**Exhibit 10.50**

 

 

***  Confidential Treatment Requested Under**

**17C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2**

 

 

**AGREEMENT FORPURCHASE OF A**

**SUREBEAM ELECTRONBEAM SYSTEM**

 

 

**BETWEEN**

 

 

**SUREBEAM CORPORATION**

**AND**

**SALUBRIS LIMITEDPARTNERSHIP**

 

----

 

**TABLE OF CONTENTS**

 
| **1.**  | **DEFINITIONS**                                |
|---------|------------------------------------------------|
| **2.**  | **EQUIPMENT AND SERVICES FURNISHED BY SELLER** |
| **3.**  | **BUYER FURNISHED ITEMS AND SERVICES.**        |
| **4.**  | **TIME OF PERFORMANCE AND FORCE MAJEURE**      |
| **5.**  | **DELIVERY, INSTALLATION AND ACCEPTANCE TEST** |
| **6.**  | **AGREEMENT PRICE AND TAXES**                  |
| **7.**  | **ROYALTY FEES**                               |
| **8.**  | **PAYMENTS, SECURITY INTEREST AND BONDS**      |
| **9.**  | **WARRANTIES**                                 |
| **10.** | **CHANGES**                                    |
| **11.** | **INSURANCE**                                  |
| **12.** | **INDEMNIFICATION**                            |
| **13.** | **ACCESS**                                     |
| **14.** | **TERMINATION FOR DEFAULT**                    |
| **15.** | **TERMINATION**                                |
| **16.** | **OWNERSHIP AND LICENSING OF TECHNOLOGY**      |
| **17.** | **AMENDMENTS**                                 |
| **18.** | **ASSIGNMENTS AND SUBCONTRACTS**               |
| **19.** | **NOTICES**                                    |
| **20.** | **MISCELLANEOUS**                              |
| **21.** | **CONFIDENTIAL INFORMATION**                   |

 

2

----

 

*** Confidential Treatment Requested Under**

**17 C.F.R. §§ 200.80(b)(4), 200.83 and240.24b-2**

 

**AGREEMENT FORPURCHASE OF A**

**SUREBEAM ELECTRONBEAM SYSTEM**

**BETWEEN**

**SUREBEAM CORPORATION**

**AND**

**SALUBRIS LIMITEDPARTNERSHIP**

 

This Agreement for Purchase ofa SureBeam Electron Beam System (“Agreement”), effective August 1, 2002(“Effective Date”), is between SureBeam Corporation, a Delaware corporationwith a principal place of business at 9276 Scranton Road, Suite 600, San Diego,California 92121 (“Seller”), and Salubris Limited Partnership, a Texas limitedpartnership with a principal place of business at 3113 South University Drive,Suite 500, Fort Worth, Texas 76109 (“Buyer”).

 

A.            Seller is engaged in the business ofdesigning, manufacturing, selling, installing, operating and servicingirradiation and pasteurization systems, including electron beam and x-rayequipment and systems.

 

B.            Seller and Fort Worth-San DiegoInvestments, LLC, an affiliate of Buyer, are parties to that certain Right ofFirst Negotiation Agreement dated March 22, 2002 (“Right of First NegotiationAgreement”), pursuant to which Fort Worth-San Diego Investments, LLC wasobligated to enter into, or to cause an affiliate to enter into, a bindingpurchase commitment for a food, hide and flower pasteurization, disinfestationand preservation system manufactured by Seller that is destined for a proposedservice center in Fort Worth, Texas.

 

C.            Buyer, as the designated affiliateof Fort Worth-San Diego Investments, LLC for purposes of the Right of FirstNegotiation Agreement, desires to purchase and Seller desires to sell suchfood, hide and flower pasteurization, disinfestation, and preservation systempursuant to the terms and conditions set forth in this Agreement.

 

NOW,THEREFORE, in consideration of the foregoing recitals, which are herebyincorporated by reference, and the mutual agreements contained herein, andother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto hereby agree as follows:

 

**1.****             DEFINITIONS**

 

1.1.          “Acceptance” means the Buyer’s deemedacceptance of the System pursuant to Section 5.2 below.

 

1.2.          “Agreement Price” means the SystemPrice and the Royalty Fee.

 

1.3.          “Buyer Materials” means all designs,know-how, inventions, technical data, ideas, uses, engineering processes andmethods arising directly from the components provided by Buyer under Section 3.

 

1.4.          “Buyer Milestones” has the meaningascribed to it in Exhibit B, attached hereto and incorporated herein.

 

3

----

 

1.5.          “Cancellation Amount” means thatportion of the System Price received by Seller from Buyer as of the date of aTermination for Convenience less (i) the Non-Recoverable Costs, and (ii) acancellation fee equal to ten percent of (10%) of the portion of the SystemPrice received by Seller from Buyer as of the date of the Termination forConvenience.

 

1.6.          “Change” has the meaning ascribed toit in Section 10.1.

 

1.7.          “Change Order” has the meaningascribed to it in Section 10.1.

 

1.8.          “Collateral” has the meaning ascribedto it in Section 8.2.

 

1.9.          “Confidential Information” meansconfidential or proprietary information of a party relating to any designs,know-how, inventions, technical data, ideas, uses, processes, methods,formulae, research and development activities, work in process, or anyscientific, engineering, manufacturing, marketing, business plan, financial orpersonnel matter relating to the disclosing party, its present or futureproducts, sales, suppliers, customers, employees, investors or business,whether in oral, written, graphic or electronic form (which is markedconfidential or acknowledged as being confidential prior to disclosure).  If the Confidential Information is disclosedorally or visually, it shall be identified as such at the time of disclosureand confirmed in writing by the disclosing party within thirty (30) days ofdisclosure.  Confidential Informationshall also include any other information in oral, written, graphic orelectronic form which, given the circumstances surrounding such disclosure,would be considered confidential. Notwithstanding anything to the contrary contained herein, the followinginformation shall not be deemed Confidential Information: (i) information thateither party knows about the other prior to the execution of this Agreement;(ii) information that is publicly known, or becomes publicly known, through nobreach by either party to this Agreement; and (iii) information that isrightfully obtained by either party from any third party who has no duty ofconfidentiality under this Agreement.

 

1.10.        “Deliverables” means the System,together with any other products, software, services, installation,documentation and training provided under this Agreement by or through theSeller, as defined in the Proposal, except for the Management Services or theOperating Services.

 

1.11.        “Documentation” means the Systemdocumentation provided by Seller to Buyer, including without limitation recommendedspare parts list, service and maintenance schedules, as-built drawings andschematics, and operations, training, service and/or repair manuals.

 

1.12.        “Facility” or “Facilities” refers to thecollective premises, equipment, construction activities, and services requiredto support the operation of the System, and includes electrical power, watercooling (primary), compressed air, heating, ventilation, ozone ventilation, airconditioning, radiation protection shield, fencing, building structure, lights,storage areas, and finishes.

 

1.13.        “Force Majeure Event” has the meaningascribed to it in Section 4.4.

 

1.14.        “Gross Processing Receipts” means thetotal amount of cash revenues actually received by Buyer for ProcessingServices using the System during the applicable period, less all amountsactually received by Buyer for sales and use taxes, insurance and shipping orfreight charges in connection with Processing Services provided by Buyer duringsuch period, less all 

 

4

----

 

amounts actually credited byBuyer to its customers during such period for future Processing Services to beprovided by Buyer using the System.

 

1.15.        “Insolvency Event” shall mean, withrespect to any party, the occurrence of any of the following events:  (i) an assignment by such party for thebenefit of creditors; (ii) such party’s dissolution or loss of charter byforfeiture that cannot be reinstated; (iii) such party having been adjudged bankruptor insolvent by a court of competent jurisdiction; (iv) a trustee or receiverhaving been appointed for such party or its assets or any substantial partthereof; (v) such party having filed a voluntary petition under any bankruptcyor other similar law providing for its reorganization, dissolution orliquidation; or (vi) such party having consented to the appointment of areceiver or a trustee for itself or its assets or of any substantial partthereof.

 

1.16.        “Intellectual Property Rights” means anynow known or hereafter existing (a) rights associated with works of authorshipthroughout the universe, including exclusive exploitation rights, copyrights,moral rights and mask works, (b) trademark and trade name rights and similarrights, (c) trade secret rights, (d) patents, designs, algorithms and otherindustrial property rights, (e) other intellectual and industrial property andproprietary rights of every kind and nature throughout the universe, whetherarising by operation of law, by contract or license, or otherwise, and (f) allregistrations, applications, renewals, extensions, combinations, divisions orreissues of the foregoing.

 

1.17.        “License Agreement” means that licenseagreement attached hereto as Exhibit E and incorporated herein that allowsBuyer to use Seller’s proprietary technologies in its operation of the System.

 

1.18.        “Limited Warranty” has the meaningascribed to it in Section 9.1.

 

1.19.        “Management Services” means thefollowing services: operation support by assisting the Buyer in theestablishment of operating procedures, HACCP Plan, Product dose mapping,validation compliance records, performance of quality audits, support inevaluating candidates for quality assurance, maintenance technician and Systemoperator positions, initial training of employees with respect to Systemoperation, assistance with Company Group (as that term is defined in the Rightof First Negotiation Agreement) System sales efforts by providing marketing androll-out support, coordination of use of trademarks and reasonableparticipation in System training seminars. Management Services specifically excludes any Operating Services.

 

1.20.        “Material Handling Subsystem” refers tothe material handling equipment provided by Seller as defined in theProposal.  This equipment includes theconveyor, closing conveyor, process conveyor and associated controls.

 

1.21.        “Non-Recoverable Costs” means allnon-recurring engineering and other labor costs incurred by Seller in itsperformance under the Statement of Work and this Agreement, and all material,equipment, supplies and parts costs incurred by Seller pursuant to theStatement of Work and this Agreement that are not capable, in Seller’s solediscretion, of being reused for

 

5

----

 

other current orders for Sellerproducts or being returned to their respective suppliers without penalties.

 

1.22.        “Operating Agreement” means theoperating agreement that may be entered into between the parties.

 

1.23.        “Operating Fees” means the considerationpayable to Seller for performing the Operating Services as will be more fullyset forth in the Operating Agreement.

 

1.24.        “Operating Services” means, if theparties select to enter into an Operating Agreement, System operation,facilities management or administrative, accounting or other customer supportfunctions or technical, maintenance and support services in connection with thepost-Acceptance operation of the System, as specifically set out in theOperating Agreement between the parties.

 

1.25.        “Processing Services” means providingcontract decontamination, pasteurization, disinfestation and preservation ofProducts by using a System or Systems.

 

1.26.        “Products” means (i) any type orcategory of food (including, without limitation, meat, fish, fowl, eggs,seafood, fruits, vegetables and spices), (ii) animal hides, and (iii)flowers.  Products shall not includewater and water shall not be considered as a type or category of food.

 

1.27.        “Project” refers to the electron beamSystem project as described in the Proposal, which will be installed at Buyer’sFort Worth Service Center.

 

1.28.        “Proposal” refers to Seller’s Proposal,which defines Seller’s responsibilities, scope-of-work, deliverables andequipment as more fully set forth in Exhibit A attached hereto and incorporatedherein.

 

1.29.        “Royalty Fee” means the royalty feespecified in Exhibit C attached hereto and incorporated herein.

 

1.30.        “Royalty Fee Statement” has the meaningascribed to it in Section 7.2.

 

1.31.        “Seller Materials” has the meaningascribed to it in Section 16.3.

 

1.32.        “Service Center” means Buyer’s facilityat which one or more Systems are or will be installed for the intended purposeof providing Processing Services to one or more end-customers.

 

1.33.        “Site” refers to the dedicated locationwhere the System will be installed, at Buyer’s Service Center in Fort Worth,Texas.

 

1.34.        “Specifications” means the finalspecifications for the applicable System including but not limited to: (i)electron accelerator system and controls; (ii) all required System conveyors;(iii) equipment assembly and installation; (iv) equipment validation; (v)dosimetry equipment, maintenance training and operating training; (vi) allnecessary x-ray targets; (vii)

 

6

----

 

control system; (viii) allrequired System software; and (ix) all reasonable and customary Systems’engineering, as more fully set forth on Exhibit A.

 

1.35.        “Statement of Work” means collectivelythe Proposal, Exhibit B, Exhibit C and Exhibit F.

 

1.36.        “System” means the equipment providedSeller as set forth in Section 2 hereof and further described in the Proposal,which is required to electron beam process the Products.  The term “Systems” shall not include anyproperty, assets or rights retained by The Titan Corporation pursuant to thatcertain License Agreement, dated as of August 4, 2000, between SureBeam and TheTitan Corporation, as amended (the “Titan License”).

 

1.37.        “System Price” means the price forSeller to provide the Deliverables as more fully set forth in Section 6.1below.

 

1.38.        “Termination for Convenience” has themeaning ascribed to it in Section 15.1.

 

1.39.        “Type 1 Materials” means any individualcomponent of any improvement, enhancement or modification created solely byBuyer that consists of (i) Seller Materials, or (ii) modifications,enhancements and derivative works of Seller Materials that do not meet UnitedStates law standards for patentability under 35 U.S.C. §§ 102 and 103, whenconsidered against “prior art” as defined by 35 U.S.C. § 102.

 

1.40.        “Type 2 Materials” means any individualcomponent of any improvement, enhancement or modification created solely byBuyer that consists of (i) Buyer Materials, (ii) modifications, enhancementsand derivative works of Buyer Materials, or (iii) modifications, enhancementsand derivative works of Seller Materials that meet United States law standardsfor patentability under 35 U.S.C. §§ 102 and 103, when considered against“prior art” as defined by 35 U.S.C. § 102.

 

1.41.        “Type 3 Materials” means any individualcomponent of improvement, enhancement or modification or parts thereof createdsolely by Buyer that consists of new inventions not derivative of or containingany Seller Materials or Buyer Materials.

 

1.42.        “Warranty Period” means the 12-monthperiod commencing upon Acceptance of the Deliverables or commercial operationof the System by the Buyer, whichever occurs first.

 

**2.****             EQUIPMENT AND SERVICES FURNISHED BYSELLER**

 

2.1.          Seller shall furnish all items setforth in Items 1.1 through 1.11 of Seller’s Proposal under “System Equipmentand Deliverables”, which such items are incorporated herein by this reference,but excluding specifically items identified as Salubris furnished items andservices.

 

2.2.          Seller shall furnish to Buyer theManagement Services and shall supply Buyer with the Documentation.

 

7

----

 

2.3.          Seller shall furnish to Buyer supportservices to assist Buyer with Buyer’s tasks defined in the Proposal.

 

2.4.          If an Operating Agreement is enteredinto between the parties, Seller shall furnish to Buyer the Operating Servicespursuant to an Operating Agreement the form of which to be mutually acceptableto Buyer and Seller.

 

3.**             BUYER FURNISHED ITEMS AND SERVICES**.

 

3.1.          Buyer shall furnish at its ownexpense, all items set forth in Items 1.12 through 1.16 of Seller’s Proposalunder “Salubris Furnished Items and Services”, which are incorporated herein bythis reference.

 

3.2.          Buyer shall additionally furnish atits own expense (i) management of the overall Project (including scheduling,budget definition and allocation, requirements definition, review and approvalof the work tasks and Product qualification); (ii) personnel to operate andmaintain the System; (iii) procurement, installation and validation of allBuyer furnished equipment; (iv) operation of the System; and (v) alladministrative and support services needed to run the business (sales,marketing, accounting, QA, etc.).

 

3.3.          Seller’s work, cost and schedule arepredicated upon Buyer providing the items set forth in this Section 3 inaccordance with the schedule defined in the Proposal.

 

**4.****             TIME OF PERFORMANCE AND FORCE MAJEURE**

 

4.1.          Performance under this Agreement bySeller and Buyer shall be in accordance with the project schedule defined inthe Proposal and the milestones set forth in Exhibit B.  Seller shall use commercially reasonableefforts to complete such System, deliver and install the System at Buyer’sFacility, and render it operational within the time period set forth in theStatement of Work.  Notwithstandinganything else to the contrary, Seller’s obligation to commence and complete themanufacture of such System, as detailed in the project schedule shall beconditioned on the timely performance by Buyer of all Buyer Milestones.

 

4.2.          Periodically, Seller shall provideBuyer with a written status report on the progress of the work.  This report shall summarize the progressachieved, identify any anticipated delays in the performance of this Agreementand highlight future schedule milestones.

 

4.3.          If Buyer does not meet one or moreBuyer Milestones as defined in Exhibit B, Seller’s work, schedule and cost maybe adjusted accordingly as provided for in Section 10 below.

 

4.4.          Except for Buyer’s payment obligationsunder this Agreement, neither party shall be liable for delays ornon-performance due to any events beyond its control, including acts of god,natural casualties, acts or war or terror, strikes, invasions, civil war orrebellion (“Force Majeure Event”), for the shorter of (i) the duration of suchForce Majeure Event plus ten (10) business days or (ii) a period of ninety (90)days.  If the Force Majeure Event lastsmore than ninety (90) days, the party whose performance has not been affectedby the Force Majeure Event 

 

8

----

 

has the right to terminate thisAgreement immediately by providing to the other party written notice oftermination.  During the Force MajeureEvent, the party whose performance has been affected will use its best effortsto develop a mutually acceptable work around plan within thirty (30) days whichwill minimize the impact of the Force Majeure Event on the other party.  Unless this Agreement is terminated by aparty pursuant to this Section 4.4, performance by the party whose performancehas been affected shall be promptly resumed upon termination of the ForceMajeure Event.

 

**5.****             DELIVERY,INSTALLATION AND ACCEPTANCE TEST**

 

5.1.          The System shall be packed forshipment and storage in accordance with Seller’s standard commercialpractices.  Seller shall ship the SystemFOB destination, for delivery at the applicable Site.  The risk of loss, injury or destruction of any System orDeliverable, from any cause whatsoever, shall be borne by Seller until deliveryof such System and Deliverables to Buyer’s designated Site.  Unless a common carrier is designated in theStatement of Work, Seller shall choose the common carrier.

 

5.2.          After the equipment is received atBuyer’s designated Site, Seller will supply qualified personnel to inspect andinstall the System.  Buyer shall providereasonable access to its premises, proper environmental and site conditions andthe full and complete cooperation of its staff and any other contractors toassist Seller during installation and testing of Deliverables.  Seller also shall do all of the following:(i) properly calibrate and test the System and all components thereof to ensurethat it is operating properly and within acceptable tolerances in accordancewith the Specifications therefor; (ii) obtain, or provide to Buyer allnecessary information and/or documentation, necessary for obtaining, allrequired federal, state, local and/or other governmental approvals, licensesand/or certifications required for the operation of the System and itscomponents; (iii) provide to Buyer and its employees or designees training (asset forth in the Statement of Work) in the proper use and operation of theSystem and each of its components such that Buyer can properly operate theSystem independently and without continued assistance of Seller; and (iv)deliver to Buyer all System Documentation for the System as required above inSection 2.2.  The System shall be deemedaccepted by Buyer upon performance by Seller of items (i) through (iv) above,provided Seller is not in material breach of any other term of this Agreementor the Right of First Negotiation Agreement (“Acceptance”).  On-site testing as set forth above shall beconducted by reference to a written “test procedure” approved by the Seller andBuyer in advance of the commencement of such testing.  Buyer shall provide to Seller contemporaneous “sign-offs” as eachfunction on the test procedure is demonstrated by the Seller.  Except for losses to the System coveredunder Seller’s Limited Warranty and indemnification obligations under thisAgreement, risk of loss to the System shall pass from Seller to Buyer inaccordance with the terms of shipment.

 

**6.****             AGREEMENTPRICE AND TAXES**

 

6.1.          Seller shall furnish the System, allDocuments and all other Deliverables for the sum of Eight Million Nine Hundredand Forty Six Thousand Dollars (US$ 8,946,000.00), as more fully set forth onExhibit C.

 

9

----

 

6.2.          Seller hereby represents that theprice set forth in Section 6.1 as of the Effective Date does not exceed thelowest price charged or offered by any of the SureBeam Parties, as defined inthe Right of First Negotiation Agreement, to any other purchaser or prospectivepurchaser at any time within one hundred eighty (180) days immediately beforethe Effective Date, in the United States (and its territories), ofsubstantially similar Systems for use specifically in contract processing ofProducts, and further provided that such lowest price is adjusted appropriatelyby Seller to correspond to any changes in design, scope and size and anymodifications to the System being purchased hereunder.  The previous determination for Systems shallspecifically exclude any Systems used for research purposes and any In-LineSystems, as defined in the Right of First Negotiation Agreement.

 

6.3.          The Agreement Price includes the costof obligations assumed by Seller under this Agreement, but excludes sales, usetaxes, tariffs, VAT, duties, local taxes, permits and fees, for which Buyershall be solely  responsible.

 

**7.****             ROYALTY FEES**

 

7.1.          In consideration for the favorableprovisions of this Agreement, the Management Services performed by Seller andthe License Agreement, Buyer shall pay the Royalty Fees to Seller for each yearduring the operation of the System. Royalty Fees shall be paid within forty-five (45) days after the end ofeach month in which such Royalty Fees have accrued.

 

7.2.          Buyer shall provide Seller with amonthly statement (“Royalty Fee Statement”) certified by Buyer’s chieffinancial officer or controller on or before the thirtieth (30th) day followingeach month that the System in operated and on or before the thirtieth (30th)day following the effective date of any termination of operation of such System,reporting as to the System (i) the amount (in pounds) of Products for whichProcessing Services were provided by Buyer for the preceding month; (ii) theGross Processing Receipts with respect to such System for the preceding month;and (iii) the calculation of the Royalty Fees due with respect to such Systemfor the preceding month.  Seller’sreceipt or acceptance of any Royalty Fee Statement or other informationfurnished pursuant to this Agreement and/or of any Royalty Fee paid hereundershall not preclude Seller from questioning the accuracy thereof at anytime.  In the event that anyinconsistency or mistake is discovered in any Royalty Fee Statements or otherpayments, it shall be rectified as promptly as possible and the appropriatecorrected statement and/or Royalty payment shall be made by Buyer to Seller.

 

7.3.          Buyer shall agree that it will keepduring the term of the License Agreement and for three (3) years after anytermination of the License Agreement correct and complete books and recordsregarding (i) Gross Processing Receipts with respect to the System and (ii) theamount (in pounds) of Products for which it provided Processing Services usingthe System.  Such books and recordsshall be in sufficient detail to establish compliance by Buyer with all theprovisions of this Agreement.  Acertified public accountant selected by Seller shall have the right to inspect,copy and audit at reasonable times during normal business hours (but not morethan once during any year), and upon reasonable advance notice to Buyer, bothduring and after the term of the License Agreement, such books and records orother documents.  Seller agrees that theinformation contained in Buyer’s books and records is Buyer’s ConfidentialInformation and will protect it in accordance with Section 21 hereof.  Any inspection or audit shall be paid

 

10

----

 

for by Seller, except asotherwise provided below.  In the eventit is ultimately determined that Buyer has (a) under-reported Gross ProcessingReceipts with respect to the System and/or the amount of Products for whichProcessing Services were provided using the System by five percent (5%) or morefor any given period and/or (b) underpaid Royalty Fees with respect to theSystem by five percent (5%) or more for any given period, then Buyer shall payto Seller within forty-five (45) days after such ultimate determination, thedeficiency in the Royalty Fee payment, plus interest thereon at the rate ofseven percent (7%) per annum from the original due date to the date of payment,and shall also pay the actual cost of such inspection or audit, includingwithout limitation Seller’s reasonable attorneys’ fees, reasonable accountant’sfees and other reasonable out-of-pocket costs.

 

7.4.          In the event of Buyer’s failure to payRoyalty Fees finally determined to be due and payable hereunder to Seller forany period of at least six (6) consecutive months and such delinquency is notcured within forty-five (45) days after written notice thereof is delivered bySeller to Buyer, Seller shall have the right to terminate the License Agreementand Buyer’s right to use the Systems owned or operated by Buyer.

 

7.5.          The rights and obligations of theparties under this Section 7 shall survive any termination of this Agreementfor so long as the System is being used.

 

**8.****             PAYMENTS, SECURITY INTEREST AND BONDS**

 

8.1.          The System Price set forth in Section6.1 above shall be due Seller according to the schedule set forth in ExhibitC.  Buyer shall make payments no laterthan the 10th day of the month following the month such milestone is invoicedby Seller.  Any late payment shall besubject to any cost of collection (including reasonable legal fees) and shallbear interest at the rate of one and one-half (1.5%) percent per month, untilpaid.

 

8.2.          Buyer hereby grants to Seller asecurity interest in all Systems now or hereafter sold by SureBeam(collectively, the “Collateral”) to secure the payment of the System Price ofthe Collateral and all amounts now or hereafter owing from Buyer to Seller inconnection with such sale (including taxes and delivery charges); provided,however, that such security interest shall not serve to secure the payment ofRoyalty Fees or Operating Services from Buyer to Seller.  The amount of the security interest in anyitem of Collateral shall not exceed the System Price of such item of Collateralplus the amount of all taxes and delivery charges due in connection with thesale thereof.  Buyer authorizes Sellerto file one or more financing statements in all states, counties and otherjurisdictions as Seller may elect without Buyer’s signature if permitted bylaw.  Buyer agrees to cooperate fullywith Seller in executing any additional documents, instruments, financingstatements or amendments thereto as Seller may request to perfect or continuethe security interest granted herein. Upon a breach by Buyer of any of its obligations to Seller, Seller shallhave all rights and remedies of a secured party under the Texas UniformCommercial Code, which rights and remedies shall be cumulative and notexclusive.  Buyer agrees to pay Seller’sreasonable costs and expenses (including but not limited to attorneys’ fees andcosts and any fees and costs incurred in connection with a bankruptcy proceedingof or involving Buyer) incurred to collect any amount unpaid or to enforceSeller’s other rights and remedies, whether or not suit is commenced.  Promptly following the receipt of payment infull of the System Price of any item of Collateral and all amounts owing toSeller in

 

11

----

 

connection with the salethereof (including taxes and delivery charges), Seller shall release and waiveany lien on or security interest in such Collateral and shall execute and fileany additional documents necessary to effect such release or waiver.  The rights and obligations of the partiesunder this Section 8.2 shall survive any termination of this Agreement.

 

**9.****             WARRANTIES AND LIMITATIONS**

 

9.1.          Parts Warranty.  With respect to System parts or componentssupplied by Seller pursuant to the Proposal and this Agreement:

 

9.1.1.       Seller Parts and Software.  For System parts or components manufacturedby Seller, or for System software developed by Seller, (“Seller Parts andSoftware”), Seller warrants that Seller Parts and Software will be free fromdefects in materials and workmanship for a period of one (1) year from the dateof acceptance or commercial operation of such System by Buyer, whichever occursfirst (“Parts Warranty”). The foregoing Parts Warranty is subject to thefollowing conditions: (i) in the case of Software developed by Seller, thedefect must be specifically traced to Seller’s software, (ii) none of the partsor components supplied by Seller have been damaged because of improper use,maintenance, handling, or operation, (iii) All parts or components supplied bySeller are replaced during normal preventative maintenance, as required, and(iv) the part in question must have a value of $250 or more and must not be a consumable.  For Seller Parts and Software, Buyer’s soleand exclusive remedies and Seller’s entire liability for breach of the PartsWarranty, provided none of the conditions above apply, shall be limited torepair or replacement, at Seller’s option, of such defective Seller Parts andSoftware.  Seller’s entire liabilityonly extends to System parts, components or software manufactured by Seller,and all costs of labor to install, test, or calibrate such Seller Parts andSoftware are the sole responsibility of Buyer.

 

9.1.2.       Third Party Parts and Software.  For System parts or components notmanufactured by Seller and System software not developed by Seller (“ThirdParty Parts and Software”), Seller shall use commercially reasonable efforts tosecure warranties from the manufacturer or developer of such Third Party Partsand Software (each a “Manufacturer”). Buyer acknowledges that Seller is not a manufacturer or developer ofsuch Third Party Parts and Software, that Seller DISCLAIMS WITH RESPECT TO ALLTHIRD PARTY PARTS AND SOFTWARE, ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY OROTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE, OR INTELLECTUAL PROPERTY INFRINGEMENT, andthat Buyer’s sole and exclusive remedies and Seller’s entire liability for anydefective Third Party Parts and Software shall be that Seller agrees to passthrough to Buyer all warranties which are provided to Seller by theManufacturer, and which are permitted to be passed through to Buyer by theManufacturer’s specific warranty. SELLER ASSUMES NO RESPONSIBILITY OR LIABILITY WHATSOEVER FORMANUFACTURER’S SPECIFICATIONS OR PERFORMANCE OR ADEQUACY OR ANY DESIGN ORSPECIFICATION PROVIDED TO SELLER BY OR ON BEHALF OF BUYER.

 

9.1.3.       SELLER REPRESENTS AND WARRANTS THAT NONEOF THE SELLER PARTS AND SOFTWARE, THIRD PARTY PARTS AND SOFTWARE OR ANY OTHERDELIVERABLES PROVIDED HEREUNDER CONSTITUTE “CONSUMER

 

12

----

 

PRODUCTS” WITHIN THE MEANING OFTHE MAGNUSON-MOSS WARRANTY ACT AND THAT IF ANY WARRANTY IS NEVERTHELESS IMPOSEDUNDER THAT ACT IT SHALL BE LIMITED TO A PERIOD OF THIRTY (30) DAYS FROM THEDATE OF DELIVERY.

 

9.2.          System Warranty.  Seller warrants to Buyer that (i) as of thecompletion of Buyer’s acceptance test, the System supplied hereunder shallmaterially comply with the Statement of Work and the Specifications applicableto the System, and (ii) for a period of one (1) year from the date ofacceptance or commercial operation of such System by Buyer, whichever occursfirst, the System will perform and operate substantially in accordance with theSpecifications applicable to the System and the performance criteria set forthin the Statement of Work (collectively “System Warranty”). The foregoing SystemWarranty is subject to the following conditions: (i) all Deliverables areinstalled (if by any person other than Seller), implemented, operated, andmaintained as defined in the Specifications and the Documentation;  (ii) the Buyer notifies Seller of any defectas soon as practicable after the appearance thereof and provides supportingdata according to Seller’s standard “trouble report” procedures; (iii) theBuyer has properly installed and paid all applicable fees for all updates madeavailable with respect to Deliverables and any updates recommended by Sellerwith respect to any other equipment or software that materially affects theperformance of the Deliverable; (iv) the Buyer has properly installed,maintained and operated all associated equipment, software and has maintainedall environmental conditions and utilities in accordance with applicablespecifications and industry standards; (v) the Buyer has not introduced otherequipment or software, or made changes to the System, that create an adverseimpact on the System or any other Deliverables; (vi) the Buyer has paid allamounts due hereunder and is not in default of any provision of this Agreement,and (vii) the Buyer has made no changes (nor permitted any changes to be madeother than by or with the express approval of Seller) to the System or to thesource code of any Deliverable.  ANYUNAUTHORIZED CHANGES TO THE SYSTEM OR TO THE SOURCE CODE OF ANY SYSTEMDELIVERABLE WILL VOID THE LIMITED WARRANTY PROVIDED UNDER THIS SUBSECTION9.1.  Buyer’s sole and exclusiveremedies and Seller’s entire liability for any breach of the Limited Warranty,provided none of the conditions above apply, shall be (i) limited to repair orreplacement, at Seller’s option, of the defective Deliverable causing the breach,or, (ii) if Seller reasonably determines that such remedy is not economicallyor technically feasible, to obtain in accordance with the specific provisionsof this Agreement an equitable partial refund of amounts paid with respect tothe defective Deliverable. NOTWITHSTANDING THE PREVIOUS SENTENCE, BUYER SHALL BE ENTITLED TOEXERCISE ITS LEGAL REMEDIES WITH RESPECT TO A REFUND OF THE PURCHASE PRICE PAIDFOR THE SYSTEM, IF SELLER IS UNABLE TO SUPPLY A SYSTEM THAT MATERIALLY COMPLIESWITH THE STATEMENT OF WORK AND THE SPECIFICATIONS APPLICABLE TO THE SYSTEM UPONCOMPLETION OF ALL MILESTONES SET FORTH ON EXHIBIT B AND IN THE PROPOSAL, ASADJUSTED PURSUANT TO THIS AGREEMENT.

 

9.3.          Limitations.

 

9.3.1.       BUYER AND SELLER AGREE THAT ANYMANAGEMENT SERVICES OR OPERATING SERVICES PROVIDED BY THE SELLER ARE ONLYPROVIDED “AS IS” AND THAT SELLER MAKES NO WARRANTY AS TO SUCH

 

13

----

 

MANAGEMENT SERVICES OROPERATING SERVICES WHATSOEVER.  THEABOVE PARTS WARRANTY AND LIMITED WARRANTY ARE IN LIEU OF ALL OTHER EXPRESS ORIMPLIED WARRANTIES, AND SELLER SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS,IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, INTELLECTUAL PROPERTYINFRINGEMENT, OR ARISING OUT OF COURSE OF CONDUCT OR OTHER TRADE CUSTOM ORUSAGE, WITH RESPECT TO THE SYSTEM, SELLER PARTS AND SOFTWARE, THIRD PARTY PARTSAND SOFTWARE OR ANY OTHER DELIVERABLES PROVIDED HEREUNDER.

 

9.3.2.       EXCEPT FOR ITS SPECIFIC INDEMNIFICATIONOBLIGATIONS UNDER SECTIONS 12.2 AND 12.3 SELLER SHALL NOT BE LIABLE TO BUYERFOR ANY DAMAGES IN CONNECTION WITH THE SALE, INSTALLATION OR USE OF THE SYSTEMUNDER THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, STRICT LIABILITY OROTHERWISE UNDER THE STATEMENT OF WORK IN EXCESS OF THE SYSTEM PRICE FOR THESYSTEM PROVIDED PAID TO SELLER AND RETAINED BY SELLER UNDER THE STATEMENT OFWORK GIVING RISE TO THE CLAIM.

 

9.3.3.       TO THE MAXIMUM EXTENT PERMITTED UNDERAPPLICABLE LAW, SELLER’S AGGREGATE ENTIRE LIABILITY TO THE BUYER FOR MANAGEMENTSERVICES OR OPERATING SERVICES, REGARDLESS OF THE FORM OF ACTION, SHALL IN NOEVENT EXCEED TOTAL FEES PAID TO SELLER AND RETAINED BY SELLER FOR THE SPECIFICMANAGEMENT SERVICE OR OPERATING SERVICE GIVING RISE TO THE CLAIM.

 

9.3.4.       NOTWITHSTANDING ANYTHING TO THE CONTRARYHEREIN, NO PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER FORESEEABLE OR NOT, THAT ARE IN ANYWAY RELATED TO THIS AGREEMENT, THE BREACH THEREOF, THE USE OR INABILITY TO USETHE SYSTEM, THE RESULTS GENERATED FROM THE USE OF THE SYSTEM, THE QUALITY OFTHE SYSTEM, ANY DEFECT IN THE SYSTEM, FAILURE OF THE SYSTEM TO PERFORM ASREPRESENTED OR EXPECTED, MANAGEMENT SERVICES, THE USE OR INABILITY TO USERESULTS OF MANAGEMENT SERVICES, OPERATING SERVICEES, ANY TRANSACTIONS RESULTINGFROM THIS AGREEMENT, LOSS OF GOODWILL OR PROFITS, LOST BUSINESS HOWEVERCHARACTERIZED AND/OR FROM ANY OTHER CAUSE WHATSOEVER.

 

9.3.5.       THE PARTIES FURTHER AGREE THAT EACH ANDEVERY PROVISION OF THIS AGREEMENT THAT PROVIDES FOR A LIMITATION OF LIABILITY,DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES IS EXPRESSLY INTENDED TO BESEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION SINCE THOSE PROVISIONSREPRESENT SEPARATE ELEMENTS OF RISK ALLOCATION BETWEEN THE PARTIES AND SHALL BESEPARATELY ENFORCED.

 

14

----

 

9.3.6.       THE PARTIES HEREBY AGREE THAT, TO THEEXTENT ANY DELIVERABLE HEREUNDER IS USED FOR THE PURPOSE OF GENERATING OUTPUTUSED IN COMPLYING WITH GOVERNMENTAL LAWS AND REGULATIONS (INCLUDING TAX LAWSAND REGULATIONS), BUYER SHALL ASSUME ALL RESPONSIBILITY FOR COMPLIANCE WITH ANYSUCH GOVERNMENTAL LAWS AND REGULATIONS.

 

9.4.          The rights andobligations of the parties under this Section 9 shall survive any terminationof this Agreement.

 

**10.****          CHANGES**

 

10.1.        No additions, changes ormodifications to any of Statement of Work by either party (each “Changes”) willbe considered by the other party unless such proposed Changes are firstsubmitted in writing to the other party and shall not have an effect until aChange Order (as defined below) is executed by both parties.  The parties acknowledge and agree that anyChanges may affect or delay the delivery and/or the System Price for theproducts or services set forth therein. Promptly after a requested Change has been submitted for approval toSeller, or to Buyer (if Seller requests a Change), Seller shall prepare anddeliver to Buyer an estimate of the anticipated impact, if any, on the deliveryschedule and/or the System Price.  AfterBuyer has received such information, Buyer shall indicate in writing whether itapproves such Changes.  Thereafter, theparties shall mutually revise the Statement of Work upon mutual execution of awritten order complying with Section 17.2 below detailing the Changes to bemade (each, a “Change Order”).  Sellershall not be obligated to implement any Changes specified in a Change Orderuntil Buyer has executed and returned such Change Order to Buyer.  Each Change Order shall state (i) a detaileddescription of the Change to the System(s) or services to be provided under theStatement of Work, (ii) the amount of the fixed adjustment to the fixed SystemPrice, and (iii) the extent of the adjustment, if any, in the deliveryschedule.  For all purposes under thisAgreement, each Change Order will be fully incorporated into the Statement ofWork to which such Change Order applies. Seller shall not be liable for any delays that occur in the delivery scheduledue to Changes requested by Buyer.

 

10.2.        Extensions of one or moredeadlines in the performance schedule may result from an excusable delayauthorized pursuant to the terms of Section 4.3.

 

**11.****          INSURANCE**

 

11.1.        Seller shall obtain, payfor and maintain the following insurance covering the performance of work underthis Agreement:

 

11.1.1.     Comprehensive General Liability Insurancefor each occurrence of bodily injury and property damage, in an amount of notless than One Million US Dollars (US$1,000,000.00) combined single limit, foreach occurrence of bodily injury and property damage, covering Buyer as anadditional insured and containing endorsements providing coverage for thefollowing: (a) Personal Injury Liability; (b) Premises - Operations Liability,including “XCU” coverage; (c) Blanket Contractual Liability; and (d) Broad FormProperty Damage

 

15

----

 

11.1.2.     Comprehensive Automobile LiabilityInsurance for owned, hired and non-owned motor vehicles, if any, used for theperformance of the services under this Agreement.  This insurance shall have the same minimum coverage limits asspecified above the Comprehensive General Liability Insurance.

 

11.1.3.     Worker’s Compensation Insurance,Occupational Disease Insurance and Disability Benefits Insurance, in accordancewith applicable statutory requirements.

 

11.1.4.     Employers’ Liability Insurance in an amountnot less than Five Hundred Thousand US Dollars (US$500,000).

 

11.1.5.     All Risk Installation Floater PropertyInsurance covering property damage arising out of the installation, assemblyand testing of the System at Buyer’s designated facility prior to FinalAcceptance.

 

11.2.        The insurance specifiedabove shall cover all work to be provided under this Agreement by Seller andall of its agents, employees, representatives and subcontractors.

 

11.3.        Prior to Seller’scommencement of any services on Buyer’s premises, Seller shall furnish validcertificates of insurance to Buyer showing that Seller has obtained insurancecoverage as required under this Section 11. The certificate required for the insurance under Section 11.1.1 shallspecifically reference the endorsements required.  The insurance policies and certificates shall also state that atleast thirty (30) days’ written notice shall be provided to Buyer prior to anycancellation, expiration, nonrenewal or material change in the insurancecoverage which occurs during the term of this Agreement.

 

**12.****          INDEMNIFICATION**

 

12.1.        Buyer shall indemnify,defend and hold Seller harmless from and against any and all claims, actions,losses, damages, demands, liabilities, costs and expenses, including reasonableattorney’s fees and expenses, whether a suit or other proceeding is initiatedor not, which may arise from the fraud, gross negligence, omissions orintentional misconduct of Buyer, its representatives, agents or employees.  Seller shall promptly notify Buyer inwriting after it becomes aware of any such claims.  Buyer shall have exclusive control over the settlement or defenseof such claims or actions.  Seller shallgive Buyer, at Buyer’s expense, all information, assistance and cooperationreasonably requested by Buyer to settle or defend such claims or actions.  Buyer shall be entitled to retain allmonetary proceeds, attorneys’ fees, costs and other rewards it receives as aresult of defending or settling such claims. In the event Buyer fails to promptly indemnify and defend such claimsand/or pay Seller’s expenses, as provided above, Seller shall have the right todefend itself, and in that case, in addition to any other rights and remediesthat Seller may have, Buyer shall reimburse Seller for all of its reasonableattorneys’ fees, costs and damages incurred in settling or defending suchclaims within thirty (30) days of each of Seller’s written requests, providedthat any settlement shall only be with Buyer’s prior written approval.

 

12.2.        Seller shall indemnify,defend and hold Buyer harmless from and against any and all claims, actions,losses, damages, demands, liabilities, costs and expenses, including reasonableattorney’s fees and expenses, whether a suit or other proceeding is initiatedor not,

 

16

----

 

which may arise from the fraud,gross negligence, omissions or intentional misconduct of Seller, itsrepresentatives, agents or employees. Buyer shall promptly notify Seller in writing after it becomes aware ofany such claims.  Seller shall haveexclusive control over the settlement or defense of such claims oractions.  Buyer shall give Seller, atSeller’s expense, all information, assistance and cooperation reasonablyrequested by Seller to settle or defend such claims or actions.  Seller shall be entitled to retain allmonetary proceeds, attorneys’ fees, costs and other rewards it receives as aresult of defending or settling such claims. In the event Seller fails to promptly indemnify and defend such claimsand/or pay Buyer’s expenses, as provided above, Buyer shall have the right todefend itself, and in that case, in addition to any other rights and remediesthat Buyer may have, Seller shall reimburse Buyer for all of its reasonableattorneys’ fees, costs and damages incurred in settling or defending suchclaims within thirty (30) days of each of Buyer’s written requests, providedthat any settlement shall only be with Seller’s prior written approval.

 

12.3.        Seller shall additionallyindemnify Buyer and hold Buyer harmless from and against any loss, claim,damage or expense (including reasonable attorneys’ fees) sustained or incurredby Buyer arising out of or in connection with any claim that the System orDocumentation, alone and not in combination with any other hardware, softwareor process, infringes any third party’s United States Intellectual PropertyRights.  Seller’s indemnificationobligation is conditioned on (i) Buyer notifying Seller within ten (10) days ofBuyer’s first knowledge of such claim; provided, however, that Buyer’s failureto notify Seller within such 10-day period shall not relieve Seller of itsindemnity obligations hereunder if such failure does not materially prejudiceSeller in its defense of such claim; (ii) Buyer making no admission without theprior written consent of Seller; and (iii) Seller, at its own expense, being entitledto conduct and/or settle all negotiations and litigation so arising (unlesssuch settlement imposes an obligation of Buyer to make any payment) and Buyeragrees to provide all reasonable assistance with such negotiations orlitigation at Seller’s request.  Inaddition to its indemnification obligations, if the System or Documentation (orany of them) become, or in Seller’s reasonable opinion are likely to become,the subject of a claim of infringement as aforesaid, then Seller may, at itsown expense, either (x) procure for Buyer the right to continue using theSystem; or (y) replace the System with non-infringing products; or (z) modifythe System to make them non-infringing. The foregoing states the entire liability of Seller with respect to anyclaim of infringement regarding the System or Documentation.  Notwithstanding anything to the contraryherein, Seller shall have no obligation to indemnify, defend or hold harmlessBuyer for any claims, liabilities, losses or other damages that arise out of orrelate to (a) the use, combination, integration or merger of the System withany other software, hardware, peripheral device or other materials not suppliedby Seller, (b) any changes or modifications to the System made by anyone otherthan Seller, (c) any infringement claims relating to any Buyer Materials, thirdparty licensed materials or to any of Buyer’s existing software, hardware orother technology, (d) the use of the System in a manner inconsistent with theprovisions of this Agreement and the Documentation, (e) the use of the Systemwith hardware or hardware configurations other than as recommended by Seller,(f) the use of anything but the latest available release of software andcontrol systems provided by Seller to Buyer, (g) Seller’s compliance with anyof Buyer specifications, designs or other requirements, (h) Buyer’s negligentor willfully wrongful actions or omissions, and/or (k) any matter orcircumstance to which Buyer indemnifies Seller under Section 12.1 above.

 

17

----

 

12.4.        The rights and obligations of theparties under this Section 12 shall survive any termination of this Agreement.

 

**13.****          ACCESS**

 

13.1.        Seller shall furnish or arrange Buyer’sreasonable access to the System and its components at the site of theirmanufacture and storage.  Buyer shallfurnish or arrange Seller’s reasonable access to the System during and afterinstallation at Buyer’s Site.

 

**14.****          TERMINATION FOR DEFAULT**

 

14.1.        Either party shall be indefault hereof if (a) such party suffers an Insolvency Event; (b) such party isin material breach of any representation or warranty made by such party herein,or fails to perform in all material respects any obligation, including withrespect to Buyer any System Price payment obligation, or to comply with anycovenant or agreement on its part to be performed or complied with hereunder,and such failure or breach remains uncured for a period of thirty (30) daysafter written notice thereof, except with respect to any such failure or breachthat is not reasonably susceptible of cure within such 30-day period if theother party promptly commences to cure such failure or breach within such30-day period and diligently prosecutes such cure to completion as soon as isreasonably practicable (but in no event later than ninety (90) days afterwritten notice of such failure or breach); (c) with respect to Buyer, Buyerfails to pay Royalty Fees (except as to any such amount of Royalty Fees whichis the subject of a continuing good faith dispute) finally determined to be dueand payable hereunder by Buyer for any period of at least six (6) consecutivemonths and such failure remains uncured for a period of forty-five (45) daysafter written notice thereof is delivered by Seller to Buyer.  Any notice of default shall be sent inaccordance with Section 19 and shall identify the contract provision at issueand describe in reasonable factual detail how the other party has materiallyviolated the provision.  If timelycorrective action is not forthcoming, the aggrieved party may then terminatethe Agreement pursuant to Section 15 and pursue all other available remedies.

 

14.2.        Except as may otherwise beset forth in the Right of First Negotiation Agreement or any other agreemententered into between Seller and any member of the Company Group, as that termin defined in the Right of First Negotiation Agreement, a default by Buyerunder this Agreement shall not affect the rights of any member of the CompanyGroup under the Right of First Negotiation Agreement or other agreementsentered into between Seller and any member of the Company Group.

 

**15.****          TERMINATION**

 

15.1.        This Agreement may be terminated byBuyer, for any reason, by giving written notice of termination to Seller on orbefore October 31, 2002 (“Termination for Convenience”).  Should Buyer elect to terminate thisAgreement pursuant to a Termination for Convenience on or before October 31,2002, then Seller shall pay to Buyer the Cancellation Amount.

 

15.2.        If no Termination for Convenienceoccurs, then this Agreement shall continue in full force and effect for so longas the System is being used by Buyer, unless terminated earlier, upon oneparty’s giving written notice of termination after following the procedures inSection 14.1 or 4.4 above.

 

18

----

 

15.3.        Upon any termination of this Agreement,neither party shall have any further right, liability or obligation hereunderafter the effective date of such termination except in respect to (a) anyliability or obligation arising out of such party’s (i) failure to performprior to such termination in all material respects any obligation or to complywith any covenant or agreement on its part to be performed or complied withhereunder prior to such termination or (ii) material breach of any of itsrepresentations or warranties contained herein; (b) any liability or obligationhereunder which was accrued or incurred under the terms hereof prior to theeffective date of such termination but remains unsatisfied or undischarged onthe effective date of such termination; (c) any right, liability, obligation orprovision which survives any such termination as expressly provided herein; or(d) any liability or obligation hereunder with respect to the System acquired hereunderprior to the effective date of such termination.  The rights and obligations of the parties under this Section 15.3shall survive any termination of this Agreement.

 

**16.****          OWNERSHIP AND LICENSING OF TECHNOLOGY**

 

16.1.        Third Party Software Products - In thecase of third party software products, Buyer hereby agrees to be bound andgoverned by the terms and conditions of the original vendor’s license agreementaccompanying such products or, if no such license agreement is included, by thevendor’s standard license terms generally applicable to the particular product.

 

16.2.        Seller’s System Deliverables - Selleragrees to license, under the License Agreement attached in Exhibit E, the useof its System Deliverables to Buyer for a single use license at the definedSite. Seller will at all times maintain ownership of all licensableDeliverables and derivative works. Buyer will not copy, use, or distribute thelicensed Deliverables for any purpose except as required to operate andmaintain the System at the Site without Seller’s explicit written approval.

 

16.3.        Buyer acknowledges and agrees thatSeller shall solely own and have exclusive worldwide right, title and interestin and to (i) all designs, know-how, inventions, technical data, ideas, uses,engineering processes and methods arising directly from the components of theSystem provided by Seller under Section 2 hereof or any Management Servicesprovided by Seller or its designees, (ii) any Documentation related thereto,(collectively “Seller Materials”) and to all modifications, enhancements andderivative works thereof except for Type 2 or Type 3 Materials, and to allIntellectual Property Rights related thereto. Buyer expressly recognizes and agrees that any Seller Materialsdeveloped under this Agreement and the Statement of Work are not a “work madefor hire” under United States or any other law.  In the event, through operation of local law or otherwise, thatBuyer obtains any proprietary or intellectual property rights regarding any ofthe Seller Materials, then as additional consideration for the favorable termsof this Agreement, Buyer hereby assigns and conveys to Seller all right, titleand interest in and to the Seller Materials, and to all modifications,enhancements and derivative works thereof except for Type 2 or Type 3Materials, and to all Intellectual Property Rights related thereto.  Either during or following termination ofthis Agreement, Buyer shall make any filings and execute any documents necessaryfor Seller to record, register, or otherwise perfect its ownership rights inthe Seller Materials.  Buyer shall notchallenge, contest or otherwise impair Seller’s ownership of the SellerMaterials or the validity or enforceability of Seller’s Intellectual PropertyRights related thereto.  Nothing in thisAgreement will be deemed to grant, by implication, estoppel, or

 

19

----

 

otherwise, a license to any ofthe foregoing under any of Seller’s existing or future Intellectual PropertyRights.

 

16.4.        Title to Type 2 Materials and Type 3Materials shall always remain with Buyer. The Parties agree that Buyer shall solely own and have exclusiveworldwide right, title and interest in and to the Type 2 Materials and Type 3Materials and to all modifications, enhancements and derivative works thereofthat are not Type 1 Materials, and to all Intellectual Property Rights relatedthereto.  Seller shall not challenge,contest or otherwise impair Buyer’s ownership of Type 2 Materials and Type 3Materials or the validity or enforceability of Buyer’s Intellectual PropertyRights related thereto.  In the eventthe Parties agree to enter into a license whereby Seller would be permitted tomake, use and/or sell any Type 2 Materials or Type 3 Materials on terms and conditionsto be negotiated by the Parties hereto, Buyer agrees that the price of suchlicense shall not exceed the lowest price charged or offered by Seller to anyother licensee or prospective licensee at any time within one hundred eighty(180) days immediately before the effective date of such license agreementbetween the Parties hereto, in the United States (and its territories), ofsubstantially similar licenses to make, use and/or sell the Type 2 Materials orType 3 Materials, and further provided that such lowest price shall be adjustedappropriately by Buyer to correspond to any differences in scope between suchsubstantially similar third party license and the license contemplated by theParties hereto.

 

16.5.        The rights and obligations of the partiesunder this Section 16 shall survive any termination of this Agreement.

 

**17.****          AMENDMENTS**

 

17.1.        This Agreement containsthe entire understanding among the parties hereto with respect to the subjectmatter hereof, and supersedes all prior and contemporaneous agreements andunderstandings, inducements, or conditions, express or implied, oral, orwritten, except as herein contained. The express terms hereof control and supersede any course of performanceor usage of the trade inconsistent with any of the terms hereof.

 

17.2.        This Agreement may not bemodified or amended other than by an agreement in writing signed by anauthorized representative of each party hereto (as designated from time to timeby such party).

 

**18.****          ASSIGNMENTS AND SUBCONTRACTS**

 

18.1.        Except as otherwiseexpressly provided herein, neither party shall, by operation of law orotherwise, assign, transfer, pledge, mortgage or otherwise hypothecate thisAgreement or any right or interest hereunder without first obtaining the priorwritten consent of the other party, which consent may be delayed, conditionedor withheld in such other party’s sole discretion.  Notwithstanding anything to the contrary contained herein, Buyeror any member of the Company Group (as that term is defined in the Right ofFirst Negotiation Agreement) may, without the consent of the other partyhereto, but upon written notice to Seller, assign this Agreement and its rightsand interests hereunder (in whole or in part) to any other member of theCompany Group.  No assignment or othertransfer permitted by this Section 18.1 shall operate as a release of theassignor’s obligations or liabilities hereunder, and the assignor shall remainliable

 

20

----

 

hereunder notwithstanding such assignmentor other transfer.  In the event of anyassignment permitted by this Section 18.1 (other than an assignment betweenmembers of the Company Group), an instrument of assignment shall be executed bythe assignee and shall expressly state that the assignee assumes all of theapplicable obligations and liabilities of the assignor contained herein.

 

**19.****          NOTICES**

 

19.1.        Anynotice, consent, approval, request, demand, declaration or other communicationrequired hereunder shall be in writing to be effective and shall be given andshall be deemed to have been given if (i) delivered in person with receiptacknowledged; (ii) telexed or telecopied and electronically confirmed; (iii)deposited in the custody of a nationally recognized overnight courier for next daydelivery; or (iv) placed in the federal mail, postage prepaid, certified orregistered mail, return receipt requested, in each case addressed as follows:

 
| If to Buyer:   | Salubris  Limited Partnership           |
|----------------|-----------------------------------------|
|           | 3113 South  University Drive, Suite 500 |
|           | Fort Worth, Texas  76109           |
|           | Attention:  David A. Corbin             |
|           | Telephone:  817/335-8282           |
|           | Fax #:  817/335-8281               |
|           |                                    |
| If to  Seller: | SureBeam  Corporation                   |
|           | 9276  Scranton Road, Suite 600          |
|           | San Diego,  California  92121      |
|           | Attention:  President                   |
|           | Telephone:  858/795-6300           |
|           | Fax #:  858/795-6301               |

 

or at suchother address as may be substituted by giving the other parties not fewer thanfive (5) business days’ advance written notice of such change of address inaccordance with the provisions hereof. The giving of any notice required hereundermay be waived in writing by the party entitled to receive such notice. Everynotice, demand, request, consent, approval, declaration or other communicationhereunder shall be deemed to have been duly served, delivered and received onthe date on which personally delivered with receipt acknowledged or telecopiedor telexed and electronically confirmed, or forty-eight (48) hours after beingdeposited into the custody of a nationally recognized overnight courier fornext day delivery, or five (5) business days after the same shall have beenplaced in the federal mail as aforesaid.

 

**20.****          MISCELLANEOUS**

 

20.1.        Notwithstanding anythingto the contrary contained herein, the failure of either party to seek a redressfor violation, or to insist upon the strict performance, of any covenant,agreement, provision, or condition hereof shall not constitute the waiver ofthe terms of such covenant, agreement, provision, or condition at subsequenttimes or of the terms of any other covenant, agreement, provision or condition,and each party shall have all remedies provided

 

21

----

 

herein with respect to anysubsequent act which would have originally constituted the violation hereunder.

 

20.2.        THIS AGREEMENT, AND ALLQUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE ANDENFORCEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNALLAWS OF THE STATE OF TEXAS, NOTWITHSTANDING ANY CONFLICT-OF-LAWS DOCTRINES OFSUCH STATE OR OTHER JURISDICTION TO THE CONTRARY.  THIS AGREEMENT HAS BEEN EXECUTED, ACCEPTED AND DELIVERED AND ISPERFORMABLE IN TARRANT COUNTY, TEXAS, AND VENUE IN ANY SUIT, PROCEEDING ORACTION ARISING OUT OF OR INVOLVING THIS AGREEMENT SHALL BE IN THE COURTS OF THESTATE OF TEXAS IN TARRANT COUNTY, TEXAS. SELLER HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS FOR THEPURPOSE OF ANY SUCH SUIT, PROCEEDING OR ACTION AND HEREBY IRREVOCABLY WAIVES(I) ANY OBJECTION THAT IT NOW HAS OR MAY HEREAFTER HAVE TO THE VENUE OF ANYSUCH COURT AND (II) ANY OBJECTION THAT ANY SUCH SUIT, PROCEEDING OR ACTIONBROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

20.3.        The provisions hereof areindependent of and separable from each other, and no provisions shall beaffected or rendered invalid or unenforceable by virtue of the fact but for anyreason any other or others of them may be invalid or unenforceable in whole orin part.

 

20.4.        Except where remedies aredesignated under this Agreement as exclusive, the remedies and rights availableunder this Agreement and the duties and obligations imposed by it shall be inaddition to, and not a limitation of, the remedies, rights, duties andobligations otherwise available or imposed by law.

 

20.5.        The headings herein arefor convenience only; they form no part of this Agreement and shall not begiven any substantive or interpretive effect whatsoever.

 

20.6.        This Agreement may beexecuted in counterparts, each of which shall be deemed an original, and allsuch counterparts together shall constitute but one and the same instrument;provided, however, that in making proof hereof, it shall not be necessary toproduce or account for more than one such counterpart.  It shall not be necessary that each partyhereto execute the same counterpart, so long as identical counterparts areexecuted by each party.  A facsimilesignature will be accepted as if it were an original signature.

 

20.7.        The prevailing party inany dispute between the parties arising out of the interpretation, applicationor enforcement of any provision hereof shall be entitled to recover all of itsreasonable attorneys’ fees and costs whether suit be filed or not, includingwithout limitation costs and attorneys’ fees related to or arising out of anyarbitration proceeding, trial or appellate proceedings.

 

20.8.        This Agreement constitutesthe complete, exclusive and final statement of the agreement between theParties regarding the subject matter hereof and supersedes all prior orcontemporaneous understandings or agreements, whether oral or written.  Exhibits A through E,

 

22

----

 

inclusive, are fullyincorporated herein.  Should any term orcondition contained in Exhibits A through E be contrary to a similar term orcondition set forth in this Agreement, then the term or condition set forth inthis Agreement shall control.

 

20.9.        The parties to thisAgreement are independent contractors. No relationship of principal to agent, master to servant, employer toemployee, or franchisor to franchisee is established hereby between theparties.  Neither party has theauthority to bind the other or incur any obligation on its behalf.

 

20.10.      During the term of thisAgreement and for a period of one (1) year thereafter, Buyer and Seller agreenot to hire, solicit, nor attempt to solicit, the services of any employee orsubcontractor of Buyer or Seller without the prior written consent of Buyer orSeller.

 

20.11.      The rights and obligationsof the parties under this Section 20 shall survive any termination of thisAgreement.

 

**21.****          CONFIDENTIAL INFORMATION**

 

21.1.        Acknowledgment ofConfidentiality - The parties anticipate that they may learn ConfidentialInformation of the other party as a consequence of the transactionscontemplated by this Agreement.  Theparties mutually agree to take all necessary steps, and to prepare and executeall documents necessary, to protect and prohibit the disclosure of ConfidentialInformation under this Section 21.

 

21.2.        Covenant Not to Disclose -With respect to the other party’s Confidential Information, the recipienthereby agrees that during the term of this Agreement and at all timesthereafter it shall not use, commercialize or disclose such ConfidentialInformation to any person or entity, except to its own employees having a “needto know” (and who are themselves bound by similar nondisclosure restrictions),and to such other recipients as the other party may approve in a signedwriting; provided that all such recipients shall have first executed aconfidentiality agreement in a form acceptable to the owner of suchinformation.  Each party shall use atleast the same degree of care in safeguarding the other party’s ConfidentialInformation as it uses in safeguarding its own confidential information.  Neither party nor any recipient may alter orremove from any software or associated documentation owned or provided by theother party hereunder, any proprietary, copyright, trademark or trade secretlegend, nor may it attempt to decompile or reverse engineer the System.

 

21.3.        Remedies for Breach ofConfidentiality - Each party acknowledges that the unauthorized use,commercialization or disclosure of the other party’s Confidential Informationwould cause irreparable harm to such other party.  The parties acknowledge that remedies at law would be inadequateto redress the actual or threatened unauthorized use, commercialization ordisclosure of such Confidential Information and that the foregoing restrictionsmay be enforced by temporary and permanent injunctive relief.  In addition, any award of injunctive reliefshall include recovery of associated costs and expenses (including reasonableattorneys’ fees).

 

21.4.        The rights and obligationsof the parties under this Section 21 shall survive any termination of thisAgreement.

 

23

----

 

IN WITNESS WHEREOF, the partieshave executed and delivered this Agreement to be effective as of the EffectiveDate.

 

 
| SUREBEAM  CORPORATION |                | SALUBRIS  LIMITED PARTNERSHIP |
|-----------------------|---------------------|-------------------------------|
|                  |                |                          |
|                  |                |                          |
| By:                   | /s/J. Thomas  Allen |                          |   | By: | /s/Dean  Davis |   |
|                  |                |                          |
| Name:                 | J. Thomas  Allen    |                          |   | Name: | Dean Davis |   |
|                  |                |                          |
| Title:                | Vice  President     |                          |   | Title: | Managing  Partner |   |
|                       |                     |                               |  |  |  |  |  |  |  |  |

 

24

----

 

**EXHIBIT A**

**SELLER’S PROPOSAL**

 

 

 

**PROPOSAL # 1-0002817**

**FOR A**

**SUREBEAM****Ò E-BEAM SYSTEM**

 

 

August 1, 2002

 

 

Prepared for:

 

**Salubris LimitedPartnership**

 

**Fort Worth, Texas**

 

 

Submitted by:

**SureBeam Corporation**

9276 Scranton Road, Suite 600

San Diego, CA  92121

 

 

| **This document contains SureBeam Proprietary Information to be used  solely for  evaluating this Proposal and may not be disclosed to any outside 3rd  party.** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

----

 

August 1, 2002

 

 

Mr. David F. Corbin

Chief Financial Officer

Corbin & Company

3113 S. University Drive, Suite 500

Fort Worth, TX  76109

 

 

Subject:                                                     Proposal#1-0002817 – SureBeam E-Beam System

 

 

Dear Mr. Corbin:

 

SureBeam appreciates the opportunity to work with you in thedevelopment of SureBeam Proposal (#1-0002817) (“Proposal”) for theimplementation of a SureBeam System to process food products at your Fort Worthfacility.

 

**Purpose of theProposal**

 

This Proposal defines ourrecommendations to implement an E-Beam system at your Fort Worth facility, tomeet the following objectives:

 

ý            Reduce or EliminatePotential Pathogens in Meats

ý            Disinfest VariousFruits and Vegetables

ý            Minimize theProcessing Cost per Pound

ý            Meet ProcessingRequirements (Volume, Dose, etc.)

ý            Achieve SystemAvailability > 95%

ý            Minimize CapitalExpenditures

ý            Minimize LogisticsExpenses

 

 

The purpose of this Proposal is to provide Salubris Limited Partnershipwith a price, schedule, and scope-of-work for a SureBeam System consistent withSalubris’ requirements for the processing of food products, and if acceptable,to provide a binding framework within which to commence performance until adefinitive purchase agreement memorializing the detailed terms of the supplyrelationship (the “Agreement”). Salubris has chosen a site in the Fort Wortharea.  The recommended concept has beentailored to this site with the goal of achieving the “best processingconcept”.  This Proposal is intended bySureBeam Corporation (“SureBeam”) and Salubris Limited Partnership (“Salubris”)to be a binding commitment regarding the SureBeam System to be purchased bySalubris and shall be governed by the terms of

 

2

----

 

the RIGHT OF FIRST NEGOTIATIONAGREEMENT dated March 22, 2002 entered into between the parties, which isincorporated herein in its entirety, until the “Agreement is entered intobetween the parties.  It is contemplatedthat the principal terms of the Agreement shall be based upon SureBeam’sStandard Terms and Conditions for purchase of a System and the applicable termsand conditions contained in the RIGHT OF FIRST NEGOTIATION AGREEMENT datedMarch 22, 2002 and will also include the terms set forth below as well as wellas any additional customary terms that are mutually acceptable to theparties.   To the extent that any termof the RIGHT OF FIRST NEGOTIATION AGREEMENT dated March 22, 2002 contradicts aterm in this Proposal, the term in this Proposal shall prevail.

 

**RequirementsDefinition**

 

Salubris requirements to beaddressed by the SureBeam system include the following:

 

•              Integratethe E-beam system into the Salubris facility.

 

•              [...***...]

 

•                                          Meetrequired quality, process integrity, and regulatory requirements defined bySalubris, ISO-11137, TNRCC (Texas Natural Resource Conservation Commission) andUSDA guidelines.

 

•                                          Developan operating concept that meets the production, processing, and operating requirementsdefined in this Proposal.

 

•                                          Integrateequipment, subsystems, procedures, and processes into an overall operating“System” to achieve performance requirements.

 

•                                          Definea System concept that provides > 95% system availability, and maintains overallprocess integrity, safety and security at 100%.

 

**Proposal Summary**

 

To meet Salubris’ requirements,we are proposing to implement a SureBeamÒElectron Beam Processing System using SureBeam technology and patented systemconcepts. The system design is based upon field proven concepts and utilizesequipment with a demonstrated track record. The design uses a simple “flowthrough” concept – products are continuously moved through the e-beam field ata defined processing rate and scan height.

 

**System Description**

 

 

----

***CONFIDENTIAL TREATMENT REQUESTED**

 

3

----

 

To meet Salubris’ requirements,SureBeam is proposing to implement a SureBeamâElectron Beam processing System (refer to attached system layout drawings). TheSystem concept is based upon field proven designs and consists of the followingmajor subsystems:

 

•           ElectronBeam Source or “Accelerator”

•           MaterialHandling System

•           Information& Control System - “SureTrack”

•           SafetyEquipment

•              RadiationShield and Support Utilities

 

 

**Figure 1-1  Proposed E-Beam Layout**

 

To provide protection fromionizing energy, the SureBeam system uses a concrete shield sized to containthe E-beam accelerator and material handling system.  The shield consists of concrete walls and roof.  Thickness gradually decreases as you movefrom the beam area to the entry or exit portions of the maze.  The purpose of the maze is to provideseveral 90° turns that provide a “torturous path” limiting any ionizingradiation from escaping (i.e. no direct line of sight path). The shield designfeatures a common wall between E-Beam and X-Ray systems.  The E-Beam portion of the shield occupiesapproximately 4,000ft2 with the overall shield occupying 7,500ft2.

 

The accelerator centerlines arelocated inside of the shield and protected from ionizing radiation and ozone byinterior walls.  The accelerator designphilosophy is to limit variability in the accelerator to one parameter (scanwidth). All other operating parameters (such as energy, and power) are fixed atvalidated set points and pre-defined high/low limits. The goal is to providestable equipment operation that always produces a consistent, uniform beam. Ifthe beam characteristics exceed pre-defined limits, then the system isshutdown.

 

4

----

 

The system utilizes twosplit-beam accelerators that enable double-sided processing.  A unique scan horn directs the beam to thetop and bottom of product in an opposed fashion.   Each accelerator is dedicated to a single processing lane.   The split beam approach eliminates the needto flip product and facilitates very high speed processing by eliminatingproduct transfers (patent pending). In addition, double sided processingincreases the efficiency and throughput of the system as well as increase theuniformity of the delivered dose. Product is conveyed into the shield andthrough the e-beam process on a material handling system that was specificallydesigned to operate in a food processing application. Basic transport functionsare accomplished using powered roller conveyor.  This conveyor efficiently moves product from the load station tothe beam area and back out to the unload station.   The conveyor close packs product prior to processing for furtherefficiency. To achieve precise dose delivery an independent process conveyor isused to control the movement of product through the e-beam field. Anindependent servo controlled conveyor is used to achieve positioning and speedcontrol of ±0.5% variance from the set point.

 

The SureTrack information andcontrol system oversees all information and processing functions. SureTrackuses a system PC and a distributed network of industrial PLCs to monitor andcontrol system functions. The software modules have been proven in similarapplications to ensure a robust control system.

 

**Description of Operation**

 

The system is simple to operatewith built-in integrity checks that ensure compliance with the processingprotocol. The basic operation is as follows:

 

The System operator initiates“Lot” setup and release by entering the Product Code, Lot Information, andselecting a pre-defined processing protocol or “recipe”.

 

5

----

 

**Figure 1-2  Operator at SureTrack Computer**

 

The SureTrack control systemchecks the information to ensure the validity of the data and schedules the Lotfor processing. When the integrity of the data has been verified, the controlsystem downloads to the accelerator and material handling controllers thepredetermined processing set points for the key parameters.  These include processing rate, scan height,dosimeter placement criteria, and key high/low limit settings, and error recoverydirections. The control system verifies all parameters are set correctly, theequipment is operating within specifications, and that system validationparameters are initialized to previously validated settings.  Process integrity is assured.

 

A typical operational overviewfollows.  Product moves to both loadareas where it is transferred onto the inbound conveyors.  Specific parameters to achieve bestprocessing results are predetermined considering product size, shape, densityand results from dose mapping tests. These include optimal dose, max/min ratio, and processing rate releasedinto the system.  Specially designedfixtures containing dosimeters are used as an independent means of monitoringintegrity of the delivered dose. In general, dosimeters are inserted into theprocess before the first product, periodically between product, and after thelast product in a Lot.  Currentregulatory guidelines recommend placement of dosimeters at the beginning,middle, and end of a Lot (at a minimum). The quantity or frequency ofdosimeters processed within the Lot will be determined by QA and input into thesystem as part of the Lot processing instructions.

 

The SureTrack information andcontrol system monitors the status and operation of the system.  It informs the system operator of theoverall process checking for the completion of each task and verifying theintegrity of the process.  SureTrackalso verifies that the operating parameters and variables are correctly set andoperating within the pre-defined limits before the product is released into thesystem.

 

6

----

 

Released product is transportedto the process area on a roller conveyor. The conveyor is the primary means oftransporting product from load/unload areas to and from the process area. Thecontrol system manages the traffic flow and accumulation of product within thesystem.

 

Immediately prior to enteringthe process area, an automatic closing conveyor is used to stage product.  The closing conveyor close-packs product tominimize the gap between products. Speed is precisely matched with that of the subsequent process.  This close packing of product maximizes theutilization of the e-beam field and hence maximizes throughput.

 

An independent, servo driven“Process Conveyor” is used to precisely control the movement and positioning ofproduct through the e-beam field. The speed of the conveyor is selectableto  allow delivery of a variety of doselevels. To verify accuracy, two independent sensors constantly monitor conveyorspeed to stay within predetermined parameters.

 

The electron beam is scannedover the product as it moves through the process. Double sided processing isachieved by using split beam accelerators. The beam from one accelerator is split and each split beam is magneticallydeflected to the desired direction.  Onedeflected beam shoots down onto a product lane while the other shoots up at thesame product lane.  Each accelerator isdedicated to a single processing lane.  The split beam approach eliminates the need to flip product andfacilitates very high speed processing by eliminating product transfers (patentpending). In addition, double sided processing increases the efficiency andthroughput of the system, and increases the uniformity of the delivered dose.

 

Product moves through thee-beam field at a pre-defined speed. Product is typically “in the beam” lessthan a second. The control system continuously monitors key process parametersto ensure the process is within defined operating limits. Any out of limitscondition will cause a coordinated shutdown of the equipment.

 

Product exiting from the e-beamprocess is conveyed directly to the unload area where product  is unloaded onto shipping pallets. Fixturescontaining dosimeters are removed for subsequent processing. The overall cycletime to move product through the process is about 7-8 minutes. Changeover fromone Lot to another can be accomplished in 3-5 minutes.

 

When the last product in theLot clears the process area, the SureTrack control system checks to ensure theLot processing is complete and records/archives all processing informationrequired to substantiate successful completion of the process. Once QA reviewsthe dosimetry and processing information, a determination will be made as towhether the Lot can be released. Released product is moved to waiting trucks and returned to thecustomer.

 

7

----

 

**System Equipment and Deliverables**

 

The SureBeamSystem consists of the following deliverables and services:

 
| 1.1   | Engineering  Analysis & Concept Definition. An initial engineering effort will be  performed prior to the implementation of the system to develop answers to the  following issues:                                                                                                                                                                                                                                           |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1.1 | Define the  system concept and the site-specific layout to fit the Salubris selected  site.                                                                                                                                                                                                                                                                                                                                       |
| 1.1.2 | Assist  Salubris with the qualification and selection of the facility General  Contractor. Salubris will contract directly with the General Contractor for  the construction of the Facility and all support utilities.                                                                                                                                                                                                           |
| 1.1.3 | Assist Salubris  resolve site specific questions (location, local codes, finalize costs,  utilities, ozone ventilation)                                                                                                                                                                                                                                                                                                           |
| 1.1.4 | Assist  Salubris evaluate process containers, if required, in sizes best suited for  achieving the processing and production requirements                                                                                                                                                                                                                                                                                         |
| 1.1.5 | Define  interfaces to other operations                                                                                                                                                                                                                                                                                                                                                                                            |
| 1.2   | Linear  Accelerator – The e-beam source consists of two linear accelerators that  generate electrons at 10 MeV energy.   The e-beam source will include the following equipment:                                                                                                                                                                                                                                        |
| 1.2.1 | Two  split-beam E-Beam LX1 accelerators, 10MeV at low power                                                                                                                                                                                                                                                                                                                                                                       |
| 1.2.2 | Horizontal  accelerator configuration with split beam scan horns                                                                                                                                                                                                                                                                                                                                                                  |
| 1.2.3 | Selectable  scan widths (3)                                                                                                                                                                                                                                                                                                                                                                                                       |
| 1.2.4 | Secondary  water conditioning and accelerator cooling system                                                                                                                                                                                                                                                                                                                                                                      |
| 1.2.5 | Packing and  Freight to the site                                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.3   | Material Handling  system - A material handling system is provided to contain, position, and  move product through the process. The equipment shall be capable of conveying  various case sizes through the system while providing integrity over the  process. The MH system shall include the following items:                                                                                                                  |
| 1.3.1 | Roller  Conveyor – Chain driven live roller conveyor is provided to transport product  cases into and out of the process area. Two independent lanes are  provided.  Rollers are plated for  corrosion resistance.                                                                                                                                                                                                      |
| 1.3.2 | Closing  Conveyor – Two (2) independent servo driven closing conveyors are provided to  “close pack” product cases on the process conveyor in two dimensions –  between cases and across lanes. This increases the processing efficiency.  Product cases do not “bump” into each other so the dose in the process area  is not compromised.                                                         |
| 1.3.3 | Process  Conveyor – Two (2) independent servo driven process conveyors are provided to  precisely control the speed of the product   case through the beam to within ± 0.5% variance from the set point.  This provides precise control over the delivery of the dose.                                                                                                                                             |
| 1.3.4 | Control  System – Controls are provided to monitor and control the flow of product  cases through the system. All actions that result in product movements (such  as merge, divert, release, rotate, and stop) shall be confirmed as being  successfully completed. Any action that affects the dose or integrity of the  process shall be redundantly monitored. Errors or out-of-limit conditions  will result in a system |

 

8

----

 
| 1.3.5  | shutdown. A  means, independent of the control system, shall be provided to automatically  maintain the logical processing sequence of the product cases. The control  system shall guide the operator through error recovery and provide a check  that recovery actions were completed successfully.                                                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.4    | Packing and  Freight to the Site.                                                                                                                                                                                                                                                                                                                                                                                          |
| 1.4.1  | SureTrack  Control System – a real-time information and control system is provided to  monitor and control the overall process. The control system shall provide the  data management, system operating functions, “logical” error detection, and  overall error recovery functions for the entire System, and provide the  following capabilities:                                                         |
| 1.4.2  | Industrial  PC based information and control computer, Pentium CPU with 512Mb RAM,  mirrored hard drives (2), color graphics monitor, and interface to Allen  Bradley PLC.                                                                                                                                                                                                                                                 |
| 1.4.3  | Real-time  PLC control system for monitoring, tracking and control of the sterilization  process                                                                                                                                                                                                                                                                                                                           |
|   | Real-time  SureTrack information system to perform the following functions:                                                                                                                                                                                                                                                                                                                                                |
| • | System  start-up and shutdown                                                                                                                                                                                                                                                                                                                                                                                              |
| • | Creation,  audit, and scheduling of processing protocols                                                                                                                                                                                                                                                                                                                                                                   |
| • | Sterilization  lot control                                                                                                                                                                                                                                                                                                                                                                                                 |
| • | Real-time  monitor and information display                                                                                                                                                                                                                                                                                                                                                                                 |
| • | Process  integrity checks                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Error  detection and recovery                                                                                                                                                                                                                                                                                                                                                                                              |
| • | Processing  reports, data management, and information archiving                                                                                                                                                                                                                                                                                                                                                            |
| 1.4.4  | Redundant  sensors for all key process monitors                                                                                                                                                                                                                                                                                                                                                                            |
| 1.4.5  | Software  Validation per SureBeam Software Development Procedures                                                                                                                                                                                                                                                                                                                                                          |
| 1.4.6  | Packing and  Freight to the Site.                                                                                                                                                                                                                                                                                                                                                                                          |
| 1.5    | Safety  System — a safety system is provided that meets the requirements for E-beam  system protection as specified by OSHA, IAEA Safety Series 107, NCRP Report  51 regulatory requirements. Safety system shall be fail-safe, and provide  “defense-in-depth”, redundancy, and independence. All safety system  components shall be fit for the purpose intended and include the following  capabilities: |
| 1.5.1  | Intrusion  alarms to detect unauthorized access into controlled areas (pressure mats,  light curtain, electronically locked doors).                                                                                                                                                                                                                                                                                        |
| 1.5.2  | Emergency  stop(s) and pull cords.                                                                                                                                                                                                                                                                                                                                                                                         |
| 1.5.3  | Fire / smoke  detection.                                                                                                                                                                                                                                                                                                                                                                                                   |
| 1.5.4  | System  start-up & shutdown.                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.5.5  | Key  lockouts.                                                                                                                                                                                                                                                                                                                                                                                                             |
| 1.5.6  | Radiation  monitors for out-of-limits conditions.                                                                                                                                                                                                                                                                                                                                                                          |
| 1.5.7  | Status  display (accelerator ON / OFF, Access OK / PROHIBITED.                                                                                                                                                                                                                                                                                                                                                             |
| 1.5.8  | Start-up  alarms and horns.                                                                                                                                                                                                                                                                                                                                                                                                |
| 1.5.9  | Start-up  timer.                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.5.10 | Status  alarms and beacons (rotating beacons).                                                                                                                                                                                                                                                                                                                                                                             |
| 1.5.11 | Ozone  exhaust flow monitor.                                                                                                                                                                                                                                                                                                                                                                                               |

 

9

----

 
| 1.5.12 | Safety signs  and markings (Radiation Hazard, Access Prohibited, High Voltage, etc.).                                                                                                                                                                                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.5.13 | Automatic  shutdown for out-of-limits conditions.                                                                                                                                                                                                                                                                                                                    |
| 1.5.14 | Sequenced  start-up.                                                                                                                                                                                                                                                                                                                                                 |
| 1.6    | Dosimetry  System – a dosimetry system is provided to independently measure delivered  dose to the product. The system shall conform to applicable ANSI standards.  Systems are sufficiently sized and will be shared by E-Beam and X-Ray  systems.  The following equipment  shall be included:                                                           |
| 1.6.1  | Equipment -  One (1) Genesys 20 spectrophotometers with accompanying software shall be  provided.  Units shall be integrated  to a PC for data processing.                                                                                                                                                                                                      |
| 1.6.2  | Dosimeters -  Five thousand (5,000) B3 radiochromic dosimeters that cover a range of doses  from 1.0 kGy — 100 kGy shall be provided.                                                                                                                                                                                                                           |
| 1.6.3  | One (1)  Bruker E-Scan II EPR Analyzer                                                                                                                                                                                                                                                                                                                               |
| 1.6.4  | Five  thousand (5,000) Alanine pellets or film                                                                                                                                                                                                                                                                                                                       |
| 1.6.5  | Beam Energy  Measurement Equipment - Two (2) Certified RISO Aluminum Energy Wedges or  Plates shall be provided.                                                                                                                                                                                                                                                     |
| 1.6.6  | Dosimetry  Computer (PC) and associated software and laser printer.                                                                                                                                                                                                                                                                                                  |
| 1.6.7  | Equipment  calibration and procedures.                                                                                                                                                                                                                                                                                                                               |
| 1.6.8  | Packing and  Freight to the Site.                                                                                                                                                                                                                                                                                                                                    |
| 1.7    | Facilities  and Utilities                                                                                                                                                                                                                                                                                                                                            |
| 1.7.1  | General  design and specification of facility and utility requirements (power,  compressed air, water, ozone exhaust) associated with the E-beam processes.  Detail design, structural, and shop drawings will be the responsibility of  the General Contractor / Salubris.                                                                                          |
| 1.7.2  | General  design and specification of the shielding requirements. SureBeam will be  responsible for the layout and design of the shield. Salubris and the General  Contractor will be responsible for the construction of the shield, building,  and all utilities. Detail design and shop drawings will be the responsibility  of the General Contractor / Salubris. |
| 1.7.3  | Hookup of  SureBeam equipment to Salubris furnished utilities (power, compressed air,  water, ozone exhaust).                                                                                                                                                                                                                                                        |
| 1.8    | Participate  in design review(s) of Salubris furnished equipment on an as needed basis.                                                                                                                                                                                                                                                                              |
| 1.8.1  | Equipment  installation, checkout, and system validation to ISO-11137, USDA, and ASTM  standards                                                                                                                                                                                                                                                                     |
| 1.8.2  | Installation  and checkout of SureBeam furnished equipment                                                                                                                                                                                                                                                                                                           |
| 1.8.3  | Hook-up of  Salubris furnished utilities to SureBeam equipment                                                                                                                                                                                                                                                                                                       |
| 1.8.4  | Checkout and  testing of equipment                                                                                                                                                                                                                                                                                                                                   |
| 1.8.5  | System  integration and performance testing                                                                                                                                                                                                                                                                                                                          |
|   | Validation  of the system to ISO-11137 requirements:                                                                                                                                                                                                                                                                                                                 |
| • | Installation  Qualification                                                                                                                                                                                                                                                                                                                                          |
| • | Irradiator  Dose Mapping                                                                                                                                                                                                                                                                                                                                             |
| • | Certification                                                                                                                                                                                                                                                                                                                                                        |
| 1.9    | Maintenance  system and support – the following maintenance support is provided to augment  the Salubris provided support:                                                                                                                                                                                                                                      |

 

10

----

 
| 1.9.1                                     | A  computerized maintenance system (MPII) will be used to track and schedule the  maintenance activities. This system will be loaded with maintenance  instructions and schedules, and maintained to provide a record of maintenance  activities for regulatory reviews.                                                                                                                                                                                                     |
|-------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.9.2                                     | On-line link  connecting the site control system to SureBeam support personnel to provide  remote diagnostic capability will be provided. Salubris is responsible for  providing an appropriate telephone line to establish reliable communications.                                                                                                                                                                                                                         |
| 1.9.3                                     | Two system  check-ups during the warranty period. SureBeam will check the equipment at  the site and perform an audit of the system. Additional training shall be  performed during these site visits                                                                                                                                                                                                                                                                        |
| 1.9.4                                     | Additional  service and maintenance support is defined in a separate agreement. Refer to  the Technical Services Agreement.                                                                                                                                                                                                                                                                                                                                                  |
| 1.10                                      | Project  management, engineering, technical services, and documentation – SureBeam  will organize and manage the delivery of the SureBeam System and provide the  following services and support:                                                                                                                                                                                                                                                                       |
| 1.10.1                                    | Structured  development methodology (Project Plan, etc.)                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 1.10.2                                    | Project  management and engineering                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 1.10.3                                    | Hazards  analysis                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 1.10.4                                    | Radiation  Survey                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 1.10.5                                    | Ozone survey                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 1.10.6                                    | Project documentation  (Design History Record)                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 1.10.7                                    | Manuals –  Operation, Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 1.10.8                                    | Documentation  - drawings, schematics, source code, and logic diagrams to define the system                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.11                                      | System  Start-up and Operations Support – To ensure proper start-up of the system the  following technical services are provided:                                                                                                                                                                                                                                                                                                                                       |
| 1.11.1                                    | Operations  training (processing tasks and procedures, dosimetry).                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.11.2                                    | Assist  Salubris develop and implement standard operating procedures (SOPs, and HACCP  Plan) for the overall operation of the System.                                                                                                                                                                                                                                                                                                                                        |
| 1.11.3                                    | Assist  Salubris perform dose mapping of selected products to be processed – define  the processing parameters and protocol.                                                                                                                                                                                                                                                                                                                                            |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Salubris Furnished Items and Services** |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                      | The  following items or services are to be provided by Salubris:                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 1.12                                      | Land and  Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.12.1                                    | Land for the  facility                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 1.12.2                                    | Detail  design and construction of the facility. The facility will include all  equipment need to operate the system not furnished by SureBeam including:  access roads, parking, truck staging areas, docks, offices, product staging  areas (in and out), load and unload areas, shield, mechanical and electrical  sub-systems, lighting (internal and external), cooling equipment, finishes,  furniture, work stations, maintenance tools, spare parts, and telephones. |
| 1.12.3                                    | Dosimetry  Lab — 10 x 15 ft.; temperature and humidity controlled with UV filters on  fluorescent lights.                                                                                                                                                                                                                                                                                                                                                               |

 

11

----

 
| 1.12.4  | Equipment  Room — 15 x 30 ft.; conditioned air, noise protection. Room to contain  modulator equipment and other LINAC equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.12.5  | Control Room  – 10 x 10 ft.; temperature controlled; secured access.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 1.12.6  | Storage and  work areas – size to be determined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 1.12.7  | Offices –  size and functionality to be determined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.12.8  | Implementation  of concrete shield at the site. Design and specification by SureBeam. The  shield is designed to provide protection from ionizing radiation generated  from the interaction of the beam and material. The design requirements for  the system require that radiation levels in the load and unload areas be <  20 mSv per year; and in areas such as the Equipment Room the levels can be  < 20 mSv per 400 hours. Access to the beam area is strictly prohibited  because the radiation level exceeds 3 mSv per hour. The shield can be  designed as an external building. |
| 1.12.9  | Temporary  construction offices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.12.10 | Permits and  licenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 1.13    | Utilities –  both temporary and permanent utilities. Temporary utilities are required when  the shield is completed and ready for joint occupancy or use by SureBeam.  Permanent utilities are required 4 weeks later. The following utilities are  required for the system equipment:                                                                                                                                                                                                                                                                                                       |
| 1.13.1  | Compressed  air – 15 CFM @ 100PSI; two drops                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 1.13.2  | Air  Compressor for Pneumatic Door – Size TBD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 1.13.3  | Electrical  power - Salubris shall supply transformers matching their primary line power  to the SureBeam accelerators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.13.4  | Electrical  power requirements are listed below and pertain to each accelerator included  in the system. All system voltages are ±10%, 3Φ, 60Hz, 3 wire plus  ground for 480VAC and 4 wire plus ground for 208 VAC. A panel supplying and  providing a single point of disconnect for the following sources:                                                                                                                                                                                                                                                                            |
| 1.13.5  | 480 VAC ,  290A each (580A total) -  Linac and  Modulator Power, water system, and air blower.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 1.13.6  | 208 VAC, 80A  each (160A total) — Modulator and Linac controls.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 1.13.7  | Isolated 480  VAC ±10%, 3φ, 60Hz., 120A, 4 wire plus ground - Material Handling System                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.13.8  | 480VAC, 100A  — Pneumatic Door Air Compressor                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 1.13.9  | Building  electrical power for cooling, lights, or other equipment – to be defined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.13.10 | Ground Rod,  resistance = 1 W to ground                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 1.13.11 | Heating,  Ventilation, and Air Conditioning (HVAC) - Conditioned Air 70°F Non  Condensing to be supplied to Equipment Room. The equipment heat load for the  HVAC system is 36 kW. Air will be drawn from the room through the cabinets  and exhausted out the cabinet top through ducting.                                                                                                                                                                                                                                                                                                  |
| 1.13.12 | Heating,  Ventilation, and Air Conditioning (HVAC) for the facility – to be defined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 1.13.13 | Water cooling  (primary) - Chilled water generated from an overall chilled water system, not  greater than the values listed in the following table below nor less than 40o  F (4o C) up to the flow rates listed below, is to be delivered to each  SureBeam Water Cooling System heat exchanger. The chilled water must run  through ball valves designed to throttle water flow to each heat  exchanger.   A                                                                                                                                                               |

 

12

----

 

flow metermust be provided to monitor the flow of facility water through each ball valve.The heat exchanger connections size and type are listed below. Pressure dropacross each SureBeam Water Cooling System is less than 20 PSI (1.4 Bar).  All lines must be flushed prior to connectionof system components with a solution of TSP (Tri-Sodium Phosphate, 1 cup to 10gallons) and then clear water. The overall Chilled Water System shall have thecapability to continuously operate at 25% of rated capacity. Inlet temperatureand flow may vary depending on the system design.

 

| **System  Description**        |   | **Heat  Load/  Ea** |   | **Flow  Rate  GPM/Ea** |   | **Max.  Inlet  Temp** |   | **Connection  Size & Type** |   |
|--------------------------------|--------|---------------------|--------|------------------------|--------|-----------------------|--------|---------------------------------|--------|
| SB LX1 LINAC System Water Skid |   | 100kW               |   | 60                     |   | 75 ̊ F            |   | 1 1⁄2” hose barb        |   |

 

1.13.14                    Ozone ventilation – Salubrisshall install an Ozone Extraction system to continuously extract ozone from theprocess chamber of the Shield Cell. The system shall be designed to maintain anet negative pressure (> 0.025 Inch. W.C.) inside the cell as compared tooutside the cell at the entrance. The duct system may be installed in or underthe concrete floor of the shield or inside the cell via ductwork runningthrough the labyrinth. If ductwork inside the cell is chosen, the ductwork mustbe 100% stainless steel from the inside of the shield to the ozone exhaust fanas schematically shown by SureBeam. The fan shall be controlled by a VariableFrequency Drive Controller that is furnished by SureBeam (max. cap. 5 HP). Thefan and ductwork shall be designed to maintain the minimum net negativepressure in the cell as specified under a low fan speed setting. It also shouldbe able to provide exhaust capability of 1 complete air change of the cellwithin 3 minutes or less at the maximum design capacity/speed of the fan.

1.13.15                    Interface Control Panel - Apanel housing the following signals:

1.13.16                    Inputs from Salubris toSureBeam System:

•      Oneset dry contacts - Ozone Exhaust Flow

•      Oneset dry contacts - Facility Fire Alarm OK

•      Oneset dry contacts - HVAC OK

•      Oneset dry contacts - Chilled Water OK

1.13.17                    Outputs from SureBeam Systemto Salubris:

•      24            VDC relay - E-Beam Fire Alarm

•      24            VDC contactor - Run Ozone ExhaustFan

1.13.18                    Lighting — work areas,rooms, inside shield

1.13.19                    Permits and licenses

1.14         Other Equipment

1.14.1      Maintenance Tools

1.14.2      Fork Trucks, telephones, office equipment, or other processingequipment

1.14.3      Stretch wrap equipment

1.14.4      Air Compressor and Associated Hardware for Pneumatic Door

 

13

----

 

1.15         Regulatory compliance (Local agency, US FDA, ISO11137,TNRCC)

1.15.1      Product qualifications

1.15.2      Process qualifications

1.15.3      Dose determination and setting

1.15.4      Regulatory filings

1.15.5      System modifications required to meet local regulatory orbuilding department requirements

1.15.6      Salubris system operating procedures

1.16         Other engineering support

1.16.1      A&E services

1.16.2      Application development

 

14

----

 

**System Price**

 

The price for the E-Beam Systemdefined above is as follows:

 

System Price(SureBeam Deliverables-items 1.1 - 1.13):
| •   Base System with 2  LX1 Accelerators                           |   | [...***...] |
|----------------------------------------------------------------------------------------|--------|-------------------|
| •   Cost to split  e-beam and x-ray systems into separate projects |   | [...***...] |
| Subtotal                                                                               |   | $8,946,000        |

 

Options
| Spare Parts |   | To be determined |
|-------------|--------|------------------|

 

 

[...***...]

 

 

Payments will be funded through the followingmilestone payment schedule:

 
| **Milestone  Number** |   | **Description**                                             |   | **Milestone  Value (%)** |   | **Comments**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------------------|--------|-------------------------------------------------------------|--------|--------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1A                    |   | Initial  Payment of Down Payment                            |   | [...***...]        |   | Payment made  on or before November 1, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                  |   |                                                        |   |                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 1B                    |   | Final  Payment of Down Payment                              |   | [...***...]        |   | Payment made  on or before December 20, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2                     |   | System  Design Complete                                     |   | [...***...]        |   | Payment made  on the completion of this milestone.   System design refers to the overall design and specification of the  facility and processing system. The following documentation shall be submitted  by SureBeam as evidence of the completion of the milestone: general design  drawings (plan and elevation views) defining the facility layout, utilities  (single line diagrams), description of operation, and processing equipment  layouts. In addition, the design of the shield will be defined including the  information required for regulatory submissions. |
| 3                     |   | Accelerator  Factory Test Complete and shipment to the Site |   | [...***...]        |   | SureBeam  will assemble and test the accelerator in the factory test cell. Upon successful  completion of the factory test as witnessed by Salubris, and shipment of the  equipment the milestone will be complete. The following documentation shall  be submitted by SureBeam as evidence of the completion of the milestone:  signed and approved factory test plan, test report defining the test results,  SureBeam certification of the test results, appropriate bills-of-lading,  packing list, shipping documents.                                                        |
| 4                     |   | Accelerator  and Material Handling Equipment Installed      |   | [...***...]        |   | SureBeam  will install the accelerator and material handling equipment. Once installed  and powered up in a manual mode the milestone will be complete. The following  documentation shall be submitted by SureBeam as evidence of the completion of  the milestone: Salubris approved checklist certifying the installation and  power up of the equipment.                                                                                                                                                                                                                       |
| 5                     |   | System  Acceptance Test Complete                            |   | [...***...]        |   | Upon  successful completion of the System Acceptance Test, the milestone will be  complete. The following documentation shall be submitted by SureBeam as  evidence of the completion of the milestone: signed and Contractor approved  Acceptance Test Document, test report defining the test results, Validation  Report per ISO-11137 requirements.                                                                                                                                                                                                                            |
|                  |   | Total                                                       |   | 100%                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

----

***CONFIDENTIAL TREATMENT REQUESTED**

 

15

----

 

**ImplementationSchedule**

 

The overall implementation of the system will be completed four monthsafter SureBeam receives beneficial access and use of the shield, utilities, andfacility provided by Salubris. The overall project is expected to take [...***...]to complete, and is predicated upon Salubris’ furnishing their deliverables by[...***...]. We expect completion of major milestones to approximate the followingschedule:

 
| **Event**                                                               |   | **Months after Award** |
|-------------------------------------------------------------------------|--------|------------------------|
| Contract Award                                                          |   | [...***...]      |
| System Design Complete (joint SureBeam and Salubris effort)             |   | [...***...]      |
| Shipment of Material Handling & Controls Equipment                  |   | [...***...]      |
| Substantial completion of shield, facility and utilities (by  Salubris) |   | [...***...]      |
| LINAC Factory Demo                                                      |   | [...***...]      |
| Building Construction Complete (permanent utilities available)          |   | [...***...]      |
| Accelerator On Site                                                     |   | [...***...]      |
| MH & Controls Installation Complete                                 |   | [...***...]      |
| Accelerator Installation Complete                                       |   | [...***...]      |
| System Integration & Test Complete                                  |   | [...***...]      |
| Acceptance Test Complete                                                |   | [...***...]      |

 

 

We hope this information will assist you in your efforts to implementElectron Beam processing at your Fort Worth facility.   We at SureBeam enjoy working with you and look forward toassisting you as we move forward with the “next step”.

 

The transaction and negotiations contemplated by this Proposal may notbe abandoned or terminated by Salubris. The parties agree that each shall be liable for the payment of all oftheir own expenses and fees associated with the negotiation of this Proposaland the Agreement.

 

The laws of the State of Texas will govern this Proposal, and bothparties acknowledge and agree that this Proposal, as governed by the RIGHT OFFIRST NEGOTIATION AGREEMENT dated March 22, 2002 entered into between theparties constitutes an agreement among the parties hereto with respect to thesubject matter hereof, and supersedes all prior and contemporaneous agreementsand understandings, inducements, or conditions, express or implied, oral, orwritten, except as herein contained. This Proposal may not be modified or amended other than by an agreementin writing signed by an authorized representative of each party hereto (asdesignated from time to time by such party).

 

16

----

 

Proposal Agreed to by:

 
| SureBeam Corporation                               | Salubris Limited Partnership          |
|----------------------------------------------------|---------------------------------------|
|                                               |                                  |
| By:                                                |  /s/  J. Thomas  Allen |   | By: |  /s/  Dean Davis |   |
| Name:                                              | J. Thomas Allen                       |   | Name: | Dean Davis |   |
| Title:                                             | Vice President                        |   | Title: | Managing Partner |   |
|                                               |                                  |
| cc:                                                | Kevin Claudio — SureBeam         |
|                                               | Larry Oberkfell – SureBeam       |
|                                               | David Rane - SureBeam                 |
|                                               | George Sullivan – SureBeam       |
|                                               |                                  |
| Attachment:   Overall System Layout |
|                                                    |                                       |  |  |  |  |  |  |  |

 

17

----

 

**EXHIBIT B**

**MILESTONES**

 

 

1.             Implementation Milestones

 

(a)           The overall implementation of thesystem will be completed four months after SureBeam receives beneficial accessand use of the shield, utilities, and facility provided by Buyer. The overallproject is expected to take [...***...] to complete, and is predicated upon Buyer’sfurnishing their deliverables by [...***...] (“Buyer Milestones”).

 

We expect the major milestonesto approximate the following schedule:

 

 
| **Event**                                                            |   | **Months after Execution of Agreement** |
|----------------------------------------------------------------------|--------|-----------------------------------------|
| Contract  Award                                                      |   | [...***...]                       |
| System  Design complete (joint Seller and Buyer effort)              |   | [...***...]                       |
| Shipment of  Material Handling & Controls Equipment              |   | [...***...]                       |
| Substantial  completion of shield, facility and utilities (by Buyer) |   | [...***...]                       |
| LINAC  Factory Demo                                                  |   | [...***...]                       |
| Building  Construction Complete (permanent utilities available)      |   | [...***...]                       |
| Accelerator  On Site                                                 |   | [...***...]                       |
| MH &  Controls installation complete                             |   | [...***...]                       |
| Accelerator  installation complete                                   |   | [...***...]                       |
| System  Integration & Test complete                              |   | [...***...]                       |
| Acceptance  Test complete                                            |   | [...***...]                       |

 

----

***CONFIDENTIAL TREATMENT REQUESTED**

 

18

----

 

**EXHIBIT C**

**PAYMENT SCHEDULE**

 

 

**C1           SYSTEMPRICE**

 

1.             The price for the system defined above is as follows:

 
| System Price  (Exhibit A items 1.1 – 1.13)                |   | [...***...] |
|----------------------------------------------------------------|--------|-------------------|
| Options (not  included in base price):                         |   |              |
| Cost to  split e-beam and x-ray systems into separate projects |   | [...***...] |
|                                                           |   |              |
| Spare parts,  tools                                            |   | To be  determined |

 

2.             [...***...]

 

 

3.             Payments will be made by bank wire to the bank accountdesignated by Seller, and based upon the Payment Terms as outlined below.

 

**Payment Terms**

 

1.             The System Price to be paid by Buyer to Seller shall bepaid in installments in accordance with the following payment schedule:

 

 

(a)           Paymentof [...***...] to be made on or before November 1, 2002;

(b)           Paymentof [...***...] to be made on or before December 20, 2002;

(c)           Paymentof [...***...] to be made on the completion of the System Design.  “System Design” refers to the overall designand specification of the facility and processing system. The followingdocumentation shall be submitted by SureBeam as evidence of the completion ofthe milestone: general design drawings (plan and elevation views) defining thefacility layout, utilities (single line diagrams), description of operation,and processing equipment layouts. In addition, the design of the shield will bedefined including the information required for regulatory submissions;

(d)           Payment of  [...***...] to be made on completion of the accelerator factory testand shipment of the accelerator to the Site. SureBeam will assemble and test the accelerator in the factory test cell.Upon successful completion of the factory test as witnessed by Salubris, andshipment of the equipment the milestone will be complete. The followingdocumentation shall be submitted by SureBeam as evidence of the completion ofthe milestone: signed and approved

 

19

----

 

factory test plan, test reportdefining the test results, SureBeam certification of the test results,appropriate bills-of-lading, packing list, shipping documents;

(e)           Payment of [...***...] to be made oncompletion of the accelerator and material handling equipmentinstallation.  SureBeam will install theaccelerator and material handling equipment. Once installed and powered up in amanual mode the milestone will be complete. The following documentation shallbe submitted by SureBeam as evidence of the completion of the milestone:Salubris approved checklist certifying the installation and power up of theequipment; and

(e)           Payment of [...***...] to be made oncompletion of the System Acceptance Test. Upon successful completion of the System Acceptance Test, the milestonewill be complete. The following documentation shall be submitted by SureBeam asevidence of the completion of the milestone: signed and Contractor approvedAcceptance Test Document, test report defining the test results, ValidationReport per ISO-11137 requirements.

 

**C2      ROYALTY FEE**

1.             In accordance with this Agreement, Buyer shall paySeller a Royalty Fee equal to the following:

 

(a)                                  [...***...]per pound of Products for which Processing Services are provided by Buyerduring a calendar year until the cumulative number of pounds of Products forwhich Processing Services are so provided during such calendar year equals[...***...] pounds (provided, however, that the total amount of RoyaltyFees due and payable hereunder for any portion of a calendar year until thecumulative number of pounds of Products for which Processing Services are soprovided during a calendar year equals [...***...] pounds, shall not exceed anamount equal to [...***...] of Gross Processing Receipts with respect to suchportion of the applicable calendar year);

 

(b)                                 [...***...]per pound of Products for which Processing Services are provided by Buyerduring a calendar year after the cumulative number of pounds of Products forwhich Processing Services are so provided during such calendar year equals[...***...] pounds until the cumulative number of pounds of Products for whichProcessing Services are so provided during such calendar year equals [...***...]pounds (provided, however, that the total amount of Royalty Feesdue and payable hereunder for any portion of a calendar year after thecumulative number of pounds of Products for which Processing Services are soprovided during a calendar year equals [...***...] pounds until the cumulativenumber of pounds of Products for which Processing Services are so providedduring a calendar year equals [...***...] pounds, shall not exceed an amount equalto [...***...] of Gross Processing Receipts with respect to such portion of theapplicable calendar year);

 

(c)                                  [...***...]per pound of Products for which Processing Services are provided by Buyerduring a calendar year after the cumulative number of pounds of Products

 

20

----

 

for whichProcessing Services are so provided during such calendar year equals [...***...]pounds until the cumulative number of pounds of Products for which ProcessingServices are so provided during such calendar year equals [...***...] pounds (provided,however, that the total amount of Royalty Fees due and payable hereunderfor any portion of a calendar year after the cumulative number of pounds ofProducts for which Processing Services are so provided during a calendar yearequals [...***...] pounds until the cumulative number of pounds of Products forwhich Processing Services are so provided during a calendar year equals [...***...]pounds, shall not exceed an amount equal to [...***...] of Gross ProcessingReceipts with respect to such portion of the applicable calendar year);

 

(d)                                 [...***...]per pound of Products for which Processing Services are provided by Buyerduring a calendar year after the cumulative number of pounds of Products forwhich Processing Services are so provided during such calendar year equals[...***...] pounds until the cumulative number of pounds of Products for whichProcessing Services are so provided during such calendar year equals [...***...]pounds (provided, however, that the total amount of Royalty Feesdue and payable hereunder for any portion of a calendar year after thecumulative number of pounds of Products for which Processing Services are soprovided during a calendar year equals [...***...] pounds until the cumulativenumber of pounds of Products for which Processing Services are so providedduring a calendar year equals [...***...] pounds, shall not exceed an amount equalto [...***...] of Gross Processing Receipts with respect to such portion of theapplicable calendar year); and

 

(e)                                  [...***...]per pound of Products for which Processing Services are provided by Buyerduring a calendar year after the cumulative number of pounds of Products forwhich Processing Services are provided during such calendar year for volumesgreater than [...***...] pounds (provided, however, that the totalamount of Royalty Fees due and payable hereunder for any portion of a calendaryear after the cumulative number of pounds of Products for which ProcessingServices are so provided during a calendar year equals [...***...] pounds, shallnot exceed an amount equal to [...***...] of Gross Processing Receipts with respectto such portion of the applicable calendar year).

 

21

----

 

**EXHIBIT D**

**THIRD PARTYMANUFACTURER WARRANTIES**

 

 

( Not Applicable )

 

22

----

 

**EXHIBIT E**

**LICENSE AGREEMENT**

 

 

( Separately Provided )

 

23

----