge Agreement, to
preserve, process, develop, maintain and protect the collateral and the value
thereof and Secured Party's interest therein, and to enable Secured Party to
preserve, protect or exercise any or all of the rights, powers or remedies
granted to Secured Party under this Pledge Agreement or to which Secured Party
is otherwise entitled under applicable law; (b) to do any and every act which
Debtor is obligated to do under this Pledge Agreement; (c) to prepare, sign,
file and record, for Debtor in Debtor's name, any financing statement covering
the
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collateral; and (d) upon the occurrence and during the continuance of any
default hereunder, to endorse and transfer the collateral upon foreclosure;
PROVIDED, however, that Secured Party shall be under no obligation whatsoever to
take any of the foregoing actions, and Secured Party shall have no liability or
responsibility for any act or omission taken with respect thereto. Debtor
hereby agrees to repay immediately and without demand all reasonable costs and
expenses incurred or expended by Secured Party in exercising any rights or
taking any action under this paragraph, together with interest from the date of
expenditure at the highest rate then in effect under the Note.
12. AMENDMENTS; WAIVERS. Neither this Pledge Agreement nor any provision
hereof may be amended, modified, waived, discharged or terminated nor may any of
the collateral be released except by an instrument in writing duly signed by or
on behalf of Secured Party and Debtor. No failure or delay on the part of
Secured Party in exercising any right, power or remedy may be, or may be deemed
to be, a waiver thereof; nor may any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or under the Note. Debtor
warrants and agrees that each of the waivers set forth in this Pledge Agreement
are made with Debtor's full knowledge of their significance and consequences,
and that under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any of such waivers are determined to be contrary to
any applicable law or public policy, such waivers shall be effective only to the
maximum extent permitted by law.
13. CUMULATIVE REMEDIES. The rights, powers and remedies of Secured Party
hereunder are cumulative and not exclusive of any other right, power or remedy
which it would otherwise have.
14. COSTS AND EXPENSES IN ENFORCEMENT. Debtor agrees to pay to Secured
Party all reasonable advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Secured Party in exercising any right,
power or remedy conferred by this Pledge Agreement, or in the enforcement
hereof, regardless of whether an action is filed hereon.
15. NOTICES. All notices, requests, demands, directions and other
communications provided for hereunder must be in writing and must be personally
delivered or mailed to the appropriate party at the address set forth on the
signature pages of this Pledge Agreement or, as to any party, at any other
address as may be designated by it in a written notice sent to all other parties
in accordance with this paragraph. Any notice, request, demand, direction or
other
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communication given by mail will be deemed effective on the third calendar day
after deposited in the United States mails with first class postage prepaid; or
if given by personal delivery, when delivered.
16. FURTHER ASSURANCES. Debtor agrees to do such further acts and things,
and to execute and deliver such additional conveyances, assignments, agreements,
documents and instruments as Secured Party may at any time reasonably request in
connection with the administration or enforcement of this Pledge Agreement or
related to the collateral or any part thereof or in order to better assure and
confirm unto Secured Party its rights, powers and remedies hereunder. Debtor
hereby consents and agrees that the issuers of the collateral or any registrar
or transfer agent or trustee for any of the collateral shall be entitled to
accept the provisions of this Pledge Agreement as conclusive evidence of the
right of Secured Party to effect any transfer or exercise any right hereunder,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Secured Party or any other person to any of such issuers or
to any such registrar or transfer agent or trustee.
17. BINDING AGREEMENT. This Pledge Agreement and the terms, covenants and
conditions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that Debtor shall not
be permitted to transfer, convey or assign this Pledge Agreement or any interest
herein without the prior written consent of Secured Party. Secured Party may
assign its interest hereunder or in the collateral in whole or in part. Without
limiting the foregoing, Debtor hereby consents to the assignment by Secured
Party of all or any portion of its rights under this Pledge Agreement and all
notices, agreements and other loan documents which are secured hereby or
referenced herein. Debtor acknowledges and agrees that any and all rights of
Secured Party under this Pledge Agreement may be exercised from time to time by
any assignee or successor of Secured Party. Debtor agrees that any assignee's
rights shall be free of all defenses, set-offs or counterclaims which Debtor may
have against Secured Party.
18. SEVERABILITY. In case any lien, security interest or other right of
Secured Party shall be held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other lien,
security interest or other right granted hereby.
19. MISCELLANEOUS. All words used herein in the plural shall be deemed to
have been used in the singular, and all words used herein in the singular shall
be deemed to have been used in the plural, where the context and construction so
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require. Section headings in this Pledge Agreement are included for convenience
of reference only and are not a part of this Pledge Agreement for any other
purpose. Time is of the essence with respect to each provision of this Security
Agreement. Schedule 1 to this Pledge Agreement, which is attached hereto, is
incorporated herein by this reference. As used herein the term "Debtor" shall
include any successor to Debtor, including without limitation any successor by
merger, and/or any other entity that assumes or reaffirms the maker's
obligations under the Note.
20. GOVERNING LAW. This Pledge Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California.
Notwithstanding the above, in the event that any law or laws of the State of
California shall require or otherwise dictate that the laws of any other
jurisdiction be applied in any proceeding involving this Agreement, such law
shall be disregarded with the result that the remaining laws of the State of
California shall be applied to such proceeding.
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IN WITNESS WHEREOF, Debtor and Secured Party have caused this Pledge
Agreement to be duly executed as September 6, 1996.
"DEBTOR":
THE TITAN CORPORATION, a Delaware corporation
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
ADDRESS:
3033 Science Park Road
San Diego, California 92121
"SECURED PARTY":
THE SUMITOMO BANK OF CALIFORNIA
By
-----------------------------------------
-----------------------------------------
[Printed Name and Title]
ADDRESS:
20100 Magnolia Street
Huntington Beach, California 92646
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EXHIBIT 10.4
FORM OF
PATENT COLLATERAL ASSIGNMENT
(The Titan Corporation)
This PATENT COLLATERAL ASSIGNMENT ("ASSIGNMENT") is made and entered
into as of September 6, 1996 by THE TITAN CORPORATION, a Delaware corporation
("GRANTOR"), in favor of SUMITOMO BANK OF CALIFORNIA ("SECURED PARTY"), with
reference to the following facts:
RECITALS
A. Pursuant to that certain Commercial Loan Agreement dated
August 8, 1994 between Grantor and Secured Party, as subsequently amended
pursuant to those certain Amendments between Grantor and Secured Party dated
May 25, 1995, December 29, 1995 and May 9, 1996 (such Commercial Loan Agreement,
as previously amended and as it may from time to time be amended, extended,
renewed, supplemented or otherwise modified, the "LOAN AGREEMENT"), Secured
Party agreed to extend certain credit facilities to Grantor.
B. Grantor and Secured Party have agreed to further amend the Loan
Agreement as set forth in that certain Fourth Amendment to Commercial Loan
Agreement of even date herewith (the "FOURTH AMENDMENT"). The Fourth Amendment
provides, as a condition to the effectiveness thereof, that Grantor shall enter
into this Assignment and shall grant security interests to Secured Party as
herein provided.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to enter into the
Fourth Amendment and to modify and amend the terms of the aforementioned credit
facilities to Grantor, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:
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1. DEFINITIONS. Capitalized terms used in this Assignment and not
otherwise defined in this Assignment shall have the meanings defined for those
terms in the Loan Agreement. Terms defined in the California Commercial Code
and not otherwise defined in this Assignment or in the Loan Agreement shall have
the meanings defined for those terms in the California Commercial Code. As used
herein, the term "INCLUDING" is by way of example and not limitation. As used
in this Assignment, the following terms shall have the meanings respectively set
forth after each:
"ASSIGNMENT" means this Patent Collateral Assignment, and any
extensions, modifications, renewals, restatements, supplements or
amendments hereof.
"COLLATERAL" means and includes all of the following: (a) all of
Grantor's presently existing and filed, or hereafter acquired, right,
title, and interest in and to all of Grantor's patents and pending patent
applications and United States and international registrations thereof,
INCLUDING those listed on SCHEDULE 1 hereto, the right to sue for past,
present, and future infringements, all rights corresponding thereto
throughout the world, and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and all improvements thereon
and inventions relating thereto and all proceeds of the foregoing,
including but not limited to, proceeds of licensing (the "PATENTS"); (b)
all applications, registrations, and recordings relating to the foregoing
in the United States Patent and Trademark Office ("USPTO") or in any
similar office or agency of the United States, any State thereof, or any
political subdivision thereof, or in any other countries, and all reissues,
extensions, and renewals thereof; EXCEPT for those jointly held and
classified patents listed on Schedule X hereto.
"GOVERNMENTAL AGENCY" means any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality
or public body, court, administrative tribunal or public utility.
"LAWS" means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
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"LIEN" means any lien, pledge, security interest or other charge or
encumbrance of any kind, whether voluntarily incurred or arising by
operation of Law or otherwise.
"LOAN DOCUMENTS" means, collectively, the Loan Agreement, the
Revolving Line Note (described in the Fourth Amendment), the Fourth
Amendment, this Assignment and any other certificates, documents or
agreements of any type or nature heretofore or hereafter executed and
delivered by Grantor to Secured Party in any way relating to or in
furtherance of the Loan Agreement, in each case either as originally
executed or as the same may from time to time be supplemented, modified,
amended, restated, extended or supplanted.
"PERSON" means any entity, whether an individual, trustee,
corporation, limited liability company, partnership, trust, unincorporated
organization, or otherwise.
"RIGHT OF OTHERS" means, as to any property in which a Person has an
interest, any legal or equitable right, title, claim or other interest
(other than a Lien) in or with respect to such property held by any other
Person, and any option or right held by any other Person to acquire any
such right, title, claim or other interest in or with respect to such
property, including any option or right to acquire a Lien.
"SECURED OBLIGATIONS" means any and all present and future obligations
of any type or nature of Grantor to Secured Party arising under or relating
to the Loan Documents or any one or more of them, whether due or to become
due, matured or unmatured, liquidated or unliquidated, or contingent or
noncontingent, INCLUDING obligations of performance as well as obligations
of payment, and INCLUDING interest that accrues after the commencement of
any bankruptcy or insolvency proceeding by or against Grantor.
"SUBSIDIARY" means, as of any date of determination and with respect
to any Person, any corporation, limited liability company, partnership or
joint venture, whether now existing or hereafter organized, formed or
acquired: (a) in the case of a corporation, of which a majority of the
securities having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned by such Person
and/or one or more Subsidiaries of such Person, or (b) in the case of a
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limited liability company, of which a majority of the member interests are
at the time beneficially owned by such Person and/or one or more
Subsidiaries of such Person, or (c) in the case of a partnership or joint
venture, of which such Person or a Subsidiary of such Person is a general
partner or joint venturer or of which a majority of the partnership or
other ownership interests are at the time beneficially owned by such Person
and/or one or more of its Subsidiaries.
2. INCORPORATION OF REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER
PROVISIONS OF LOAN DOCUMENTS. All representations, warranties, affirmative and
negative covenants and other provisions contained in any Loan Document that are
applicable to Loan Documents generally are fully applicable to this Assignment
and are incorporated herein by this reference as though set forth herein in
full. Without limiting the generality of the foregoing, the waiver of jury
trial provisions set forth in SECTION 8.12 of the Loan Agreement are
incorporated herein and Grantor agrees to be bound by such provisions in
connection with any claim, demand, action or cause of action arising under or in
connection with this Assignment.
3. ASSIGNMENT. For valuable consideration, Grantor hereby grants,
assigns, and conveys to Secured Party, to secure the prompt and indefeasible
payment and performance of the Secured Obligations, and each of them, a security
interest in all of the presently existing and hereafter acquired Collateral.
This Assignment is a continuing and irrevocable agreement and all the rights,
powers, privileges and remedies hereunder shall apply to any and all Secured
Obligations, INCLUDING those arising under successive transactions which shall
either continue the Secured Obligations, increase or decrease them, or from time
to time create new Secured Obligations after all or any prior Secured
Obligations have been satisfied, and notwithstanding the bankruptcy of Grantor
or any other Person or any other event or proceeding affecting any Person.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Grantor represents,
warrants and agrees that:
(a) All of the existing Collateral is valid, subsisting and
enforceable, and Grantor owns the sole, full, and marketable title thereto,
and the right and power to grant the security interests granted hereunder.
Without limiting the foregoing, Grantor has filed all renewal affidavits
and applications, and paid all maintenance fees, necessary to maintain the
existence of the Collateral as valid, subsisting and registered patents.
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Grantor shall, at its sole expense, perform all acts and execute all
documents necessary to maintain the existence of the Collateral as valid,
subsisting, and registered patents, INCLUDING the filing of any renewal
affidavits and applications and payment of all maintenance fees. The
Collateral is not subject to any Liens, Rights of Others, claims,
assignments or licenses (except as disclosed to Secured Party in writing)
of any nature whatsoever, whether recorded or unrecorded.
(b) As of the date hereof, Grantor has no Patents registered, or
subject to pending applications, in the USPTO, or any similar office or
agency in the United States, or any other country other than those
described in SCHEDULE 1.
(c) EXCEPT as listed on SCHEDULE 2, to the best of Grantor's
knowledge, there are no actions, suits, proceedings or investigations
pending or threatened in writing against Grantor before any Governmental
Agency which, if determined adversely to such Grantor, would cause the
Collateral, or any portion thereof, to be adjudged invalid or
unenforceable, in whole or in part.
(d) Grantor shall not assign, sell, mortgage, lease, transfer,
pledge, hypothecate, grant a security interest in or Lien upon, encumber,
grant an exclusive or nonexclusive license or sublicense relating to, or
otherwise dispose of, any of the Collateral without the prior written
consent of Secured Party. Nothing in this Assignment shall be deemed a
consent by Secured Party to any such action, EXCEPT as such action is
expressly permitted hereunder.
(e) Grantor shall promptly notify Secured Party in writing (and
in advance, if possible) if Grantor or any Subsidiary of any Grantor shall
file any application for the registration of a patent with the USPTO or any
similar office or agency in the United States, any State therein, or any
other country. Upon request of Secured Party, Grantor shall, and shall
cause any such Subsidiary to, execute and deliver to Secured Party any and
all assignments, agreements, instruments, documents, and such other papers
as may be requested by Secured Party to evidence the assignment to Secured
Party of such patent. Grantor authorizes Secured Party to modify this
Assignment by amending SCHEDULE 1 to include any new patent or renewal of
Grantor applied for and obtained hereafter.
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(f) Grantor has not abandoned any of the Patents (except as
disclosed in Schedule X), and neither Grantor nor any Subsidiary of Grantor
shall do any act, or omit to do any act, whereby the Patents (or any of
them) may become abandoned, cancelled, invalidated, unenforceable, avoided,
or avoidable. Grantor shall promptly notify Secured Party if it knows, or
has reason to know, of any reason why any application, registration, or
recording may become abandoned, cancelled, invalidated, or unenforceable.
(g) Grantor shall render any assistance, as Secured Party may
determine is necessary, to Secured Party in any proceeding before the
USPTO, any federal or state court, or any other foreign or domestic
Governmental Agency, to maintain the Patents and to protect Secured Party's
interest therein, INCLUDING filing of renewals, affidavits of use,
affidavits of incontestability, and opposition, interference, and
cancellation proceedings.
(h) Grantor assumes all responsibility and liability arising
from the use of the Patents, and Grantor hereby indemnifies and holds
Secured Party harmless from and against any claim, suit, loss, damage, or
expense (INCLUDING reasonable attorneys' fees) arising out of any alleged
defect in any product manufactured, promoted, or sold by Grantor (or any
affiliate or Subsidiary thereof) in connection with any Patent or out of
the manufacture, promotion, labeling, sale, or advertisement of any such
product by Grantor or any Affiliate or Subsidiary thereof (INCLUDING patent
infringement and contributory patent suits that may be brought against
Secured Party).
(i) In any action or proceeding instituted by Secured Party in
connection with any matters arising at any time out of, or with respect to,
this Assignment, Grantor shall not interpose any counterclaim of any
nature.
(j) Grantor shall promptly notify Secured Party in writing of
the institution of, and adverse determination in, any proceeding in the
USPTO or any other foreign or domestic Governmental Agency, court or body,
regarding Grantor's claim of ownership in any of the Patents. In addition,
Grantor shall promptly notify Secured Party in writing if Grantor (or any
affiliate or Subsidiary thereof) learns of any use by any Person of any
term or design likely to cause confusion with any of the Patents, or of
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any material use by any Person of any other process or product which
infringes upon any of the Patents. In the event of any material
infringement of any of the Patents by a third Person, Grantor shall
promptly notify Secured Party of such infringement. If Grantors shall fail
to sue for and diligently pursue damages for such infringement within
one (1) month after such notice is given to Secured Party, Secured Party
may, but shall not be required to, itself take such action in the name of
Grantor, and Grantor hereby appoints Secured Party the true and lawful
attorney of Grantor, for Grantor and in its name, place and stead, on
behalf of Grantor, to commence judicial proceedings in any court or before
any other Governmental Agency to enjoin and recover damages for such
infringement, any such damages due to Grantor, net of costs and reasonable
attorneys' fees, to be applied to the Secured Obligations. If requested by
Secured Party, Grantor, at its sole expense, shall join with Secured Party
in such action as Secured Party in Secured Party's discretion, may deem
advisable for the protection of Secured Party's interest in and to the
Patents.
(k) Grantor shall, at its sole expense, do, make, execute and
deliver all such additional and further acts, things, deeds, assurances,
and instruments, in each case in form and substance reasonably satisfactory
to Secured Party, relating to the creation, validity, or perfection of the
security interests and collateral assignments provided for in this
Assignment under 35 U.S.C. Section 261, the California Commercial Code or
other Law of the United States, the State of California, or of any
countries or other States as Secured Party may from time to time reasonably
request, and shall take all such other action as Secured Party may
reasonably require to more completely vest in and assure to Secured Party
its rights hereunder or in any of the Collateral. In the event that any
recording or refiling (or the filing of any statement of continuation or
assignment of any financing statement) or any other action, is required at
any time to protect and preserve such security interest and collateral
assignments, Grantor shall, at its sole cost and expense, cause the same to
be done or taken at such time and in such manner as may be necessary and as
may be reasonably requested by Secured Party. Grantor hereby authorizes
Secured Party to execute and file one or more financing statements (or
similar documents) with respect to the Collateral signed only by Secured
Party. Grantor further authorizes Secured Party to have this Assignment, a
duplicate original or an exact copy of this Assignment, or any other
similar assignment or security
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agreement recorded or filed with the Commissioner of Patents and Trademarks
or other appropriate federal, state or government office.
(l) Secured Party may, in its sole discretion, pay any amount,
or do any act which Grantor fails to pay or do as required hereunder or as
requested by Secured Party to preserve, defend, protect, maintain, record,
amend, or enforce the Secured Obligations, the Collateral, or the security
interests granted hereunder, INCLUDING, but not limited to, all filing or
recording fees, renewal fees, court costs, collection charges, and
reasonable attorneys' fees. Grantor will be liable to Secured Party for
any such payment, which payment shall be deemed an advance by Secured Party
to Grantor, shall be payable on demand, together with interest at the
Default Rate, and shall be part of the Secured Obligations.
5. LICENSE. Effective upon the occurrence and continuation of an Event
of Default, Grantor hereby grants to Secured Party a royalty-free right and
exclusive license to make, use and sell the Collateral, and the subject matter
thereof, for Secured Party's benefit and account, and for none other.
6. EVENTS OF DEFAULT. Any one of the following events shall
constitute an Event of Default hereunder:
(a) any default under the Loan Agreement or any other Loan
Document shall have occurred and be continuing;
(b) any failure by Grantor to observe or perform any covenant or
agreement contained in this Assignment for more than ten (10) calendar days
after receipt from Secured Party of notice of such default; or
(c) any representation or warranty made by Grantor in this
Assignment shall prove to have been false or incorrect in any material
respect when made.
7. RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, in addition to all other rights and remedies
of Secured Party, whether provided under Law, the Loan Agreement or otherwise,
Secured Party shall have the following rights and remedies, which may be
exercised without notice to, or consent by, Grantor, EXCEPT as such notice or
consent is expressly provided for hereunder:
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(a) Secured Party may use any of the Patents for the sale of
goods, completion of work in process, or rendering of services in
connection with enforcing any security interest granted to Secured Party by
Grantor or any Subsidiary of Grantor.
(b) Secured Party may grant such license or licenses relating to
the Collateral for such term or terms, on such conditions and in such
manner, as Secured Party shall, in its sole discretion, deem appropriate.
Such license or licenses may be general, special, or otherwise, and,
subject to the rights of any other then existing licensee, may be granted
on an exclusive or nonexclusive basis throughout all or part of the
United States of America, its territories and possessions, and all foreign
countries.
(c) Secured Party may assign, sell, or otherwise dispose of the
Collateral, or any part thereof, either with or without special conditions
or stipulations, EXCEPT that Secured Party agrees to provide Grantor with
five (5) days' prior written notice of any proposed disposition of the
Collateral. The requirement of sending notice conclusively shall be met if
such notice is mailed, first class mail, postage prepaid, to Grantor in
accordance with the notice provisions of the Loan Agreement. Grantor
expressly waives any right to receive notice of any public or private sale
of any Collateral or other security for the Secured Obligations EXCEPT as
expressly provided in this SECTION 7(c). Secured Party shall have the
power to buy the Collateral, or any part thereof, and Secured Party shall
also have the power to execute assurances and perform all other acts which
Secured Party may, in Secured Party's sole discretion, deem appropriate or
proper to complete such assignment, sale, or disposition.
(d) In addition to the foregoing, in order to implement the
assignment, sale or other disposition of any of the Collateral pursuant to
SECTION 7(c) hereof, Secured Party may, at any time, execute and deliver,
on behalf of Grantor, pursuant to the authority granted in powers of
attorney, one or more instruments of assignment of the Patents (or any
application, registration, or recording relating thereto), in form suitable
for filing, recording, or registration. Grantor agrees to pay Secured
Party, on demand, all costs incurred in any such transfer of the
Collateral, INCLUDING any taxes, fees and reasonable attorneys' fees.
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(e) Secured Party may first apply the proceeds actually received
from any such license, assignment, sale, or other disposition of Collateral
first to the reasonable costs and expenses thereof, INCLUDING reasonable
attorneys' fees and all other reasonable expenses which may be incurred by
Secured Party in connection with the enforcement of the Secured
Obligations. Thereafter, Secured Party may apply any remaining proceeds to
such of the Secured Obligations as provided in the Loan Agreement. Grantor
shall remain liable to Secured Party for any expenses or Secured
Obligations remaining unpaid after the application of such proceeds, and
Grantor will pay Secured Party, on demand, any such unpaid amount, together
with interest at the Default Rate.
(f) If any such license, assignment, sale, or other disposition
of the Collateral (or any part thereof) is made after the occurrence of an
Event of Default, Grantor shall supply to Secured Party, or Secured Party's
designee, Grantor's knowledge and expertise relating to the manufacture and
sale of the products and services based on the Patents and Grantor's
customer lists and other records relating to the Patents and the
distribution hereof.
Nothing contained herein shall be construed as requiring Secured Party to take
any such action at any time. All of Secured Party's rights and remedies,
whether provided under Law, the Loan Agreement, this Assignment, or otherwise,
shall be cumulative, and none is exclusive of any right or remedy otherwise
provided herein or in any of the other Loan Documents, at Law or in equity.
Such rights and remedies may be enforced alternatively, successively, or
concurrently.
8. WAIVERS.
(a) Grantor hereby waives any and all rights that it may have to
a judicial hearing, if any, in advance of the enforcement of any of Secured
Party's rights hereunder, INCLUDING its rights following any Event of
Default to take immediate possession of the Collateral and exercise its
rights with respect thereto.
(b) Secured Party shall not be required to marshal any present
or future security for (including, but not limited to, this Assignment and
the Collateral subject to a security interest hereunder), or guaranties of,
the Secured Obligations or any of them, or to resort to such security or
guaranties in any particular order. Grantor hereby agrees that it will not
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invoke any Law relating to the marshalling of collateral which might cause
delay in or impede the enforcement of Secured Party's rights under this
Assignment or any other instrument evidencing any of the Secured
Obligations or by which any of such Secured Obligations is secured or
guaranteed, and Grantor hereby irrevocably waives the benefits of all such
Laws.
(c) Secured Party shall have no duty as to the protection of the
Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto except as otherwise required by Law. Secured Party may exercise
its rights with respect to the Collateral without resorting or regard to
other collateral or sources of reimbursement for liability.
9. ATTORNEY-IN-FACT. Grantor hereby irrevocably nominates and
appoints Secured Party as its attorney-in-fact for the following purposes:
(a) to do all acts and things which Secured Party may deem necessary or
advisable to perfect and continue perfected the security interests created by
this Assignment and, upon the occurrence and during the continuance of an
Event of Default, to preserve, process, develop, maintain and protect the
Collateral; (b) upon the occurrence and during the continuance of an Event of
Default, to do any and every act which Grantor is obligated to do under this
Assignment, at the sole expense of Grantor and without any obligation to do
so; (c) to prepare, sign, file and/or record, for Grantor, in the name of
Grantor, any financing statement, application for registration, or like
paper, and to take any other action deemed by Secured Party necessary or
desirable in order to perfect or maintain perfected the security interests
granted hereby; and (d) upon the occurrence and during the continuance of an
Event of Default, to execute any and all papers and instruments and do all
other things necessary or desirable to preserve and protect the Collateral
and to protect Secured Party's security interests therein; PROVIDED, HOWEVER,
that Secured Party shall be under no obligation whatsoever to take any of the
foregoing actions, and, absent bad faith or actual malice, Secured Party
shall have no liability or responsibility for any act taken or omission with
respect thereto.
10. COSTS AND EXPENSES.
(a) Grantor shall pay any and all charges, costs and taxes
incurred in implementing or subsequently amending this Assignment,
INCLUDING, recording and filing fees, appraisal fees, stamp taxes, and
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reasonable fees and disbursements of Secured Party's counsel incurred by
Secured Party, and the allocated cost of in-house counsel to Secured Party,
in connection with this Assignment, and in the enforcement of this
Assignment and in the enforcement or foreclosure of any Liens, security
interests or other rights of the Secured Party under this Assignment, or
under any other documentation heretofore, now, or hereafter given to
Secured Party in furtherance of the transactions contemplated hereby.
(b) Grantor agrees to reimburse Secured Party for and indemnify
it against, any and all losses, expenses and liabilities (INCLUDING
liabilities for penalties) of whatever kind or nature sustained and
reasonably incurred in connection with any claim, demand, suit or legal or
arbitration proceeding relating to this Assignment, or the exercise of any
rights or powers hereunder, including reasonable attorneys' fees and
disbursements, and the allocated cost of in-house counsel to the Secured
Party.
11. MISCELLANEOUS.
(a) Grantor and Secured Party may from time to time agree in
writing to the release of certain of the Collateral from the security
interests created hereby.
(b) This Assignment and all rights and obligations hereunder,
INCLUDING matters of construction, validity and performance, shall be
governed by the Laws of the United States, and, to the extent that the Laws
of the United States are not applicable, by the Laws of the State of
California.
(c) Any notice, request, demand or other communication required
or permitted under this Assignment shall be in writing and shall be deemed
to be properly given if done in accordance with SECTION 8.7 of the Loan
Agreement.
(d) EXCEPT as otherwise set forth in the Loan Agreement, the
provisions of this Assignment may not be modified, amended, restated or
supplemented, whether or not the modification, amendment, restatement or
supplement is supported by new consideration, EXCEPT by a written
instrument duly executed and delivered by Secured Party and Grantor.
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(e) EXCEPT as otherwise set forth in the Loan Agreement or this
Assignment, any waiver of the terms and conditions of this Assignment, or
any Event of Default and its consequences hereunder or thereunder, and any
consent or approval required or permitted by this Assignment to be given,
may be made or given with, but only with, the written consent of Secured
Party on such terms and conditions as specified in the written instrument
granting such waiver, consent or approval.
(f) Any failure or delay by Secured Party to require strict
performance by Grantor of any of the provisions, warranties, terms, and
conditions contained herein, or in any other agreement, document, or
instrument, shall not affect Secured Party's right to demand strict
compliance and performance therewith, and any waiver of any default shall
not waive or affect any other default, whether prior or subsequent thereto,
and whether of the same or of a different type. None of the warranties,
conditions, provisions, and terms contained herein, or in any other Loan
Document, shall be deemed to have been waived by any act or knowledge of
Secured Party, its agents, officers, or employees, but only by an
instrument in writing, signed by an officer of Secured Party and directed
to Grantor, specifying such waiver.
(g) In the event of any ACTUAL, IRRECONCILABLE conflict between
any provision hereof and any provision of the Loan Agreement, it is
intended that the provision of the Loan Agreement shall control; PROVIDED
that the inclusion of additional obligations on the part of Grantor and
supplemental rights and remedies in favor of Secured Party herein shall not
be deemed a conflict with the Loan Agreement.
(h) This Assignment shall be binding upon, and for the benefit
of, the parties hereto and their respective legal representatives,
successors, and assigns.
(i) This Assignment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same agreement.
12. CONTINUING EFFECT. This Assignment shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be
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appointed for all or any significant part of Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by Secured Party, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment and
performance had not been made. In the event that any payment or any part
thereof is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
13. RELEASE OF GRANTOR. This Assignment and all Secured Obligations
of Grantor hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitment remains outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return any Collateral to Grantor, or
to the Person or Persons legally entitled thereto, and shall endorse, execute,
deliver, record and file all instruments and documents, and do all other acts
and things, reasonably required for the return of the Collateral to Grantor, or
to the Person or Persons legally entitled thereto, and to evidence or document
the release of Secured Party's interests arising under this Assignment, all as
reasonably requested by, and at the sole expense of, Grantor.
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IN WITNESS WHEREOF, Grantor has executed this Assignment by its duly
authorized officer(s) as of the date first written above.
"GRANTOR":
THE TITAN CORPORATION, a Delaware corporation
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
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ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
"SECURED PARTY":
SUMITOMO BANK OF CALIFORNIA
By
---------------------------
---------------------------
[Printed Name and Title]
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EXHIBIT 10.5
FORM OF
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of September 6, 1996,
is made by TITAN INFORMATION SYSTEMS CORPORATION, a Delaware corporation
("GRANTOR"), in favor of THE SUMITOMO BANK OF CALIFORNIA ("SECURED PARTY"), with
reference to the following facts:
RECITALS
A. Pursuant to that certain Commercial Loan Agreement dated August 8,
1994 by and between The Titan Corporation ("Borrower"), as Borrower, and Secured
Party, as subsequently amended pursuant to Amendments dated May 25, 1995,
December 29, 1995, May 9, 1996, and of even date herewith (and as such agreement
may from time to time be further supplemented, modified, amended, renewed,
extended or supplanted, the "LOAN AGREEMENT"), Secured Party has agreed to
extend certain credit facilities to Borrower.
B. The Loan Agreement provides, as a condition precedent to Secured
Party's obligation to extend additional credit facilities to Borrower, that
Grantor shall grant to Secured Party a security interest in certain of its
assets under the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to continue to extend
credit facilities to Borrower under the Loan Agreement, and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Grantor hereby represents, warrants, covenants, agrees, assigns
and grants as follows:
1. DEFINITIONS. This Agreement is one of the Security Agreements
referred to in the Loan Agreement and is one of the loan documents referred to
therein. Terms defined in the Loan Agreement and not otherwise defined in this
Agreement shall have the meanings given those terms in the Loan Agreement.
Terms defined in the California Commercial Code and not otherwise defined in the
Agreement or in the Loan Agreement shall have the meanings defined for those
terms in the California Commercial Code. The following terms shall have the
meanings respectively set forth after each:
"AGREEMENT" means this Security Agreement and any extensions,
modifications, renewals, restatements, supplements or amendments hereof.
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"COLLATERAL" means all present and future right, title and
interest of Grantor in or to any property or assets whatsoever, and all
rights and powers of Grantor to transfer any interest in or to any property
or assets whatsoever, INCLUDING, without limitation, any and all of the
following property:
(1) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements,
guaranties, undertakings, surety bonds, insurance policies, notes and
drafts, and all forms of obligations owing to Grantor or in which
Grantor may have any interest, however created or arising;
(2) All present and future general intangibles, all tax
refunds of every kind and nature to which Grantor now or hereafter may
become entitled, however arising, all other refunds, and all deposits,
goodwill, choses in action, trade secrets, computer programs,
software, customer lists, trademarks, trade names, patents, licenses,
copyrights, technology, processes, proprietary information, franchises
and insurance proceeds;
(3) All present and future deposit accounts of Grantor,
INCLUDING, without limitation, any demand, time, savings, passbook or
like account maintained by Grantor with any bank, savings and loan
association, credit union or like organization, and all money, cash
and cash equivalents of Grantor, whether or not deposited in any such
deposit account;
(4) All present and future books and records, INCLUDING,
without limitation, books of account and ledgers of every kind and
nature, all electronically recorded data relating to Grantor or the
business thereof, all receptacles and containers for such records, and
all files and correspondence;
(5) All present and future goods, INCLUDING, without
limitation, all consumer goods, farm products, inventory, equipment,
machinery, tools, molds, dies, furniture, furnishings, fixtures, trade
fixtures, motor vehicles and all other goods used in connection with
or in the conduct of Grantor's business, INCLUDING without limitation,
all goods as defined in Section 9109(2) of the California Commercial
Code;
(6) All present and future inventory and merchandise,
INCLUDING, without limitation, all
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present and future goods held for sale or lease or to be furnished
under a contract of service, all raw materials, work in process and
finished goods, all packing materials, supplies and containers
relating to or used in connection with any of the foregoing, and all
bills of lading, warehouse receipts or documents of title relating to
any of the foregoing;
(7) All presently existing and filed, or hereafter acquired
patents and pending patent applications and United States and
international registrations thereof, the right to sue for past,
present, and future infringements, all rights corresponding thereto
throughout the world, and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof and all
improvements thereon and inventions relating thereto and all proceeds
of the foregoing, including but not limited to, proceeds of licensing;
(b) all applications, registrations, and recordings relating to the
foregoing in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, or
any political subdivision thereof, or in any other countries, and all
reissues, extensions, and renewals thereof;
(8) All present and future accessions, appurtenances,
components, repairs, repair parts, spare parts, replacements,
substitutions, additions, issue and/or improvements to or of or with
respect to any of the foregoing;
(9) All other tangible and intangible property of Grantor;
(10) All rights, remedies, powers and/or privileges of
Grantor with respect to any of the foregoing; and
(11) Any and all proceeds and products of any of the
foregoing, INCLUDING, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible
property received upon the sale or disposition of any of the
foregoing.
"LOAN DOCUMENTS" means collectively, the Loan Agreement, the
Revolving Line Note, this Agreement, and any other certificates, documents
or agreements of any type or nature heretofore or hereafter executed and
delivered by Borrower (or by Grantor or other subsidiaries
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or affiliates of Borrower) to Bank in any way relating to or in furtherance
of the Loan Agreement, in each case either as originally executed or as the
same may from time to time be supplemented, modified, amended, restated,
extended or supplanted.
"NOTE" means the Revolving Line Note.
"PERSON" means and includes any natural person, corporation,
firm, association, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
2. SECURITY AGREEMENT. For valuable consideration, Grantor hereby
grants and assigns to Secured Party a security interest in all of the Collateral
now or hereafter owned by Grantor as security for the timely payment and
performance of the obligations of Borrower under the Loan Agreement and other
Loan Documents, including but not limited to the Note (collectively, the
"OBLIGATIONS"). This Agreement is a continuing agreement and all the rights,
powers and remedies hereunder shall apply to any and all Obligations, including
those arising under successive transactions which shall either continue the
Obligations, increase or decrease them, or from time to time create new
Obligations after all or any prior Obligations have been satisfied, and
notwithstanding the bankruptcy of Grantor or any other party to the Loan
Agreement and related documents or any other event or proceeding affecting any
of the aforementioned persons.
3. FURTHER ASSURANCES. At any time and from time to time at the
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance reasonably satisfactory to Secured Party, as shall be necessary or
reasonably desirable to fully perfect, when filed and/or recorded, Secured
Party's security interest granted pursuant to Section 2 of this Agreement. At
any time and from time to time, Secured Party shall be entitled to file and/or
record any or all such financing statements, instruments and documents held by
it, and any or all such further financing statements, documents and instruments,
and to take all such other actions, as Secured Party may deem appropriate to
perfect and to maintain perfected the security interest granted in Section 2 of
this Agreement. Before and after the occurrence of any Event of Default, at
Secured Party's request, Grantor shall execute all such further financing
statements, instruments and documents, and shall do all such further acts and
things, as may be deemed necessary or reasonably desirable by Secured Party to
create and perfect, and to continue and preserve, the security interest in the
Collateral in favor of Secured Party, or the priority thereof. With respect to
any Collateral consisting of instruments, documents, certificates of title or
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the like, as to which Secured Party's security interest is required to be
perfected by, or the priority thereof is required to be assured by, possession
of or notation on the certificate of title pertaining to such Collateral,
Grantor will upon demand of Secured Party deliver possession of same in pledge
to Secured Party, or note the lien on such certificate of title in favor of
Secured Party for the benefit of Secured Party.
4. GRANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Except as
otherwise disclosed to Secured Party in the UCC search attached hereto as
Exhibit A, Grantor represents, warrants and agrees that: (a) the security
interests granted in Section 2 of this Agreement are first priority security
interests in the Collateral indefeasible by any third party; (b) EXCEPT for
financing statements in favor of Secured Party and as otherwise disclosed to
Secured Party in writing, no financing statement covering any of the Collateral
or the proceeds thereof is on file in any public office or held by any person;
(c) Grantor has and will continue to have, except for security interests granted
pursuant to the Loan Agreement and related documents in favor of Secured Party
and except for such other liens as are permitted pursuant to the Loan Agreement,
full title to the Collateral, free from any lien, security interest, encumbrance
or claim, and full power and authority to grant to Secured Party the security
interest in the Collateral as provided herein subject to the Permitted
Encumbrances, and will, at its sole cost and expense, defend any action which
might materially affect the Collateral or Secured Party's security interest in
the Collateral; (d) Grantor will pay, prior to delinquency, all taxes, charges,
liens and assessments against the Collateral, unless such taxes, charges, liens
or assessments are not yet required to be paid, and upon its failure to pay or
so contest such taxes, charges, liens and assessments, Secured Party at its
option may pay any of them, and Secured Party shall be the sole judge of the
legality or validity thereof and the amount necessary to discharge the same;
(e) the Collateral will not be used for any unlawful purpose or in violation of
any law, regulation or ordinance, nor used in any way that will void or impair
any insurance required to be carried in connection therewith; (f) Grantor will,
to the extent consistent with good business practice, keep the Collateral in
reasonably good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements, additions and
improvements thereto and, as appropriate and applicable, will otherwise deal
with such portion of the Collateral in all such ways as are considered good
practice by owners of like property; (g) Grantor will take all reasonable steps
to preserve and protect the Collateral; (h) Grantor will maintain, with
responsible insurance companies, insurance covering the Collateral against such
insurable losses as is required by the Loan Agreement and will cause Secured
Party to be designated as
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loss payee with respect to such insurance, will obtain the written agreement of
the insurers that such insurance shall not be cancelled without at least ten
(10) days prior written notice to Secured Party, and will furnish copies of such
insurance policies or certificates to Secured Party promptly upon request
therefor; (i) Grantor will promptly notify Secured Party in writing in the event
of any substantial or material damage to the Collateral from any source
whatsoever, and, except for the disposition of collections and other proceeds of
the Collateral permitted by Section 6 hereof, Grantor will not remove or permit
to be removed any part of the Collateral from its places of business without the
prior written consent of Secured Party, except for such items of the Collateral
as are removed in the ordinary course of business or in connection with any
transaction or disposition otherwise permitted by the Loan Agreement; and
(j) Grantor will not move its principal place of business without giving at
least ten (10) days' notice to Secured Party.
5. SECURED PARTY'S RIGHTS REGARDING COLLATERAL. At any time
(whether or not an Event of Default has occurred, EXCEPT as provided in
clause (b) below), without notice or demand and at the expense of Grantor (if an
Event of Default has occurred), Secured Party may, to the extent it may be
necessary or desirable to protect the security hereunder, but Secured Party
shall not be obligated to: (a) enter upon any premises on which Collateral is
situated and examine the same (other than areas subject to government security
restrictions) or (b) after an Event of Default has occurred and is
continuing, perform any obligation of Grantor under this Agreement or any
obligation of any other party under the Loan Documents. At any time and from
time to time (except as provided in clause (iii) below), at the expense of
Grantor (if an Event of Default has occurred), Secured Party may to the extent
it may be necessary or desirable to protect the security hereunder, but Secured
Party shall not be obligated to: (i) notify obligors on the Collateral that the
Collateral has been assigned to Secured Party; (ii) at any time and from time to
time request from obligors on the Collateral, in the name of Grantor or in the
name of Secured Party, information concerning the Collateral and the amounts
owing thereon; and (iii) after an Event of Default has occurred and is
continuing, cause the Collateral to be registered in the name of Secured Party,
as legal owner. Grantor shall maintain books and records pertaining to the
Collateral in such detail, form and scope as Secured Party shall reasonably
require consistent with Secured Party's interests hereunder. Grantor will at
any time at Secured Party's request mark the Collateral and/or Grantor's ledger
cards, books of account, and other records relating to the Collateral with
appropriate notations satisfactory to Secured Party disclosing that they are
subject to Secured Party's security interests. Secured Party shall at all times
on notice have full access to and the right to audit any and
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all of Grantor's books and records pertaining to the Collateral, and to confirm
and verify the value of the Collateral and to do whatever else Secured Party may
deem necessary or desirable to protect its interests. Secured Party shall be
under no duty or obligation whatsoever to take any action to preserve any rights
of or against any prior or other parties in connection with the Collateral, or
make or give any presentments, demands for performance, notices of non-
performance, protests, notices of protests, notices of dishonor, or notices of
any other nature whatsoever in connection with the Collateral or the
Obligations. Secured Party shall be under no duty or obligation whatsoever to
take any action to protect or preserve the Collateral or any rights of Grantor
therein, or to make collections or enforce payment thereon, or to participate in
any foreclosure or other proceeding in connection therewith.
6. COLLECTIONS ON THE COLLATERAL. Grantor shall have the right to
use and to continue to make collections on and receive other proceeds of all of
the Collateral in the ordinary course of business so long as no Event of Default
shall have occurred and be continuing. Upon the occurrence and during the
continuance of an Event of Default, at the option of Secured Party, Grantor's
right to make collections on and receive proceeds of the Collateral and to use
or dispose of such collections and proceeds shall terminate, and any and all
proceeds and collections, including all partial or total prepayments, then held
or thereafter received on or on account of the Collateral will be held or
received by Grantor in trust for Secured Party and immediately delivered to
same. Any remittance received by Grantor from customers shall be presumed to
relate to the Collateral and to be subject to the Secured Party's security
interests. Upon the occurrence of an Event of Default, Secured Party shall have
the right at all times to receive, receipt for, endorse, assign, deposit and
deliver, in the name of Secured Party or in the name of Grantor, any and all
checks, notes, drafts and other instruments for the payment of money
constituting proceeds of or otherwise relating to the Collateral; and Grantor
hereby authorizes Secured Party to affix, by facsimile signature or otherwise,
the general or special endorsement of it, in such manner as Secured Party shall
deem advisable, to any such instrument in the event the same has been delivered
to or obtained by Secured Party without appropriate endorsement, and Secured
Party and any collecting bank are hereby authorized to consider such endorsement
to be a sufficient, valid and effective endorsement by Grantor, to the same
extent as though it were manually executed by the duly authorized officer of
Grantor, regardless of by whom or under what circumstances or by what authority
such facsimile signature or other endorsement actually is affixed, without duty
of inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest
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and notice of protest or dishonor and all other notices of every kind and nature
with respect to any such instrument.
7. POSSESSION OF COLLATERAL BY SECURED PARTY. All the Collateral
now, heretofore or hereafter delivered to Secured Party shall be held by Secured
Party in its possession, custody and control. Any or all of the Collateral
consisting of money delivered to Secured Party shall be held in an interest
bearing account, and prior to an Event of Default, interest thereon shall accrue
to Grantor; however, Grantor shall not be entitled to any other compensation
thereon or by reason of Secured Party's possession and/or use thereof. Upon the
occurrence of an Event of Default, whenever any of the Collateral is in Secured
Party's possession, Secured Party may use, operate and consume the Collateral,
whether for the purpose of preserving and/or protecting the Collateral, or for
the purpose of performing any of Grantor's obligations with respect thereto, or
otherwise. Secured Party may at any time deliver or redeliver the Collateral or
any part thereof to Grantor, and the receipt of any of the same by Grantor shall
be complete and full acquittance for the Collateral so delivered, and Secured
Party thereafter shall be discharged from any liability or responsibility
therefor. So long as Secured Party exercises reasonable care with respect to
any Collateral in its possession, custody or control, Secured Party shall have
no liability for any loss of or damage to such Collateral, and in no event shall
Secured Party have liability for any diminution in value of Collateral
occasioned by economic or market conditions or events. Secured Party shall be
deemed to have exercised reasonable care within the meaning of the preceding
sentence if the Collateral in the possession, custody or control of Secured
Party is accorded treatment substantially equal to that which Secured Party
accords its own similar property, it being understood that Secured Party shall
not have any responsibility for taking any necessary steps to preserve rights
against any Person with respect to any Collateral.
8. EVENTS OF DEFAULT. Any one of the following events shall
constitute an Event of Default hereunder:
(a) any default under the Loan Agreement or any other Loan
Document shall have occurred and be continuing;
(b) any failure by Grantor to observe or perform any covenant or
agreement contained in this Assignment for more than ten (10) calendar days
after receipt from Secured Party of notice of such default; or
(c) any representation or warranty made by Grantor in this
Assignment shall prove to have been false or incorrect in any material
respect when made.
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9. REMEDIES.
9.1 RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and
during the continuance of an Event of Default, Secured Party shall have in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies which Secured Party may have under applicable law or in equity or
under this Agreement (including, without limitation, all rights set forth in
Section 6 hereof) or under any other Loan Document, all of its rights and
remedies as a secured party under the Uniform Commercial Code as enacted in any
jurisdiction, and in addition the following rights and remedies, all of which
may be exercised to the maximum extent permitted by law with or without further
notice to Grantor and without affecting the liability of Grantor hereunder or
the enforceability of the security interests created hereby: (a) to foreclose
the liens and security interests created hereunder or under any other agreement
relating to any Collateral by any available judicial procedure or without
judicial process; (b) to enter any premises where any Collateral may be located
for the purpose of taking possession of or removing the same; (c) to sell,
assign, lease or otherwise dispose of any Collateral or any part thereof, either
at public or private sale or at any broker's board, in lot or in bulk, for cash,
on credit or otherwise, with or without representations or warranties and upon
such terms as shall be acceptable to Secured Party; (d) to notify obligors on
the Collateral that the Collateral has been assigned to Secured Party and that
all payments thereon are to be made directly and exclusively to Secured Party;
(e) to collect by legal proceedings or otherwise all interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f) to
enter into any extension, reorganization, deposit, merger or consolidation
agreement, or any other agreement relating to or affecting the Collateral, and
in connection therewith, Secured Party may deposit or surrender control of the
Collateral and/or accept other property in exchange for the Collateral; (g) to
settle, compromise or release, on terms acceptable to Secured Party, in whole or
in part, any amounts owing on the Collateral; (h) to extend the time of payment,
make allowances and adjustments and issue credits in connection with the
Collateral in the name of Secured Party or in the name of Grantor; (i) to
enforce payment and prosecute any action or proceeding with respect to any or
all of the Collateral and take or bring, in the name of Secured Party or in the
name of Grantor, steps, actions, suits or proceedings deemed by Secured Party
necessary or desirable to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
thereon, and Grantor specifically consents to any nonjudicial foreclosure of any
or all of the Collateral or any other action taken by Secured Party which may
release any obligor from personal liability on any of the Collateral, and
Grantor waives any right not
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expressly provided for in this Agreement to receive notice of any public or
private judicial or nonjudicial sale or foreclosure of any security or any of
the Collateral; and any money or other property received by Secured Party in
exchange for or on account of the Collateral, whether representing collections
or proceeds of Collateral, and whether resulting from voluntary payments or
foreclosure proceedings or other legal action taken by Secured Party or Grantor
shall be applied by Secured Party without notice to Grantor to the Obligation(s)
in the order and manner as is provided for in the Loan Agreement or, if no such
provision is applicable, in such order and manner as Secured Party in its sole
discretion shall determine; (j) to insure, process and preserve the Collateral;
(k) to exercise all rights under any of the Loan Documents; (l) to remove from
any premises where the same may be located, the Collateral and any and all
documents, instruments, files and records, and any receptacles and cabinets
containing the same, relating to the Collateral, and Secured Party may, at the
cost and expense of Grantor, use such of its supplies and space at its places of
business as may be necessary to properly administer and control the portion of
the Collateral owned by it or the handling of collections and realizations
thereon; (m) to receive, open and dispose of all mail addressed to Grantor and
notify postal authorities to change the address for delivery thereof to such
address as Secured Party may designate; provided that Secured Party agrees that
it will promptly deliver over to Grantor such opened mail as does not relate to
the Collateral; and (n) to exercise all other rights, powers and remedies of an
owner of the Collateral; all at Secured Party's sole option and as Secured Party
in its sole discretion may deem advisable. Grantor will, at Secured Party's
request, assemble all Collateral and make it available to Secured Party at
places which Secured Party may designate, whether at the premises of Grantor or
elsewhere, and will make available to Secured Party all premises and facilities
of Grantor for the purpose of Secured Party's taking possession of the
Collateral or removing or putting the Collateral in salable form.
9.2 POSSESSION BY SECURED PARTY. Upon the occurrence of an
Event of Default, Secured Party also shall have the right, without notice or
demand, either in person, by agent or by a receiver to be appointed by a court
(and Grantor hereby expressly consents to the appointment of such a receiver),
and without regard to the adequacy of any security for the Obligations, to take
possession of the Collateral or any part thereof and to collect and receive the
rents, issues, profits, income and proceeds thereof. Taking possession of the
Collateral shall not cure or waive any Event of Default or notice thereof or
invalidate any act done pursuant to such notice. The rights, remedies and
powers of any receiver appointed by a court shall be as ordered by said court.
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9.3 SALE OF COLLATERAL. Any public or private sale or other
disposition of the Collateral may be held at any office of Secured Party, or at
Grantor's places of business, or at any other place permitted by applicable law,
and without the necessity of the Collateral's being within the view of
prospective purchasers. Secured Party may direct the order and manner of sale
of the Collateral, or portions thereof, as it in its sole and absolute
discretion may determine. Secured Party or any Person on Secured Party's behalf
may bid and purchase at any such sale or other disposition.
9.4 NOTICE OF SALE. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will send or otherwise make available to
Grantor reasonable notice of the time and place of any public sale thereof or of
the time on or after which any private sale or other disposition thereof is to
be made. The requirement of sending reasonable notice conclusively shall be met
if such notice is mailed, first class mail, postage prepaid, to Grantor at its
address set forth in the Loan Agreement at least five (5) days before the time
of the sale or disposition. Grantor expressly waives any right to receive
notice of any public or private sale of any Collateral or other security for the
Obligation(s) except as expressly provided for in the preceding sentence.
9.5 TITLE OF PURCHASERS. Upon consummation of any sale of
Collateral hereunder, Secured Party shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the Collateral so sold absolutely
free from any claim or right upon the part of Grantor or any other person
claiming through Grantor, and Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. If the sale of all or any part of the Collateral is made on
credit or for future delivery, Secured Party shall not be required to apply any
portion of the sale price to the Obligations until such amount is actually
received by Secured Party, and any Collateral so sold may be retained by Secured
Party until the sale price is paid in full by the purchaser or purchasers
thereof. Secured Party shall not incur any liability in case any such purchaser
or purchasers shall fail to pay for the Collateral so sold, and, in case of any
such failure, the Collateral may be sold again.
10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably nominates and appoints Secured Party as its attorney-in-fact for the
following purposes: (a) to do all acts and things which Secured Party may deem
necessary or advisable to perfect and continue perfected the security interests
created by this Agreement and, upon the occurrence of
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an Event of Default, to preserve, process, develop, maintain and protect the
Collateral; (b) to prepare, sign, file and/or record, for Grantor in the name of
Grantor, any financing statement, application for registration, and like papers
and to take any other action deemed by Secured Party necessary or desirable in
order to perfect the security interests granted hereby; (c) to execute any and
all papers and instruments and do all other things necessary or desirable to
preserve and protect the Collateral and to protect Secured Party's security
interests therein; and (d) upon the occurrence of an Event of Default, to do any
and every act which Grantor is obligated to do under this Agreement, at the
expense of Grantor; PROVIDED, HOWEVER, that Secured Party shall be under no
obligation whatsoever to take any of the foregoing actions, and absent bad faith
or actual malice, Secured Party shall have no liability or responsibility for
any act or omission taken with respect thereto.
11. COSTS AND EXPENSES. Grantor agrees to pay to Secured Party all
reasonable costs and expenses (including without limitation reasonable
attorneys' fees and disbursements, including the allocated costs of in-house
counsel) incurred by Secured Party in the enforcement of this Agreement with
regard to the Collateral owned by it, whether or not an action is filed in
connection therewith, and in connection with any waiver or amendment of any term
or provision hereof. All advances, charges, costs and expenses, including
reasonable attorneys' fees, incurred or paid by Secured Party in exercising any
right, power or remedy conferred by this Agreement (including without limitation
the right to perform any Obligation of Grantor under the Loan Documents), or in
the enforcement thereof, shall be secured hereby and shall become a part of the
Obligations and shall be paid to Secured Party by Grantor, immediately upon
demand, together with interest thereon at the rate(s) provided for under the
Loan Agreement.
12. STATUTE OF LIMITATIONS AND OTHER LAWS. Until the Obligations
shall have been paid and performed in full, the power of sale and all other
rights, powers and remedies granted to Secured Party hereunder shall continue to
exist and may be exercised by Secured Party at any time and from time to time
irrespective of the fact that any of the Obligations may have become barred by
any statute of limitations. Grantor expressly waives the benefit of any and all
statutes of limitation, laws providing for exemption of property from execution
or for valuation and appraisal upon foreclosure to the maximum extent permitted
by applicable law.
13. OTHER AGREEMENTS. Nothing herein shall in any way modify or
limit the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or
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in connection with the Obligations, but each and every term and condition hereof
shall be in addition thereto.
14. LIENS ON REAL PROPERTY. In the event that all or any part of the
Obligations at any time are secured by any one or more deeds of trust or
mortgages or other instruments creating or granting liens on any interest in
real property, Grantor authorizes Secured Party, upon the occurrence of any
Event of Default, at the sole option of Secured Party, without notice or demand
and without affecting any Obligations of Grantor, the enforceability of this
Agreement, or the validity or enforceability of any liens of Secured Party on
any Collateral, to foreclose any or all of such deeds of trust or mortgages or
other instruments by judicial or nonjudicial sale. Grantor expressly waives any
defenses to the enforcement of this Agreement or any liens created or granted
hereby or to the recovery by Secured Party against any guarantor or any other
Person liable therefor of any deficiency after a judicial or nonjudicial
foreclosure or sale. Grantor expressly waives any defenses or benefits that may
be derived from California Code of Civil Procedure Sections 580a, 580b, 580d
or 726, or comparable provisions of the laws of any other jurisdiction, and all
other suretyship defenses it otherwise might or would have under California law
or other applicable law.
15. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS. Grantor
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Grantor otherwise
may have against Secured Party or others, or against any Collateral. If any of
the waivers or consents herein are determined to be unenforceable under
applicable law, such waivers and consents shall be effective to the maximum
extent permitted by law.
16. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the Laws of the State of California.
17. AGREEMENTS REGARDING INDEBTEDNESS OF THIRD PARTY BORROWERS.
17.1 WARRANTIES. Grantor acknowledges that this Pledge Agreement
secures (or may secure) in whole or in part the indebtedness of one or more
persons (as used herein, the term "person" includes an individual, trust,
corporation, partnership, association or any other type of entity) other than
Grantor (herein referred to as "Third Party Borrowers"). Grantor warrants that
(a) this Pledge Agreement is executed at the request of such Third Party
Borrowers; (b) this Pledge Agreement complies with any agreements between
Grantor and such
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Third Party Borrowers regarding Grantor's execution hereof; (c) Secured Party
has made no representation to Grantor as to the creditworthiness of such Third
Party Borrowers; and (d) Grantor has established adequate means of obtaining
from such Third Party Borrowers on a continuing basis financial and other
information pertaining to the financial condition of such Third Party Borrowers.
Grantor agrees to keep adequately informed from such means of any facts, events
or circumstances which might in any way affect Grantor's risks hereunder, and
Grantor further agrees that Secured Party shall have no obligation to disclose
to Grantor information or material acquired in the course of Secured Party's
relationship with such Third Party Borrowers.
17.2 WAIVERS.
(a) Grantor waives any right to require Secured Party to
(i) proceed against any person, including any of the Third Party Borrowers
or any guarantor; (ii) proceed against or exhaust (either in any particular
order or manner or at all) any collateral or guaranty held from any of the
Third Party Borrowers or any other person; (iii) give notice of the terms,
time and place of any public or private sale of personal property security
held from any of the Third Party Borrowers or any other person or comply
with any other provision of Section 9504 of the California Uniform
Commercial Code; (iv) pursue any other remedy in Secured Party's power; or
(v) make any presentment, demand for performance, or give any notice of
nonperformance, protest, notice of protest or notice of dishonor in
connection with any obligation or evidence of indebtedness held by Secured
Party as security, in connection with any obligation or evidence of
indebtedness which constitutes in whole or in part the indebtedness, or in
connection with the creation of new or additional obligations.
(b) Grantor waives any defenses arising by reason of (i) any
disability or other defense of any of the Third Party Borrowers or any
other person; (ii) the cessation from any cause whatsoever of the
obligations of any of the Third Party Borrowers or any other person;
(iii) the application by any of the Third Party Borrowers of the proceeds
of any of the indebtedness for purposes other than the purposes represented
by such Third Party Borrowers to Secured Party or intended or understood by
Secured Party or Grantor; (iv) any act or omission by Secured Party which
directly or indirectly results in or aids the discharge or release of any
of the Third Party Borrowers, any other person, any of the indebtedness, or
any collateral by operation of law or equity or otherwise; or (v) any
modification of the indebtedness in any form whatsoever, including without
limitation the renewal,
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extension, acceleration or other change in time for payment of such
obligations, increase or decrease of the rate of interest thereon, or other
change in the terms of the indebtedness or any part thereof.
(c) Grantor waives all rights which Grantor may have under any
requirement of law or equity that Secured Party exhaust any other security
for the indebtedness before proceeding under this Pledge Agreement.
(d) Grantor acknowledges that all or a portion of the present
and future indebtedness of Third Party Borrowers to Secured Party is or may
be secured by one or more deed(s) of trust covering certain interests in
real property. Grantor authorizes Secured Party, at its sole option,
without notice or demand and without affecting the liability of Grantor
under this Pledge Agreement, to foreclose any or all of the deed(s) of
trust and the interests in real property secured thereby by nonjudicial
sale, or to execute any other right or remedy with respect to the deed(s)
of trust or the property covered thereby. No such action by Secured Party
shall release or limit the liability of Grantor hereunder, even if the
effect of that action is to deprive Grantor of the right to reimbursement
from the Third Party Borrowers for any sums paid by Grantor to Secured
Party with respect to the indebtedness. Grantor specifically agrees that
Grantor shall not be released from liability hereunder by any action taken
by Secured Party, including without limitation a nonjudicial sale under any
deed of trust, that would afford Third Party Borrowers a defense based on
any anti-deficiency laws of any state. Grantor expressly waives (i) any
defense to the recovery of a deficiency against Grantor after such a
nonjudicial sale, notwithstanding that such sale may result in a loss by
Grantor of the right to recover from Third Party Borrowers any of such
deficiency, (ii) any defense or benefits that may be derived from
California Code of Civil Procedure Sections 580a, 580d or 726, or analogous
laws of any other state (if any) and (iii) all suretyship defenses that it
would otherwise have under the laws of any state. Without limiting the
foregoing, Grantor understands that, in the absence of the foregoing
waivers and releases, Grantor might have a defense against an action by
Secured Party to recover a deficiency from Grantor under this Pledge
Agreement following a nonjudicial foreclosure sale under any deed(s) of
trust securing
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any indebtedness of Borrower to Secured Party guaranteed hereby, and
Grantor is specifically waiving this defense and all other defenses which
Grantor might otherwise have to the recovery by Secured Party against
Grantor. Grantor waives any right to receive notice of any judicial or
nonjudicial sale or foreclosure of any real property subject to any deed of
trust securing the indebtedness, and Grantor's failure to receive any such
notice shall not impair or affect Grantor's liability hereunder.
(e) Grantor shall have no right of subrogation, and Grantor
further waives any right to enforce any remedy which Grantor now has or
later may have against any of the Third Party Borrowers or any other
person, and waives any benefit of, and any right to participate in, any
security now or later held by Secured Party.
17.3 UNDERSTANDINGS WITH RESPECT TO WAIVERS. Grantor warrants
and agrees that each of the waivers set forth above are made with Grantor's full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense waived may diminish, destroy or otherwise
adversely affect rights which Grantor otherwise may have against any of the
Third Party Borrowers, Secured Party or others, or against collateral, and that,
under the circumstances, the waivers are reasonable and not contrary to public
policy or law. If any of the waivers are determined to be contrary to any
applicable law or public policy, such waivers shall be effective to the maximum
extent permitted by law.
17.4 WAIVER OF AUTHENTICATION OF VALIDITY OF ACTS OF CORPORATION
OR PARTNERSHIP. It is not necessary for Secured Party to inquire into the power
of any of the Third Party Borrowers or any agents acting or purporting to act on
their behalf, and all obligations made, created or accepted in reliance upon the
professed exercise of such power shall be secured hereby.
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IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officers as of the date first written above.
"Grantor":
TITAN INFORMATION SYSTEMS
CORPORATION, a Delaware
corporation
By
---------------------------
---------------------------
[Printed Name & Title]
By
---------------------------
---------------------------
[Printed Name & Title]
Acknowledged:
THE SUMITOMO BANK OF CALIFORNIA
By
---------------------------
---------------------------
[Printed Name & Title]
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EXHIBIT 10.6
FORM OF
PATENT COLLATERAL ASSIGNMENT
(Titan Information Systems Corporation)
This PATENT COLLATERAL ASSIGNMENT ("ASSIGNMENT") is made and entered
into as of September 6, 1996 by TITAN INFORMATION SYSTEMS CORPORATION, a
Delaware corporation ("GRANTORS"), and each of them, jointly and severally, as
Grantors, in favor of SUMITOMO BANK OF CALIFORNIA ("SECURED PARTY"), with
reference to the following facts:
RECITALS
A. Pursuant to that certain Commercial Loan Agreement dated
August 8, 1994 between The Titan Corporation, a Delaware corporation
("BORROWER"), and Secured Party, as subsequently amended pursuant to those
certain Amendments between Borrower and Secured Party dated May 25, 1995,
December 29, 1995 and May 9, 1996 (such Commercial Loan Agreement, as previously
amended and as it may from time to time be amended, extended, renewed,
supplemented or otherwise modified, the "LOAN AGREEMENT"), Secured Party agreed
to extend certain credit facilities to Borrower.
B. Borrower and Secured Party have agreed to further amend the Loan
Agreement as set forth in that certain Fourth Amendment to Commercial Loan
Agreement of even date herewith (the "FOURTH AMENDMENT"). The Fourth Amendment
provides, as a condition to the effectiveness thereof, that Grantors shall enter
into this Assignment and shall grant security interests to Secured Party as
herein provided.
C. Each Grantor expects to realize direct and indirect benefits as a
result of the availability of the aforementioned credit facilities.
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AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to enter into the
Fourth Amendment and to modify and amend the terms of the aforementioned credit
facilities to Borrower, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantors hereby jointly
and severally represent, warrant, covenant, agree, assign and grant as follows:
1. DEFINITIONS. Capitalized terms used in this Assignment and not
otherwise defined in this Assignment shall have the meanings defined for those
terms in the Loan Agreement. Terms defined in the California Commercial Code
and not otherwise defined in this Assignment or in the Loan Agreement shall have
the meanings defined for those terms in the California Commercial Code. As used
herein, the term "INCLUDING" is by way of example and not limitation. As used
in this Assignment, the following terms shall have the meanings respectively set
forth after each:
"ASSIGNMENT" means this Patent Collateral Assignment, and any
extensions, modifications, renewals, restatements, supplements or
amendments hereof, INCLUDING any documents or agreements by which
additional Grantors become party hereto.
"COLLATERAL" means and includes all of the following: (a) all of
Grantors' presently existing and filed, or hereafter acquired, right,
title, and interest in and to all of Grantors' patents and pending patent
applications and United States and international registrations thereof,
INCLUDING those listed on SCHEDULE 1 hereto, the right to sue for past,
present, and future infringements, all rights corresponding thereto
throughout the world, and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and all improvements thereon
and inventions relating thereto and all proceeds of the foregoing,
including but not limited to, proceeds of licensing (the "PATENTS");
(b) all applications, registrations, and recordings relating to the
foregoing in the United States Patent and Trademark Office ("USPTO") or in
any similar office or agency of the United States, any State thereof, or
any political subdivision thereof, or in any other countries, and all
reissues, extensions, and renewals thereof; EXCEPT for those jointly held
and classified patents listed on Schedule X hereto.
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"GRANTORS" means Titan Information Systems Corporation, a Delaware
corporation, and each of them, and any one or more of them, jointly and
severally.
"GOVERNMENTAL AGENCY" means any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality
or public body, court, administrative tribunal or public utility.
"LAWS" means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"LIEN" means any lien, pledge, security interest or other charge or
encumbrance of any kind, whether voluntarily incurred or arising by
operation of Law or otherwise.
"LOAN DOCUMENTS" means, collectively, the Loan Agreement, the
Revolving Line Note (described in the Fourth Amendment), the Fourth
Amendment, this Assignment and any other certificates, documents or
agreements of any type or nature heretofore or hereafter executed and
delivered by Borrower or any Grantor to Secured Party in any way relating
to or in furtherance of the Loan Agreement, in each case either as
originally executed or as the same may from time to time be supplemented,
modified, amended, restated, extended or supplanted.
"PERSON" means any entity, whether an individual, trustee,
corporation, limited liability company, partnership, trust, unincorporated
organization, or otherwise.
"RIGHT OF OTHERS" means, as to any property in which a Person has an
interest, any legal or equitable right, title, claim or other interest
(other than a Lien) in or with respect to such property held by any other
Person, and any option or right held by any other Person to acquire any
such right, title, claim or other interest in or with respect to such
property, including any option or right to acquire a Lien.
"SECURED OBLIGATIONS" means any and all present and future obligations
of any type or nature of Borrower, Grantors or any one or more of them to
Secured Party arising under or relating to the Loan Documents
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or any one or more of them, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or noncontingent,
INCLUDING obligations of performance as well as obligations of payment, and
INCLUDING interest that accrues after the commencement of any bankruptcy or
insolvency proceeding by or against Borrower or any Grantor.
"SUBSIDIARY" means, as of any date of determination and with respect
to any Person, any corporation, limited liability company, partnership or
joint venture, whether now existing or hereafter organized, formed or
acquired: (a) in the case of a corporation, of which a majority of the
securities having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned by such Person
and/or one or more Subsidiaries of such Person, or (b) in the case of a
limited liability company, of which a majority of the member interests are
at the time beneficially owned by such Person and/or one or more
Subsidiaries of such Person, or (c) in the case of a partnership or joint
venture, of which such Person or a Subsidiary of such Person is a general
partner or joint venturer or of which a majority of the partnership or
other ownership interests are at the time beneficially owned by such Person
and/or one or more of its Subsidiaries.
2. INCORPORATION OF REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER
PROVISIONS OF LOAN DOCUMENTS. All representations, warranties, affirmative and
negative covenants and other provisions contained in any Loan Document that are
applicable to Loan Documents generally are fully applicable to this Assignment
and are incorporated herein by this reference as though set forth herein in
full.
3. ASSIGNMENT. For valuable consideration, Grantors and each of
them hereby jointly and severally grant, assign, and convey to Secured Party, to
secure the prompt and indefeasible payment and performance of the Secured
Obligations, and each of them, a security interest in all of the presently
existing and hereafter acquired Collateral. This Assignment is a continuing and
irrevocable agreement and all the rights, powers, privileges and remedies
hereunder shall apply to any and all Secured Obligations, INCLUDING those
arising under successive transactions which shall either continue the Secured
Obligations, increase or decrease them, or from time to time create new Secured
Obligations after all or any prior Secured Obligations have been satisfied, and
notwithstanding
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the bankruptcy of any Grantor or any other Person or any other event or
proceeding affecting any Person.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Grantor
represents, warrants and agrees that:
(a) All of the existing Collateral is valid, subsisting and
enforceable, and Grantors own the sole, full, and marketable title thereto,
and the right and power to grant the security interests granted hereunder.
Without limiting the foregoing, Grantors have filed all renewal affidavits
and applications, and paid all maintenance fees, necessary to maintain the
existence of the Collateral as valid, subsisting and registered patents.
Grantors shall, at their expense, perform all acts and execute all
documents necessary to maintain the existence of the Collateral as valid,
subsisting, and registered patents, INCLUDING the filing of any renewal
affidavits and applications and payment of all maintenance fees. The
Collateral is not subject to any Liens, Rights of Others, claims,
assignments or licenses (except as disclosed to Secured Party in writing)
of any nature whatsoever, whether recorded or unrecorded.
(b) As of the date hereof, none of Grantors nor any of their
Subsidiaries has any Patents registered, or subject to pending
applications, in the USPTO, or any similar office or agency in the United
States, or any other country other than those described in SCHEDULE 1.
(c) EXCEPT as listed on SCHEDULE 2, to the best of Grantors'
knowledge, there are no actions, suits, proceedings or investigations
pending or threatened in writing against any Grantor before any
Governmental Agency which, if determined adversely to such Grantor, would
cause the Collateral, or any portion thereof, to be adjudged invalid or
unenforceable, in whole or in part.
(d) No Grantor nor any Subsidiary of any Grantor shall assign,
sell, mortgage, lease, transfer, pledge, hypothecate, grant a security
interest in or Lien upon, encumber, grant an exclusive or nonexclusive
license or sublicense relating thereto, or otherwise dispose of, any of the
Collateral without the prior written consent of Secured Party. Nothing in
this Assignment shall be deemed a consent by Secured Party to any such
action, EXCEPT as such action is expressly permitted hereunder.
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(e) Grantors shall promptly notify Secured Party in writing (and
in advance, if possible) if any Grantor or any Subsidiary of any Grantor
shall file any application for the registration of a patent with the USPTO
or any similar office or agency in the United States, any State therein, or
any other country. Upon request of Secured Party, Grantors shall, and
shall cause any such Subsidiary to, execute and deliver to Secured Party
any and all assignments, agreements, instruments, documents, and such other
papers as may be requested by Secured Party to evidence the assignment to
Secured Party of such patent. Each Grantor authorizes Secured Party to
modify this Assignment by amending SCHEDULE 1 to include any new patent or
renewal of any Grantor applied for and obtained hereafter.
(f) No Grantor has abandoned any of the Patents (except as
disclosed in Schedule X), and no Grantor nor any Subsidiary of any Grantor
will do any act, or omit to do any act, whereby the Patents may become
abandoned, cancelled, invalidated, unenforceable, avoided, or avoidable.
Each Grantor shall promptly notify Secured Party if it knows, or has reason
to know, of any reason why any application, registration, or recording may
become abandoned, cancelled, invalidated, or unenforceable.
(g) Grantors shall render any assistance, as Secured Party may
determine is necessary, to Secured Party in any proceeding before the
USPTO, any federal or state court, or any other foreign or domestic
Governmental Agency, to maintain the Patents and to protect Secured Party's
interest therein, INCLUDING filing of renewals, affidavits of use,
affidavits of incontestability, and opposition, interference, and
cancellation proceedings.
(h) Grantors assume all responsibility and liability arising
from the use of the Patents, and each Grantor hereby indemnifies and holds
Secured Party harmless from and against any claim, suit, loss, damage, or
expense (INCLUDING reasonable attorneys' fees) arising out of any alleged
defect in any product manufactured, promoted, or sold by any Grantor (or
any affiliate or Subsidiary thereof) in connection with any Patent or out
of the manufacture, promotion, labeling, sale, or advertisement of any such
product by any Grantor or any Affiliate or Subsidiary thereof (INCLUDING
patent infringement and contributory patent suits that may be brought
against Secured Party).
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(i) In any action or proceeding instituted by Secured Party in
connection with any matters arising at any time out of, or with respect to,
this Assignment, no Grantor will interpose any counterclaim of any nature.
(j) Grantors shall promptly notify Secured Party in writing of
the institution of, and adverse determination in, any proceeding in the
USPTO or any other foreign or domestic Governmental Agency, court or body,
regarding any Grantor's claim of ownership in any of the Patents. In
addition, Grantors shall promptly notify Secured Party in writing if any
Grantor (or any affiliate or Subsidiary thereof) learns of any use by any
Person of any term or design likely to cause confusion with any of the
Patents, or of any material use by any Person of any other process or
product which infringes upon any of the Patents. In the event of any
material infringement of any of the Patents by a third Person, Grantors
shall promptly notify Secured Party of such infringement. If Grantors shall
fail to sue for and diligently pursue damages for such infringement within
one (1) month after such notice is given to Secured Party, Secured Party
may, but shall not be required to, itself take such action in the name of
any or all Grantors, and each Grantor hereby appoints Secured Party the
true and lawful attorney of Grantors, and each of them, for them and in
their name, place and stead, on behalf of Grantors, to commence judicial
proceedings in any court or before any other Governmental Agency to enjoin
and recover damages for such infringement, any such damages due to
Grantors, net of costs and reasonable attorneys' fees, to be applied to the
Secured Obligations. If requested by Secured Party, Grantors, at their
expense, shall join with Secured Party in such action as Secured Party in
Secured Party's discretion, may deem advisable for the protection of
Secured Party's interest in and to the Patents.
(k) Each Grantor shall, at its sole expense, do, make, execute
and deliver all such additional and further acts, things, deeds,
assurances, and instruments, in each case in form and substance reasonably
satisfactory to Secured Party, relating to the creation, validity, or
perfection of the security interests and collateral assignments provided
for in this Assignment under 35 U.S.C. Section 261, the California
Commercial Code or other Law of the United States, the State of California,
or of any countries or other States as Secured Party may from time to time
reasonably request, and shall take all such other action as Secured Party
may reasonably require to more completely vest in and assure to Secured
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Party its rights hereunder or in any of the Collateral. In the event that
any recording or refiling (or the filing of any statement of continuation
or assignment of any financing statement) or any other action, is required
at any time to protect and preserve such security interest and collateral
assignments, Grantors shall, at their sole cost and expense, cause the same
to be done or taken at such time and in such manner as may be necessary and
as may be reasonably requested by Secured Party. Each Grantor hereby
authorizes Secured Party to execute and file one or more financing
statements (or similar documents) with respect to the Collateral signed
only by Secured Party. Each Grantor further authorizes Secured Party to
have this Assignment, a duplicate original or exact copy of this
Assignment, or any other similar assignment or security agreement recorded
or filed with the Commissioner of Patents and Trademarks or other
appropriate federal, state or government office.
(l) Secured Party may, in its sole discretion, pay any amount,
or do any act which Grantors fail to pay or do as required hereunder or as
requested by Secured Party to preserve, defend, protect, maintain, record,
amend, or enforce the Secured Obligations, the Collateral, or the security
interests granted hereunder, INCLUDING, but not limited to, all filing or
recording fees, renewal fees, court costs, collection charges, and
reasonable attorneys' fees. Grantors will be liable to Secured Party for
any such payment, which payment shall be deemed an advance by Secured Party
to Borrower, shall be payable on demand, together with interest at the
Default Rate, and shall be part of the Secured Obligations.
5. LICENSE. Effective upon the occurrence and continuation of an Event
of Default, each Grantor hereby grants to Secured Party a royalty-free right and
exclusive license to make, use and sell the Collateral, and the subject matter
thereof, for Secured Party's benefit and account, and for none other.
6. EVENTS OF DEFAULT. Any one of the following events shall
constitute an Event of Default hereunder:
(a) any default under the Loan Agreement or any other Loan
Document shall have occurred and be continuing;
(b) any failure by Grantor to observe or perform any covenant or
agreement contained in this Assignment for more than ten (10) calendar days
after receipt from Secured Party of notice of such default; or
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(c) any representation or warranty made by Grantor in this
Assignment shall prove to have been false or incorrect in any material
respect when made.
7. RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, in addition to all other rights and remedies
of Secured Party, whether provided under Law, the Loan Agreement or otherwise,
Secured Party shall have the following rights and remedies, which may be
exercised without notice to, or consent by, Grantor, EXCEPT as such notice or
consent is expressly provided for hereunder:
(a) Secured Party may use any of the Patents for the sale of
goods, completion of work in process, or rendering of services in
connection with enforcing any security interest granted to Secured Party by
Grantors or any Subsidiary of any Grantor.
(b) Secured Party may grant such license or licenses relating to
the Collateral for such term or terms, on such conditions and in such
manner, as Secured Party shall, in its sole discretion, deem appropriate.
Such license or licenses may be general, special, or otherwise, and,
subject to the rights of any other then existing licensee, may be granted
on an exclusive or nonexclusive basis throughout all or part of the
United States of America, its territories and possessions, and all foreign
countries.
(c) Secured Party may assign, sell, or otherwise dispose of the
Collateral, or any part thereof, either with or without special conditions
or stipulations, EXCEPT that Secured Party agrees to provide Grantors with
five (5) days' prior written notice of any proposed disposition of the
Collateral. The requirement of sending notice conclusively shall be met if
such notice is mailed, first class mail, postage prepaid, to Borrower, on
behalf of all Grantors, in accordance with the notice provisions of the
Loan Agreement. Each Grantor hereby irrevocably appoints Borrower as its
agent for the purpose of receiving notice of sale hereunder, and agrees
that such Grantor conclusively shall be deemed to have received notice of
sale when notice of sale has been given to Borrower. Each Grantor
expressly waives any right to receive notice of any public or private sale
of any Collateral or other security for the Secured Obligations EXCEPT as
expressly provided in this SECTION 7(c). Secured Party shall have the
power to buy the Collateral, or any part thereof, and Secured Party shall
also have the
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power to execute assurances and perform all other acts which Secured Party
may, in Secured Party's sole discretion, deem appropriate or proper to
complete such assignment, sale, or disposition.
(d) In addition to the foregoing, in order to implement the
assignment, sale or other disposition of any of the Collateral pursuant to
SECTION 7(c) hereof, Secured Party may, at any time, execute and deliver,
on behalf of Grantors, and each of them, pursuant to the authority granted
in powers of attorney, one or more instruments of assignment of the Patents
(or any application, registration, or recording relating thereto), in form
suitable for filing, recording, or registration. Grantors agree to pay
Secured Party, on demand, all costs incurred in any such transfer of the
Collateral, INCLUDING any taxes, fees, and reasonable attorneys' fees.
(e) Secured Party may first apply the proceeds actually received
from any such license, assignment, sale, or other disposition of Collateral
first to the reasonable costs and expenses thereof, INCLUDING reasonable
attorneys' fees and all other reasonable expenses which may be incurred by
Secured Party in connection with the enforcement of the Secured
Obligations. Thereafter, Secured Party may apply any remaining proceeds to
such of the Secured Obligations as provided in the Loan Agreement.
Grantors shall remain liable to Secured Party for any expenses or Secured
Obligations remaining unpaid after the application of such proceeds, and
Grantors will pay Secured Party, on demand, any such unpaid amount,
together with interest at the Default Rate.
(f) If any such license, assignment, sale, or other disposition
of the Collateral (or any part thereof) is made after the occurrence of an
Event of Default, Grantors shall supply to Secured Party, or Secured
Party's designee, Grantors' knowledge and expertise relating to the
manufacture and sale of the products and services based on the Patents and
Grantors' customer lists and other records relating to the Patents and the
distribution hereof.
Nothing contained herein shall be construed as requiring Secured Party to take
any such action at any time. All of Secured Party's rights and remedies,
whether provided under Law, the Loan Agreement, this Assignment, or otherwise,
shall be cumulative, and none is exclusive of any right or remedy otherwise
provided herein or in any of the other Loan Documents, at Law or in equity.
Such rights and remedies may be enforced alternatively, successively, or
concurrently.
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8. WAIVERS.
(a) Each Grantor hereby waives any and all rights that it may
have to a judicial hearing, if any, in advance of the enforcement of any of
Secured Party's rights hereunder, INCLUDING its rights following any Event
of Default to take immediate possession of the Collateral and exercise its
rights with respect thereto.
(b) Secured Party shall not be required to marshal any present
or future security for (including, but not limited to, this Assignment and
the Collateral subject to a security interest hereunder), or guaranties of,
the Secured Obligations or any of them, or to resort to such security or
guaranties in any particular order. Each Grantor hereby agrees that it
will not invoke any Law relating to the marshalling of collateral which
might cause delay in or impede the enforcement of Secured Party's rights
under this Assignment or any other instrument evidencing any of the Secured
Obligations or by which any of such Secured Obligations is secured or
guaranteed, and each Grantor hereby irrevocably waives the benefits of all
such Laws.
(c) Secured Party shall have no duty as to the protection of the
Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto except as otherwise required by Law. Secured Party may exercise
its rights with respect to the Collateral without resorting or regard to
other collateral or sources of reimbursement for liability.
9. ATTORNEY-IN-FACT. Each Grantor hereby irrevocably nominates and
appoints Secured Party as its attorney-in-fact for the following purposes: (a)
to do all acts and things which Secured Party may deem necessary or advisable to
perfect and continue perfected the security interests created by this Assignment
and, upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which such Grantor is obligated to do under this Assignment, at the
expense of Grantors and without any obligation to do so; (c) to prepare, sign,
file and/or record, for Grantors, in the name of any and/or all Grantors, any
financing statement, application for registration, or like paper, and to take
any other action deemed by Secured Party necessary or desirable in order to
perfect or maintain perfected the security interests granted hereby; and (d)
upon the occurrence and
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during the continuance of an Event of Default, to execute any and all papers and
instruments and do all other things necessary or desirable to preserve and
protect the Collateral and to protect Secured Party's security interests
therein; PROVIDED, HOWEVER, that Secured Party shall be under no obligation
whatsoever to take any of the foregoing actions, and, absent bad faith or actual
malice, Secured Party shall have no liability or responsibility for any act
taken or omission with respect thereto.
10. COSTS AND EXPENSES.
(a) Grantors shall pay any and all charges, costs and taxes
incurred in implementing or subsequently amending this Assignment,
INCLUDING, recording and filing fees, appraisal fees, stamp taxes, and
reasonable fees and disbursements of Secured Party's counsel incurred by
Secured Party, and the allocated cost of in-house counsel to Secured Party,
in connection with this Assignment, and in the enforcement of this
Assignment and in the enforcement or foreclosure of any Liens, security
interests or other rights of the Secured Party under this Assignment, or
under any other documentation heretofore, now, or hereafter given to
Secured Party in furtherance of the transactions contemplated hereby.
(b) Grantors agree to reimburse Secured Party for and indemnify
it against, any and all losses, expenses and liabilities (INCLUDING
liabilities for penalties) of whatever kind or nature sustained and
reasonably incurred in connection with any claim, demand, suit or legal or
arbitration proceeding relating to this Assignment, or the exercise of any
rights or powers hereunder, including reasonable attorneys' fees and
disbursements, and the allocated cost of in-house counsel to the Secured
Party.
11. MISCELLANEOUS.
(a) Grantors and Secured Party may from time to time agree in
writing to the release of certain of the Collateral from the security
interests created hereby.
(b) This Assignment and all rights and obligations hereunder,
INCLUDING matters of construction, validity and performance, shall be
governed by the Laws of the United States, and, to the extent that the Laws
of the United States are not applicable, by the Laws of the State of
California.
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<PAGE>
(c) Any notice, request, demand or other communication required
or permitted under this Assignment shall be in writing and shall be deemed
to be properly given if done in accordance with SECTION 8.7 of the Loan
Agreement. The address set forth in such section shall be the address for
each Grantor.
(d) EXCEPT as otherwise set forth in the Loan Agreement, the
provisions of this Assignment may not be modified, amended, restated or
supplemented, whether or not the modification, amendment, restatement or
supplement is supported by new consideration, EXCEPT by a written
instrument duly executed and delivered by Secured Party and Grantors.
(e) EXCEPT as otherwise set forth in the Loan Agreement or this
Assignment, any waiver of the terms and conditions of this Assignment, or
any Event of Default and its consequences hereunder or thereunder, and any
consent or approval required or permitted by this Assignment to be given,
may be made or given with, but only with, the written consent of Secured
Party on such terms and conditions as specified in the written instrument
granting such waiver, consent or approval.
(f) Any failure or delay by Secured Party to require strict
performance by Grantors of any of the provisions, warranties, terms, and
conditions contained herein, or in any other agreement, document, or
instrument, shall not affect Secured Party's right to demand strict
compliance and performance therewith, and any waiver of any default shall
not waive or affect any other default, whether prior or subsequent thereto,
and whether of the same or of a different type. None of the warranties,
conditions, provisions, and terms contained herein, or in any other Loan
Document, shall be deemed to have been waived by any act or knowledge of
Secured Party, its agents, officers, or employees, but only by an
instrument in writing, signed by an officer of Secured Party and directed
to Grantors, specifying such waiver.
(g) In the event of any ACTUAL, IRRECONCILABLE conflict between
any provision hereof and any provision of the Loan Agreement, it is
intended that the provision of the Loan Agreement shall control; PROVIDED
that the inclusion of additional obligations on the part of any Grantor and
supplemental rights and remedies in favor of Secured Party herein shall not
be deemed a conflict with the Loan Agreement.
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<PAGE>
(h) This Assignment shall be binding upon, and for the benefit
of, the parties hereto and their respective legal representatives,
successors, and assigns.
(i) This Assignment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same agreement.
12. CONTINUING EFFECT. This Assignment shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable Law, rescinded or reduced in
amount, or must otherwise be restored or returned by Secured Party, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment and performance had not been made. In the event that any payment or any
part thereof is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
13. RELEASE OF GRANTORS. This Assignment and all Secured Obligations
of Grantors hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitment remains outstanding. Upon such release of Grantors' Secured
Obligations hereunder, Secured Party shall return any Collateral to Grantors, or
to the Person or Persons legally entitled thereto, and shall endorse, execute,
deliver, record and file all instruments and documents, and do all other acts
and things, reasonably required for the return of the Collateral to Grantors, or
to the Person or Persons legally entitled thereto, and to evidence or document
the release of Secured Party's interests arising under this Assignment, all as
reasonably requested by, and at the sole expense of, Grantors.
14. INCORPORATION OF SURETYSHIP PROVISIONS AND WAIVERS. The attached
EXHIBIT A, "Suretyship Provisions and Waivers," is hereby incorporated by this
reference as though set forth herein in full.
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<PAGE>
15. WAIVER OF JURY TRIAL. The parties to this Assignment acknowledge
that jury trials often entail additional expenses and delays not occasioned by
nonjury trials. The parties to this Assignment further agree and stipulate that
a fair trial may be had before a state or federal judge by means of a bench
trial without a jury. In view of the foregoing, and as a specifically
negotiated provision of this Assignment, each party to this Assignment hereby
expressly waives any right to trial by jury of any claim, demand, action or
cause of action (1) arising under this Assignment or any other instrument,
document or agreement executed or delivered in connection herewith, or (2) in
any way connected with or related or incidental to the dealings of the parties
hereto or any of them with respect to this Assignment or any other instrument,
document or agreement executed or delivered in connection herewith, or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether sounding in contract or tort or otherwise; and
each party hereby agrees and consents that any such claim, demand, action or
cause of action shall be decided by court trial without a jury, and that any
party to this Assignment may file an original counterpart or a copy of this
section with any court as written evidence of the consent of the parties hereto
to the waiver of their right to trial by jury.
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<PAGE>
IN WITNESS WHEREOF, each Grantor has executed this Assignment by its
duly authorized officer as of the date first written above.
"GRANTORS":
TITAN INFORMATION SYSTEMS CORPORATION, a
Delaware corporation
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
By
------------------------------------------
------------------------------------------
[Printed Name and Title]
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<PAGE>
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
"SECURED PARTY":
SUMITOMO BANK OF CALIFORNIA
By
---------------------------
---------------------------
[Printed Name and Title]
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<PAGE>
EXHIBIT A
SURETYSHIP PROVISIONS AND WAIVERS
16. WAIVERS AND CONSENTS. Each Grantor acknowledges that the Liens
created or granted herein will or may secure obligations of Persons other than
such Grantor and, in full recognition of that fact, each Grantor consents and
agrees that Secured Party may, at any time and from time to time, without notice
or demand, and without affecting the enforceability or security hereof:
(a) supplement, modify, amend, extend, renew, accelerate, or
otherwise change the time for payment or the terms of the Secured
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon;
(b) supplement, modify, amend or waive, or enter into or give
any agreement, approval or consent with respect to, the Secured Obligations
or any part thereof or any of the Loan Documents or any additional security
or guaranties, or any condition, covenant, default, remedy, right,
representation or term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Secured Obligations or any part thereof;
(d) accept partial payments on the Secured Obligations;
(e) receive and hold additional security or guaranties for the
Secured Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, subordinate,
exchange, substitute, transfer and enforce any security or guaranties, and
apply any security and direct the order or manner of sale thereof as
Secured Party in its sole and absolute discretion may determine;
(g) release any Person or any guarantor from any personal
liability with respect to the Secured Obligations or any part thereof;
(h) settle, release on terms satisfactory to Secured Party or by
operation of applicable laws or otherwise liquidate or enforce any
EXHIBIT A -- Page 1
<PAGE>
Secured Obligation and any security or guaranty therefor in any manner,
consent to the transfer of any security and bid and purchase at any sale;
and
(i) consent to the merger, change or any other restructuring or
termination of the corporate existence of Borrower or any other Person, and
correspondingly restructure the Secured Obligations, and any such merger,
change, restructuring or termination shall not affect the liability of any
Grantor or the continuing existence of any Lien hereunder, under any other
Loan Document to which any Grantor is a party or the enforceability hereof
or thereof with respect to all or any part of the Secured Obligations.
Upon the occurrence of and during the continuance of any Event of
Default, Secured Party may enforce this Assignment independently as to each
Grantor and independently of any other remedy or security Secured Party at any
time may have or hold in connection with the Secured Obligations, and it shall
not be necessary for Secured Party to marshal assets in favor of any Grantor,
Borrower or any other Person or to proceed upon or against and/or exhaust any
other security or remedy before proceeding to enforce this Assignment. Each
Grantor expressly waives any right to require Secured Party to marshal assets in
favor of such Grantor, Borrower or any other Person or to proceed against any
other Person or any collateral provided by any other Person, and agrees that
Secured Party may proceed against any Person and/or collateral in such order as
it shall determine in its sole and absolute discretion. Secured Party may file
a separate action or actions against any Grantor, whether action is brought or
prosecuted with respect to any other security or against any other Grantor,
Borrower or any other Person, or whether any other Person is joined in any such
action or actions. Each Grantor agrees that Secured Party and Borrower and any
other Person may deal with each other in connection with the Secured Obligations
or otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the security of this Assignment. Secured Party's rights hereunder
shall be reinstated and revived, and the enforceability of this Assignment shall
continue, with respect to any amount at any time paid on account of the Secured
Obligations which thereafter shall be required to be restored or returned by
Secured Party upon the bankruptcy, insolvency or reorganization of Borrower, any
Grantor or any other Person, or otherwise, all as though such amount had not
been paid. The Liens created or granted herein and the enforceability of this
Assignment at all times shall remain effective to secure the full amount of all
the Secured Obligations including, without limitation, the amount of all loans
and interest thereon at the rates provided for in the Loan Agreement and the
note(s) thereunder, even though the Secured Obligations, including any part
thereof or
EXHIBIT A -- Page 2
<PAGE>
any other security or guaranty therefor, may be or hereafter may become invalid
or otherwise unenforceable as against Borrower or any other Person and whether
or not Borrower or any other Person shall have any personal liability with
respect thereto. Each Grantor expressly waives any and all defenses now or
hereafter arising or asserted by reason of (a) any disability or other defense
of Borrower or any other Person with respect to the Secured Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Secured
Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Secured Obligations, (c) the cessation for any
cause whatsoever of the liability of Borrower or any other Person (other than by
reason of the full payment and performance of all Secured Obligations), (d) any
failure of Secured Party to marshal assets in favor of such Grantor or any other
Person, (e) except as otherwise provided in this Assignment, any failure of
Secured Party to give notice of sale or other disposition of collateral to such
Grantor or any other Person or any defect in any notice that may be given in
connection with any sale or disposition of collateral, (f) except as otherwise
provided in this Assignment, any failure of Secured Party to comply with
applicable Laws in connection with the sale or other disposition of any
collateral or other security for any Secured Obligation, including without
limitation any failure of Secured Party to conduct a commercially reasonable
sale or other disposition of any collateral or other security for any Secured
Obligation, (g) any act or omission of Secured Party or others that directly or
indirectly results in or aids the discharge or release of Borrower, any Grantor
or any other Person or the Secured Obligations or any other security or guaranty
therefor by operation of law or otherwise, (h) any Law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of Secured Party to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person, (j) the election by Secured Party,
in any bankruptcy proceeding of any Person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy Code,
(k) any extension of credit or the grant of any Lien under Section 364 of the
United States Bankruptcy Code, (l) any use of cash collateral under Section 363
of the United States Bankruptcy Code, (m) any agreement or stipulation with
respect to the provision of adequate protection in any bankruptcy proceeding of
any Person, (n) the avoidance of any Lien in favor of Secured Party for any
reason, (o) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against any Person, including any discharge of, or bar or stay against
collecting, all or any of the Secured Obligations (or any interest thereon) in
or as a result of any such proceeding, or (p) to the extent permitted, the
benefits of any form of one-action
EXHIBIT A -- Page 3
<PAGE>
rule. Until no part of any commitment to lend remains outstanding and all of
the Secured Obligations have been paid and performed in full, Grantors shall
have no right of subrogation, contribution, reimbursement or indemnity, and each
Grantor expressly waives any right to enforce any remedy that Secured Party now
has or hereafter may have against any other Person and waives the benefit of, or
any right to participate in, any other security now or hereafter held by Secured
Party. Each Grantor waives all rights and defenses arising out of an election
of remedies by Secured Party, even though that election of remedies, such as a
non-judicial foreclosure with respect to security for the obligations has
destroyed such Grantor's rights of subrogation and reimbursement of principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise. Each
Grantor expressly waives all setoffs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Secured
Obligations, and all notices of acceptance of this Assignment or of the
existence, creation or incurring of new or additional Secured Obligations.
17. CONDITION OF BORROWER AND ITS SUBSIDIARIES. Each Grantor
represents and warrants to Secured Party that such Grantor has established
adequate means of obtaining from Borrower, on a continuing basis, financial and
other information pertaining to the businesses, operations and condition
(financial and otherwise) of Borrower and its properties, and such Grantor now
is and hereafter will be completely familiar with the businesses, operations and
condition (financial and otherwise) of Borrower and its properties. Each
Grantor hereby expressly waives and relinquishes any duty on the part of Secured
Party to disclose to such Grantor any matter, fact or thing related to the
businesses, operations or condition (financial or otherwise) of Borrower or its
properties, whether now known or hereafter known by Secured Party during the
life of this Assignment. With respect to any of the Secured Obligations,
Secured Party need not inquire into the powers of Borrower or any officers or
employees acting or purporting to act on its behalf, and all Secured Obligations
made or created in good faith reliance upon the professed exercise of such
powers shall be secured hereby.
18. LIENS ON REAL PROPERTY. In the event that all or any part of the
Secured Obligations at any time are secured by any one or more deeds of trust or
mortgages creating or granting Liens on any interests in real property, each
Grantor authorizes Secured Party, upon the occurrence of and during the
continuance of any Event of Default, at its sole option, without notice or
demand and without affecting any Secured Obligation, the enforceability of this
Assignment, or
EXHIBIT A -- Page 4
<PAGE>
the validity or enforceability of any Liens of Secured Party on any collateral,
to foreclose any or all of such deeds of trust or mortgages by judicial or
nonjudicial sale. Each Grantor expressly waives any defenses to the enforcement
of this Assignment or any Liens created or granted hereby or to the recovery by
Secured Party against Borrower or any other Person liable therefor of any
deficiency after a judicial or nonjudicial foreclosure or sale, even though such
a foreclosure or sale may impair the subrogation rights of such Grantor and may
preclude such Grantor from obtaining reimbursement or contribution from any
other Person. Each Grantor expressly waives any defenses or benefits that may
be derived from California Code of Civil Procedure Sections 580a, 580b, 580d or
726, or comparable provisions of the Laws of any other jurisdiction, including,
without limitation, and all other suretyship defenses it otherwise might or
would have under California Law or other applicable Law.
19. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding anything to the
contrary elsewhere contained herein or in any other Loan Document to which any
Grantor is a party, until such time, if any, as all of the Secured Obligations
have been paid and performed in full and no portion of the Commitment remains in
effect, each Grantor hereby waives with respect to Borrower and its successors
and assigns (including any surety) and any other Person any and all rights at
Law or in equity, to subrogation, to reimbursement, to exoneration, to
contribution, to setoff or to any other rights that could accrue to a surety
against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, or to a holder or transferee
against a maker and which such Grantor may have or hereafter acquire against
Borrower or any other Person in connection with or as a result of such Grantor's
execution, delivery and/or performance of this Assignment or any other Loan
Document to which such Grantor is a party. Each Grantor agrees that it shall
not have or assert any such rights against Borrower or its successors and
assigns or any other Person (including any surety), either directly or as an
attempted setoff to any action commenced against such Grantor by Borrower (as
borrower or in any other capacity) or any other Person. Each Grantor hereby
acknowledges and agrees that this waiver is intended to benefit Secured Party
and shall not limit or otherwise affect such Grantor's liability hereunder,
under any other Loan Document to which such Grantor is a party, or the
enforceability hereof or thereof.
20. WAIVER OF DISCHARGE. Without limiting the generality of the
foregoing, each Grantor hereby waives discharge by waiving all defenses based on
suretyship or impairment of collateral.
EXHIBIT A -- Page 5
<PAGE>
21. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS. Each
Grantor warrants and agrees that each of the waivers and consents set forth
herein is made with full knowledge of its significance and consequences, with
the understanding that events giving rise to any defense waived may diminish,
destroy or otherwise adversely affect rights which such Grantor otherwise may
have against Borrower, Secured Party or others, or against collateral, and that,
under the circumstances, the waivers and consents herein given are reasonable
and not contrary to public policy or Law. If any of the waivers or consents
herein are determined to be contrary to any applicable Law or public policy,
such waivers and consents shall be effective to the maximum extent permitted by
Law.
EXHIBIT A -- Page 6
<PAGE>
EXHIBIT 10.7
FORM OF
CONTINUING GUARANTY
For valuable consideration, the undersigned ("Guarantors")
unconditionally guarantee and promise to pay The Sumitomo Bank of California
("Bank"), or order, on demand, in lawful money of the United States, any and all
Indebtedness of The Titan Corporation, a Delaware corporation ("Borrowers"), to
Bank. The word "Indebtedness" is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and liabilities of
Borrowers or any one or more of them heretofore, now, or hereafter made,
incurred or created, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether Borrowers may be liable individually or
jointly with others, or whether recovery upon the Indebtedness may be or
hereafter becomes barred by any statute of limitations, or whether the
Indebtedness may be or hereafter becomes otherwise unenforceable.
1. LIABILITY. The Indebtedness guaranteed hereby for which
Guarantors shall be liable shall include, without limitation, all indebtedness
and obligations owing in connection with that certain Commercial Loan Agreement
dated August 6, 1994 between Bank and The Titan Corporation, as amended,
pursuant to which Bank has agreed to advance to Borrowers up to Twenty-Two
Million Dollars ($22,000,000).
2. CONTINUING GUARANTY. This is a continuing guaranty relating to
any Indebtedness, including that arising under successive transactions which
shall either continue or from time to time renew the Indebtedness whether or not
any prior Indebtedness has been satisfied. This guaranty shall not apply to any
new Indebtedness created after actual receipt by Bank of written notice of its
revocation. Revocations of this guaranty must be in writing. Said written
revocation shall not apply to extensions or renewals of Indebtedness in
existence at the time of receipt of the written revocation, or any advances made
in connection with the Indebtedness existing at the time of the receipt of the
written revocation. Notwithstanding the full payment of any Indebtedness, this
guaranty shall remain in effect or be reinstated with respect to such
Indebtedness if, in connection with bankruptcy, insolvency or similar
proceedings filed by or against the Borrowers, a court enters an order or
judgment compelling or requiring the Bank to return any or all payments made
with respect to such Indebtedness.
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3. OBLIGATIONS OF GUARANTORS ARE INDEPENDENT. The obligations
hereunder are independent of the obligations of Borrowers, and a separate action
or actions may be brought and prosecuted against Guarantors whether action is
brought against Borrowers or whether Borrowers are joined in any such action or
actions; and Guarantors waive the benefit of any statute of limitations
affecting their liability hereunder or the enforcement thereof to the extent
permitted by law. Any partial payment by Borrowers or other circumstance which
operates to toll any statute of limitations as to Borrowers shall operate to
toll the statute of limitations as to Guarantors. In addition, the obligations
hereunder are in addition to the obligations of Guarantors under any other
present or future guaranty of any liability or obligation of Borrowers or any
other person.
4. AUTHORITY TO MODIFY INDEBTEDNESS. Guarantors authorize Bank,
without notice or demand and without affecting their liability hereunder or
under any other document related to the Indebtedness to which any of the
Guarantors is a party, from time to time to (a) renew, compromise, extend,
amend, waive, restructure, refinance, release, accelerate or otherwise change
the time for payment of, or otherwise change the terms of the Indebtedness or
any part thereof, including increasing or decreasing the Indebtedness or the
rate of interest thereon; (b) accept new or additional documents, instruments or
agreements relative to the Indebtedness; (c) consent to the change, restructure
or termination of the corporate structure of Borrower and correspondingly
restructure the Indebtedness; (d) take and hold security or additional
guarantees for the payment of this guaranty or the Indebtedness guaranteed, and
amend, alter, exchange, substitute, transfer, enforce, waive, subordinate,
terminate or release any such security; (e) apply such security and direct the
order or manner of sale thereof as Bank in its discretion may determine;
(f) release or substitute any one or more of the endorsers or guarantors;
(g) accept partial payment on the Indebtedness; and (h) assign this Guaranty in
whole or in part.
5. WAIVER OF RIGHTS AND DEFENSES. Guarantors waive any right to
require Bank to (a) proceed against Borrowers or any other person; (b) proceed
against or exhaust any security held from Borrowers; or (c) pursue any other
remedy in Bank's power whatsoever. Bank may, at its election, exercise any
right or remedy it may have against Borrowers or any security held by Bank,
including without limitation the right to foreclose upon any such security by
judicial or nonjudicial sale, without affecting or impairing in any way the
liability of Guarantors hereunder except to the extent the Indebtedness has been
paid, and Guarantors waive any defense arising out of the absence, impairment or
loss of any right of reimbursement or subrogation or other right or remedy of
Guarantors against Borrowers or any such security, whether resulting from such
election by Bank or otherwise. Without limiting the foregoing or any other
provision of this guaranty, Guarantors waive any defense based upon or arising
by reason of:
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<PAGE>
(i) any disability or other defense of Borrowers or any other person; (ii) the
cessation or limitation from any cause whatsoever, other than payment in full,
of the Indebtedness of Borrowers or any other person; (iii) any lack of
authority of any officer, director, partner, agent or any other person acting or
purporting to act on behalf of Borrowers, or any defect in the formation of
Borrowers; (iv) the application by Borrowers of the proceeds of any Indebtedness
for purposes other than the purposes represented by Borrowers to Guarantors
and/or Bank, or intended or understood by Guarantors and/or Bank; (v) any act or
omission by Bank which directly or indirectly results in or aids the discharge
of Borrowers or any Indebtedness by operation of law or otherwise; or (vi) any
modification of the Indebtedness, in any form whatsoever, including any
modification made after revocation hereof, to any Indebtedness incurred prior to
such revocation, and including without limitation the renewal, extension,
acceleration or other change in time for payment of the Indebtedness, or other
change in the terms of the Indebtedness or any part thereof, including increase
or decrease of the rate of interest thereon. Until all Indebtedness of
Borrowers to Bank shall have been paid in full, even though such Indebtedness is
in excess of Guarantors' liability hereunder, Guarantors shall have no right of
subrogation, and waive any right to enforce any remedy which Bank now has or may
hereafter have against Borrowers, and waive any benefit of, and any right to
participate in any security now or hereafter held by Bank. Guarantors waive all
presentments, demands for performance, notices of non-performance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
guaranty and of the existence, creation, or incurring of new or additional
Indebtedness.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, GUARANTORS EXPRESSLY
WAIVE ANY RIGHT, DEFENSE OR BENEFIT UNDER CALIFORNIA CIVIL CODE SECTIONS 2809,
2810, 2819, 2845, 2849, 2850, AND 2855, AND CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 337, 580a, 580b, 580d AND ANY AMENDMENTS THERETO. GUARANTORS WAIVE
ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY BANK, EVEN
THOUGH THAT ELECTION OF REMEDIES, SUCH AS NONJUDICIAL FORECLOSURE WITH RESPECT
TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED GUARANTORS' RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST BORROWERS BY THE OPERATION OF SECTION 580d
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE. AS AN ADDITIONAL
EXPLANATION, AND WITHOUT LIMITING THE FOREGOING IN ANY MANNER, BANK MAY ELECT TO
FORECLOSE UPON THE REAL PROPERTY SECURING THE INDEBTEDNESS OF BORROWERS PURSUANT
TO THE POWER OF SALE CONTAINED IN ANY DEED OF TRUST SECURING THE INDEBTEDNESS OR
BY A LAWSUIT TO ESTABLISH ANY DEFICIENCY BETWEEN THE INDEBTEDNESS AND THE VALUE
OF THE REAL PROPERTY. IF BANK ELECTS TO FORECLOSE PURSUANT TO THE POWER OF
SALE, CALIFORNIA COURTS HAVE HELD THAT GUARANTORS WILL HAVE A DEFENSE TO ANY
DEFICIENCY BECAUSE GUARANTORS' SUBROGATION RIGHTS AGAINST BORROWERS WILL BE CUT
OFF BY SECTION 580d OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. THE LOSS OF
THOSE
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SUBROGATION RIGHTS GIVES GUARANTORS IMMUNITY FROM ANY DEFICIENCY JUDGMENT.
GUARANTORS, WITH FULL UNDERSTANDING OF THIS IMMUNITY, AND IN RETURN FOR BANK'S
AGREEMENT TO EXTEND CREDIT TO BORROWERS, HEREBY WAIVE, IN ADVANCE, THE BENEFIT
OF THIS ANTIDEFICIENCY DEFENSE AND RELINQUISHES THE RIGHT TO IMMUNITY FROM A
DEFICIENCY JUDGMENT, IF BANK ELECTS TO FORECLOSE BY SALE UNDER THE POWER OF SALE
CONTAINED IN THE DEED OF TRUST.
6. INFORMATION ABOUT BORROWER'S FINANCIAL CONDITION. Guarantors
assume the responsibility for being and keeping themselves informed of the
business, operation and financial condition of Borrowers and of all other
circumstances bearing upon the risk of nonpayment of the Indebtedness which
diligent inquiry would reveal, and agree that absent a written request for such
information by Guarantors, Bank shall have no duty to advise Guarantors of
information, matter, fact or thing now or hereafter known to it regarding such
conditions or any such circumstance.
7. LIENS AND SETOFF. In addition to all liens upon, and rights of
setoff against the moneys, securities or other property of Guarantors given to
Bank by law, Bank shall have a lien upon and a right of setoff against all
moneys, securities and other property of Guarantors, now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account or deposit, or for safekeeping or otherwise; and every such lien and
right of setoff may be exercised without demand upon or notice to Guarantors.
No lien or right of setoff shall be deemed to have been waived by any act or
conduct on the part of Bank, or by any neglect to exercise such right of setoff
or to enforce such lien, or by any delay in so doing; and every right of setoff
and lien shall continue in full force and effect until such right of setoff or
lien is specifically waived or released by an instrument in writing executed by
Bank.
8. ACCELERATION. If this guaranty is secured by a deed of trust,
the deed of trust contains the following statement (Due on Sale clause): Upon
default by Trustor in payment of any indebtedness secured hereby or in
performance of any agreement hereunder, or in the event Trustor or any successor
in interest to Trustor in the property sells, conveys, alienates, assigns or
transfers said property, or any part thereof, or any interest therein, or
becomes divested of Trustor's title or any interest therein in any manner of
way, whether voluntary or involuntary. Beneficiary shall have the right, at its
option, to declare said note or notes and any other indebtedness or obligation
secured hereby, irrespective of maturity dates specified in any note or written
agreement evidencing the same, immediately due and payable without notice or
demand, and no wavier of this right shall be valid or enforceable unless in
writing and signed by Beneficiary.
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9. SUBORDINATION. Any Indebtedness of Borrowers now or hereafter
held by Guarantors is hereby subordinated to the Indebtedness of Borrowers to
Bank; and such Indebtedness of Borrowers to Guarantors is hereby assigned to
Bank as security for this guaranty and if Bank so requests shall be collected,
enforced and received by Guarantors as trustees for Bank and be paid over to
Bank on account of the Indebtedness of Borrowers to Bank but without reducing or
affecting in any manner the liability of Guarantors under the other provisions
of this guaranty.
10. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding anything to the
contrary contained herein or in any other document to which any of the
Guarantors is a party, Guarantors expressly waive any and all rights to
subrogation, reimbursement, exoneration, contribution, setoff or any other
rights that could accrue to a surety against a principal, to a guarantor against
a maker or obligor, to an accommodation party against the party accommodated, or
to a holder or transferee against a maker, and which any of the Guarantors may
have or hereafter acquire against Borrowers or any other person in connection
with or as a result of Guarantors' execution, delivery and/or performance of
this guaranty or any other document to which any of the Guarantors is a party,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law. Guarantors shall not have or assert any such rights
against Borrowers or their successors and assigns or any other person (including
any surety), either directly or as an attempted setoff to any action commenced
against any of the Guarantors by any of the Borrowers (as borrowers or in any
other capacity), Bank or any other person. Guarantors hereby acknowledge and
agree that this waiver is intended to benefit Borrowers and Bank and shall not
limit or otherwise affect Guarantors' liability under this guaranty, under any
other document to which any of the Guarantors is a party, or the enforceability
hereof or thereof. In furtherance, and not in limitation, of the preceding
waiver, Guarantors agree that any payments made by them under this guaranty
shall be deemed a contribution to the capital of Borrowers or other obligated
party and any such payment shall not cause Guarantors to become creditors of
Borrowers or other such party.
11. ADDITIONAL REPRESENTATION AND WARRANTIES. Without limiting any
other provision of this guaranty, Guarantors represent and warrant that (a)
there is an express benefit, either directly or indirectly, to Guarantors in
executing this guaranty, which offsets their liability to Bank under this
guaranty; (b) this Guaranty is executed at Borrowers' request; (c) Guarantor has
not and shall not, without the prior written consent of Bank, sell, lease,
assign, encumber, hypothecate, transfer or otherwise dispose of all or a
substantial or material part of Guarantor's assets other than in the ordinary
course of business; and (d) Bank has made no representation to Guarantor as to
the creditworthiness of any of the Borrowers.
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12. TRANSFER OF GUARANTY. This guaranty shall, without further
reference, pass to and may be relied upon and enforced by any successor or
assignee of Bank and any transferee or subsequent holder of any of the
Indebtedness.
13. AUTHORITY OF OFFICERS. Where any one or more of Borrowers are
corporations or partnerships it is not necessary for Bank to inquire into the
powers of Borrowers or the officers, directors, partners or agents acting or
purporting to act on their behalf, and any Indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
14. ATTORNEYS' FEES. Guarantors agree to pay a reasonable attorneys'
fee and all other costs and expenses which may be incurred by Bank in the
enforcement of this guaranty.
15. RECOURSE TO SEPARATE PROPERTY. Any married person who signs this
guaranty hereby expressly agrees that recourse may be had against his or her
separate property for all his or her obligations under this guaranty.
16. RIGHTS CUMULATIVE. The rights, powers and remedies given to Bank
by this guaranty are cumulative and shall be in addition to and independent of
all rights, powers and remedies given Bank by virtue of any statute, rule of
law, or any agreement between Guarantors and Bank or between Borrowers and Bank.
Any forbearance or failure or delay by Bank in exercising any right, power or
remedy hereunder shall not preclude the further exercise thereof; and every
right, power and remedy of the Bank shall continue in full force and effect
until such right, power or remedy is specifically waived by an instrument in
writing signed by Bank.
17. SUCCESSORS AND ASSIGNS. The guaranty shall bind Guarantors'
successors and assigns. Bank may without notice assign the guaranty in whole or
in part.
18. APPLICABLE LAW. This guaranty shall be governed by, and
construed in accordance with, the laws of the State of California.
19. JOINT AND SEVERAL. The obligations of Guarantors hereunder are
joint and several.
20. SECTION HEADINGS. The section headings used in this guaranty are
for convenience of reference only and shall not limit or otherwise affect this
guaranty.
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21. SINGULAR, PLURAL. Whenever the context requires, all words used
in the singular will be construed to have been used in the plural, and vice
versa, and each gender will include any other gender. Therefore, in all cases
where there is but a single Borrower or a single Guarantor, then all words used
herein in the plural shall be deemed to have been used in the singular where the
context and construction so require; and when there is more than one Borrower
named herein, or when this guaranty is executed by more than one Guarantor, the
word "Borrowers" and the word "Guarantors" respectively shall mean all and any
one or more of them.
22. MODIFICATION. This guaranty may not be amended or modified
except by a writing executed by Bank and Guarantors.
23. ACKNOWLEDGMENTS. Guarantors acknowledge that they have read and
fully understood all of the provisions of this guaranty.
IN WITNESS WHEREOF, the undersigned Guarantors have executed this
guaranty this 6th day of September 1996.
"Guarantors":
TITAN INFORMATION SYSTEMS CORPORATION, a
Delaware corporation
By
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------------------------------------------
[Printed Name and Title]
By
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------------------------------------------
[Printed Name and Title]
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Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 28,
1996 and July 31, 1996 included in The Titan Corporation's Form 10-K for the
year ended December 31, 1995 and Form 8-K/A dated August 7, 1996,
respectively, and to all references to our firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
San Diego, California
August 26, 1996
