CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R.
SECTIONS 200.80(B)(4), 200.83 AND 230.406
AMENDED AND RESTATED AGREEMENT #3 FOR
PURCHASE OF AN
X-RAY SYSTEM
BY AND AMONG
SUREBEAM CORPORATION,
THE TITAN CORPORATION,
(TITAN)
HAWAII PRIDE LLC,
XXXX X. XXXXX
AND
XXXX XXXXXXX
AMENDED AND RESTATED AGREEMENT #3
AMONG
SUREBEAM CORPORATION, THE TITAN CORPORATION,
HAWAII PRIDE LLC,
XXXX X. XXXXX AND XXXX XXXXXXX
The purpose of this Amended and Restated Agreement #3 ("Agreement") is to
document the current understanding between SureBeam Corporation, a wholly owned
subsidiary of the Titan Corporation ("SureBeam"), Xxxx Xxxxxxx, Xxxx Xxxxx and
Hawaii Pride, LLC ("HP LLC"). This Agreement will supersede the Agreement dated
November 22, 1999 among Titan Scan Corp., Hawaii Pride LLC, Xxxx X. Xxxxx and
Xxxx Xxxxxxx, as well as the two amended and restated versions of such
Agreement. If this Agreement is acceptable, please sign it and return it to the
attention of the undersigned.
GENERAL PRINCIPALS OF THE AGREEMENT
1. Hawaii Pride, LLC will acquire from SureBeam an X-ray system ("the X-ray
system", "the X-ray" or, the "X-ray Project") for the purpose of
disinfesting fruit, flowers and other products with X-rays.
2. SureBeam, under the direction of Mr. Xxx Xxxxx, will be responsible for
managing the construction of the X-Ray Project.
3. APA, Inc. will provide certain engineering, architectural and consulting
services on the X-ray Project as directed by SureBeam.
4. The X-ray will be located in Keaau, Hawaii, the original site which was
agreed to by all parties within HP LLC. The HP LLC will purchase the
20-acre parcel. SureBeam will identify at least two contractors and obtain
quotes in connection with building the facility at this site. SureBeam in
conjunction with the other members of HP LLC will make the final
determination with respect to contractor selection.
5. HP LLC will obtain approximately $9 million worth of financing with the
assistance of Web Financial Government Lending. Out of the total $9 million
of financing, approximately $6.75 million worth of financing will be
provided by the USDA Rural Development Agency. Titan will provide
the remaining $2.25 million worth of financing to HP LLC primarily related
to the purchase of land and the building and the construction of the
building and related improvements. The Titan Corporation also has a buy
back provision as follows: At Titan's sole discretion, at any time,
Titan may acquire the entire business including all of its assets
to protect its equity investment in accordance with Phase 3 of this
Agreement disclosed in # 6 below.
In addition, as consideration for obtaining and maintaining the capital
structure of HP LLC, the Titan Corporation will receive a management fee of
[...***...] for 2 years starting the first month of operation and
[...***...] thereafter for the remaining life of the USDA loan.
Nothing in this Agreement shall be construed or interpreted to mean that
either Titan or SureBeam is responsible for operating the business of HP
LLC.
* Confidential Treatment Requested
6. Titan's financing of the project will be set up as convertible equity
comprised of 3 different phases as follows:
Phase 1 will be a loan in the amount of $1 million evidenced by a
promissory note, that can be exercised for $1 at any time, at SureBeam's
discretion, to convert $1 million of the Titan financing for exchange
of 19.9% of the total equity of HP LLC.
Phase 2 of the convertible equity relates to the remaining $1.9 million
of financing and any additional working capital initially required to
meet the net tangible equity requirement of the loan. This loan for $1.9
million will be evidenced by a promissory note and will be recorded as
convertible preferred stock with an annual interest rate of 10%. HP LLC
will make monthly interest payments to SureBeam. This convertible preferred
stock may be converted to an additional 30.1% equity in HP LLC upon the
payment of $1.00 for protective measures only and only under the following
circumstances:
- Mismanagement of HP LLC by the then current management; or
- An action resulting in default on loan payments and/or other
financing requirements; or
- A liquidity event; or
- Generally not exercising appropriate fiduciary responsibility to
operate the business in a prudent and reasonable manner.
During Phase 3 of this Agreement, should any of the following occur:
- Mismanagement of HP LLC by the then current management; or
- An action resulting in default on loan payments and/or other
financing requirements; or
- A liquidity event; or
- Generally not exercising appropriate fiduciary responsibility to
operate the business in a prudent and reasonable manner.
and this causes HP LLC to default on the loan payments or fails to comply
with the USDA requirements both operationally or within the covenants of
the loan, SureBeam may exercise, upon payment of an additional $1, a
warrant for the total combined equity interests of Xxxx X. Xxxxx and
Xxxx Xxxxxxx at the time of exercise. Additionally, if Titan exercises
this warrant, the land and building will be transferred by the owners of
HP LLC to Titan.
HP LLC will, on a monthly basis, prepare a covenant compliance worksheet,
per its loan agreement with Web Financial, whereby all financial covenants
are calculated and certified by the equity owners of HP LLC. To the extent
HP LLC is compliant and funds are available to repay any of Titan's
outstanding advances, HP LLC will make such payments monthly to
Titan.
7. Once this Agreement is executed, and the X-ray project is successfully
completed, as evidenced by HP LLC's acceptance thereof, and the initial
loan for $1 million is converted to equity by SureBeam, the equity
structure of HP LLC will be:
- Xxxx X. Xxxxx or designee - 40.05%
- Xxxx Xxxxxxx or designee - 40.05%
- Titan SureBeam or designee - 19.9%
Profit and losses of HP LLC along with any distributions made will be
allocated in accordance with the equity ownership of HP LLC.
The equity owners of HP LLC will be restricted as to any sale or transfers
of their ownership interest in HP LLC as follows:
The selling shareholder's equity interest shall be sold equally to the
shareholders who wish to acquire such interest. If only one of the
shareholders wishes to purchase the equity interest of the selling
shareholder, then it may acquire the selling shareholder's interest in its
entirety. If neither HP LLC nor any of the HP LLC equity owners wish to
purchase the selling shareholder's equity interest, then the selling
shareholder may sell its interest to an unrelated third party.
Under any of the above scenarios, the equity sale price will be
determined as follows:
- Mutual agreement between the buying and selling parties
Or, if that fails
- A valuation will be made by an independent public accounting
firm, the cost of which valuation will be split by the buying and
selling party.
In the event the selling shareholder sells its shares to an unrelated
third party, the non-participating shareholders must first give consent
to such third party sale as well as consent to the price of the shares
to be sold.
8. The basic financial model supporting the X-ray project, HP LLC, and,
obtaining the financing, is based on the ability of HP LLC to obtain
commitments from potential customers to have product processed at the HP
LLC X-ray site.
9. The total aggregate capital cost required to have the X-ray operational is
[...***...] dollars ($US). Once the X-ray project is initiated, the
estimated time to complete the X-ray project is expected to be
approximately 9-12 months.
10. SureBeam represents that it will use good manufacturing practices in
accordance with applicable USDA regulations and requirements. SureBeam
agrees to maintain and properly calibrate all equipment and maintain
appropriate records, and SureBeam agrees to use appropriately trained
operators for each aspect of the processing, if so separately engaged to
perform this service by HP LLC. SureBeam will provide an X-ray system that
will meet the Animal Plant Health Inspection Services standards relative to
the irradiation of fruit.
11. SureBeam will provide HP LLC with access to a working capital line of
credit up to a total aggregate amount of $[...***...] prior to obtaining
USDA funding. The line of credit will be secured by a lien on the assets of
HP LLC. The interest rate will be at [...***...].
12. HP LLC will be responsible for paying all of the costs and expenses
related to the X-ray project. These total costs and expenses are
currently estimated to be approximately $[...***...]. This includes all
capital costs and pre operating costs. SureBeam will be selling an X-ray
system to HP LLC. The cost of SureBeam's component of the X-ray system
will be $[...***...]. SureBeam's component, as described on Exhibit I,
includes the following:
* Confidential Treatment Requested
- Electron acceleration and controls
- Product conveyers
- Equipment assembly
- Equipment startup and validation
- Dosemetry equipment, maintenance training and operating training
- X-ray target
The payment milestone from HP LLC to SureBeam for the $[...***...] SureBeam
component will be made as follows:
Payment #1 - $[...***...] upon successful closure of financing and funding
received
Payment #2 - $[...***...] due at HP LLC's acceptance of the SureBeam
component
All payments hereunder will be made in US dollars and are exclusive of
taxes and shipping charges.
Once SureBeam exercises the conversion option in Phase 1 of this Agreement,
$1 million will be contributed from Titan or $1 million will be converted
from the outstanding Titan financing and converted into 19.9% equity
interest in HP LLC. The 19.9% equity interest received by SureBeam will be
dilution protected. In other words, in no case will SureBeam's ownership
in HP LLC be reduced below 19.9%, unless SureBeam, in its
sole discretion, agrees to such reduction. If HP LLC issues
additional equity, including, without limitation, warrants and stock
options, to parties other than SureBeam, SureBeam will concurrently be
issued additional equity so that SureBeam's 19.9% ownership interest
in HP LLC is preserved.
13. Any references to this Agreement that are made in any other related
agreements between the parties, shall refer only to this Amended and
Restated Agreement #3 and not to any previous version.
* Confidential Treatment Requested
CONFIDENTIALITY
The parties anticipate that HP LLC, Xxxx X. Xxxxx, Xxxx Xxxxxxx and SureBeam may
learn confidential and proprietary information about each other. These parties
on behalf of themselves, employees and agents, agree to keep all such
proprietary information confidential and not disclose such information directly
or indirectly to any third party or use it for any other purpose without prior
written authorization from an authorized representative of other parties
organization. These confidentiality requirements will not apply to the
following: (1) information parties knew prior to signing this Agreement; (2)
information that is publicly known or becomes publicly known through no breach
of this Agreement, and (3) information that rightfully obtained by parties from
any third party who has no duty of confidentiality. Parties agree to take all
necessary steps to protect confidential information from distribution or
disclosure. The obligations of this paragraph continue in perpetuity after this
Agreement terminates and apply to employees and agents of parties.
LIABILITY AND INDEMNIFICATION
SureBeam's obligations under this Agreement are limited to providing the
services in accordance with the provisions of this Agreement. Except as set out
in this Agreement, SureBeam makes no other representations or warranties of any
kind, express or implied, including without limitation, the implied warranties
of merchantability and fitness for a particular purpose and non-infringement.
Subject to the preceding sentence, HP LLC will defend, indemnify and hold
SureBeam harmless from the following items described in this paragraph relating
to the services SureBeam will provide as described in this Agreement. These
items include any loss, damage, cost, expense (including attorney fees), claim
or liability arising out of or relating to this Agreement including, without
limitation, any liability of HP LLC relating to a product recall. For purposes
of this paragraph, the "Company" means SureBeam, The Titan Corporation, all
subsidiary and related companies as well as all employees, agents, officers and
directors of all such entities. This provision does not apply to liability
resulting from illegal acts or gross negligence of the Company. SureBeam is not
liable for any indirect, special, consequential or punitive damages of any kind
under any circumstances regardless of the nature of the claim or liability.
ARBITRATION
The parties agree to submit all disputes they cannot resolve themselves to final
and binding arbitration held in San Diego, California. American Arbitration
Association ("AAA") rules relating to commercial arbitration will apply. The
parties involved in the dispute agree jointly to select a single arbitrator from
an AAA panel. If the parties cannot agree on an arbitrator, they will each
select an arbitrator and the arbitrators so selected will pick the single
arbitrator who will decide the dispute. The parties agree the arbitrator will
not have the authority to award punitive or consequential damages. The parties
involved in the arbitration proceeding will split equally the costs of the
arbitration and each such party will be responsible for payment of its own legal
fees. Arbitration awards are not appealable. The parties can each enforce them
through any court of competent jurisdiction. The arbitrator must apply
California law and has exclusive authority to resolve any dispute relating to
the interpretations, applicability or formation of this Agreement. The parties
waive all rights to adjudication in a court of law and to a venue other than San
Diego, CA.
FORCE MAJEURE
If any party is unable to carry out its obligations under this Agreement
excluding the obligation to pay money, because of force majeure, the parties
agree to suspend performance until the event creating the force majeure is over.
For this purpose force majeure includes storms, floods, earthquakes, other acts
of God, the acts of civil or military authority, quarantine restrictions, riots,
strikes, fires, lockouts, other labor disputes, commercial impossibility,
explosions and bombings, the inability to obtain permits or other governmental
approvals, or because of any other cause or causes beyond the reasonable control
of the party seeking to be excused from performance. The party unable to perform
agrees to resume performance of its obligations upon the termination of the
event or cause, which excused performance.
MISCELLANEOUS PROVISIONS
This Agreement will be interpreted and enforced under California law, without
regard to its conflicts of laws principles. It will be interpreted in accordance
with its plain meaning and not strictly for or against any party, regardless of
the drafter. The parties will not consider any part of this Agreement waived,
amended or modified unless that waiver, amendment or modification is in writing
and signed by all parties. The terms of this Agreement may not be changed or
modified without the prior written consent of all parties. If there is a
discrepancy between the terms of any purchase order or invoice and any of the
terms in this Agreement, the terms of this Agreement will prevail. This
Agreement is binding upon and inures to the benefit of the parties and their
respective successors in interest. If a court or arbitrator determines any
portion of this Agreement is not valid, or enforceable, the remaining parts of
the Agreement remain valid. This Agreement contains the entire understanding of
the matters set forth in this document. It supersedes all other prior written
and oral agreements and understandings of such matters. The parties each
acknowledge it has the authority to sign this Agreement. In addition, the
parties each acknowledges that it has not relied on any written or oral
representations other than those contained in this Agreement. Any notices
required under this Agreement will be made in writing and send by first class
certified mail, personal delivery or expedited overnight carrier. Unless any of
the parties notifies the others to the contrary, the addresses at the beginning
of this Agreement will be used for notice purposes.
Sincerely,
/s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
President & CEO
SureBeam Corporation
EXHIBIT I
SUMMARY OF ESTIMATED TOTAL
CAPITAL COSTS OF HAWAII PRIDE LLC
X-RAY SYSTEM FACILITY (US DOLLARS)
Land $ [...***...]
Total building & infrastructure
Cost to support X-ray system [...***...]
Total X-ray system costs (SureBeam component) [...***...]
Total APA support costs [...***...]
Equipment & furniture & fixtures [...***...]
Total fruit packing line [...***...]
-------
Total estimated costs [...***...]
Total cost "contingency" [...***...]
---------
Total estimated capital costs $[...***...]
==========
* Confidential Treatment Requested
Accepted and Agreed by:
By: /s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxx X. Xxxxx
--------------------------- ------------------------
Title: President & CEO Title: President
------------------------ -----------------------
Date: October 2, 2000 Date: October 2, 2000
------------------------- ------------------------
SureBeam Corporation Hawaii Pride LLC
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxx X. Xxxxx
--------------------------- ------------------------
Title: Vice President, Sales Title: President
------------------------ -----------------------
Date: October 2, 2000 Date: October 2, 2000
------------------------- ------------------------
Xxxx X. Xxxxx Xxxx Xxxxxxx
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------
Title: President & CEO
------------------------
Date: October 2, 2000
-------------------------
The Titan Corporation
Signature Page to the Amended and Restated Agreement #3 for Purchase of an
X-Ray System
