SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
OCTOBER 5, 1998
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Date of Report
(Date of earliest event reported)
POWERCOLD CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 33-19584 23-2582701
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(State of Incorporation) (Commission File No.) (IRS Employer Ident. No.)
103 GUADALUPE DRIVE
CIBOLO, TEXAS 78108
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(Address of principal executive offices)
210-659-8450
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(Registrant's telephone number)<PAGE>
ITEM 1 - CHANGES IN CONTROL OF REGISTRANT
None
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
None
ITEM 3 - BANKRUPTCY OR RECEIVERSHIP
None
ITEM 4 - CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None
ITEM 5 - OTHER EVENTS
Effective October 1, 1998, Channel freeze Technologies, Inc., a wholly owned
subsidiary of the Company, acquired eighty percent (80%) of the related assets
and business of Channel Ice Technologies from Los Angeles, CA. based Sir
Sorldwide, LLC for cash, royalties and stock options.
Channel Ice Technologies has a proprietary, multi patented, multi purpose
freezing system that is highly efficient. It can be employed for freezing
virtually any liquid or semi liquid product in a variety of industries
including: ice plants, fish, meat and produce food products, fruit and juice
products, food by-products, recreational snow for theme parks and ski resorts,
plus many other applications. The Channel Ice System was introduced to the
market in 1995, and todate there are ten (10) systems installed worldwide.
A major new application for the Channel Ice System is in municipal water
systems, pulp and paper plants, refineries and utilities where solids are
economically separated from industrial waste by the freeze/thaw method. The
water in the frozen sludge drains off during thaw and the remaining materials
are then disposed of and recycled at a greatly reduced cost.
ITEM 6 - RESIGNATIONS OF REGISTRANT'S DIRECTORS
None
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a. None
b. None
c. Exhibits
10.1 - Agreement
10.2 - First Amendment To Agreement
10.3 - Royalty Agreement
99.1 - Sir Worldwide Certification and Opinion
99.2 - Sir Worldwide Resolutions of the Members
99.3 - Letter from Oppenheimer Wolff & Donnelly LLP
99.4 - Sir Worldwide Asset Listings
ITEM 8 - CHANGE IN FISCAL YEAR
None<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: OCTOBER 5, 1998
POWERCOLD CORPORATION
/s/Francis L. Simola
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FRANCIS L. SIMOLA
PRESIDENT/CEO<PAGE>
AGREEMENT
THIS AGREEMENT is made effective September 15, 1998, between and among SIR
WORLDWIDE, LLC, a California Limited Liability Company ("Seller"), CHANNEL
FREEZE TECHNOLOGIES, INC., a Nevada Corporation, ("Purchaser" or "Buyer"), and
POWERCOLD CORPORATION, a Nevada Corporation ("PowerCold"). The Seller,
Purchaser, and PowerCold are collectively referred to as the "Parties".
W I T N E S S E T H
WHEREAS, Seller owns and operates a business known as "SIR Worldwide LLC",
owner of Channel Ice Technologies ("CIT") located at 418 South Central Avenue,
Suite 204, Los Angeles, California 90013 (the "business");
WHEREAS, the Seller desires to sell and the Purchaser desires to purchase
80% of the assets of Channel Ice Technologies owned by Seller as hereinafter
described and referred to as "The Assets" in various installments; and
WHEREAS, the parties hereto intend to affect such acquisition upon the
terms and conditions herein contained.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements hereinafter set forth, and in reliance upon the representations
and warranties herein contained, the parties agree as follows:
I.
Purchase and Sale of Assets
1.1 Sale of Assets. Based upon the representations of the parties
hereinafter contained, and subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, convey, transfer, assign, and deliver
to Buyer at the closing eighty percent of its Assets and Buyer agrees to
purchase from Seller all of its interest in the following:
(a) The entire right, title and interest to the machinery, equipment, and
fixtures, listed on Exhibit "A" attached hereto and herein incorporated,
relating to said business. For purposes of this agreement, "CIT Units" or
"Channel Ice Technology Units" are defined as Channel Ice based freezing
technology.
(b) All of the inventory of Seller, as listed on Exhibit "B"
attached hereto and herein incorporated by this reference; all at a price
determined as hereinafter described, and all of which shall include, but
not be limited to, records, documents and papers used by Seller in
conducting said business, including property records, sales records,
purchase orders, customer lists, catalogs and brochures (the "business
records");
(c) All right, title, and interest in and to the name Channel Ice
Technologies, and assign all rights in and to any tradenames and
trademarks (whether Federal or State) as they relate to the business and
assets of Seller; and,
(d) All intellectual property, including patents, licenses, copyrights,
"know-how" and assign all rights in and to any patents, licenses,
copyrights, "know-how" (whether Federal or State) as they relate to the
business and assets of Seller.
1.2 Liabilities of Assets. The sale of the assets enumerated above to
Purchaser shall be made free and clear of all liabilities, obligations, liens
and encumbrances, except those encumbrances enumerated within Exhibit "D,"
hereto attached and by this reference herein incorporated.<PAGE>
1.3 Assets Not Included. Notwithstanding the provisions herein above
stated, the following assets of the business shall not be sold pursuant to this
transaction: those certain items enumerated on Exhibit "E" attached hereto and
herein incorporated, all of which shall remain the property of the Seller.
1.4 Assignment Instruments. The subject assets enumerated in
subparagraphs a and b of Paragraph 1.1 above, shall be conveyed, assigned and
transferred by the execution and delivery of a Bill of Sale, as evidenced by
attached Exhibit "F" together with any consents, assignments or waivers
necessary or desirable effectively to convey, assign and transfer the subject
assets to the Purchaser. Seller shall take all necessary steps to put
Purchaser in actual possession and operating control of the respective subject
assets as of the date of possession as specified in Paragraph IX. Seller shall
provide title, free and clear of all encumbrances, liens, mortgages, security
interests, or encumbrances of any nature for: (i) U.S. Patent No. 5,029,453;
(ii) all trade secrets, patents, patent applications, "know-how" and technology
used by Seller in connection with its "CIT Units".
1.5 Further Assurances. Seller, from time to time, without additional
consideration, shall execute and deliver further instruments of conveyance and
transfer (in addition to the documents of transfer) and any and all other
necessary documents and instruments, and shall take any and all such necessary
actions to convey, transfer and vest in Purchaser the entire right, title and
interest in and to each of the respective subject assets, including such
appropriate documents as requested by Purchaser to be filed with the U.S.
Patent and Trademark office and similar State agencies.
1.6 Accounting Terms. General accounting terms shall be interpreted in
accordance with Financial Accounting Standards Board ("FASB").
1.7 Definitions
(a) "The Business" or "CIT Business" means solely Seller's business of
designing, engineering, performing research and development related
to, manufacturing and selling of highly efficient automated machinery
for freezing ice, food, food by-products, non-foods, freeze-thawed
residual products, thermal energy storage, making recreational snow,
and other applications not yet defined which incorporate the
Intellectual Property and is commonly referred to as "Channel Ice" or
"Channel Ice Technologies", but excluding the Intellectual Property
of PowerCold.
(b) "Business Information" means financial, marketing and business data,
pricing and cost information, business and marketing plans and
customer and supplier lists and other information relating to the
Business.
(c) "CIT Equipment" or "CIT Units" or "Channel Ice Technology Units"
means Channel Ice equipment manufactured by Buyer which is covered by
some or all of the claims of the Patents or Patent Application.
(d) "Intellectual Property" means all of Seller's right, title and
interest in and to (a) the domestic and foreign patents, patent
applications, patent disclosures and improvements thereto relating to
the CIT Business as set forth in Exhibit "A"; (b) domestic and
foreign trademarks relating to the CIT Business; and the good will
associated there with and registrations and applications for
registration thereof: and (c) trade secrets and confidential business
in formation (including ideas, formulas' compositions' inventions
(whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings,
specifications. designs, plans. Proposals, technical data and
copyright table works used for the CIT Business.<PAGE>
(e) "Material Adverse Effect" means with respect to the Business or the
Purchased Assets any significant and substantial adverse effect or
change in condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the
Business and/or Purchased Assets or on the ability of Seller to
consummate the transaction contemplated hereby.
(f) Net Gross Invoice Price" or "Net Sales" means payments received from
customers by Purchaser less commissions to non-employee agents,
export preparation, inland freight and forwarding fees, import and
export duties, tariffs, taxes, accessments, levies and other
government charges, ocean freight, shipping insurance, discounts and
all warranty work performed during relevant warranty period. All such
commissions, fees, expenses and other deductions from payments
received from customers by Purchaser or PowerCold to develop "Net
Gross Invoice Price" or "Net Sales" for purposes of this Agreement
must be itemized or separately invoiced by Purchaser.
(g) "List Price" means price as listed for end user or retail sales. For
purposes of this Agreement, all sales are either at "List Price" or
"Distributor Price".
(h) "Distributor Price" means price as listed for distributors for
resale, which is discounted from retail sale price or "List Price".
For purposes of this Agreement, all sales are either at "List Price'
or `Distributor Price".
(i) "Base Price" means the same as "List Price".
(j) "Fee Payment" means additional consideration apart from royalty and
installment payments to be paid to Seller based upon a percentage of
sales.
(k) "Installment Payment" means payments to Seller by Purchaser for each
$1,000,000 in sales up to a maximum total "Installment Payments" as
specified in the Agreement. For each installment payment, Purchaser
will receive an additional percentage ownership of Channel Ice
Technologies.
(l) "Taxes" mean any and all taxes, charges, fees, levies or other
assessments including gross receipts, excise, real or personal
property, sales, use, service, license, of any taxing authority
(whether domestic or foreign, including any federal, state, county,
local or foreign government or any subdivision or taxing agency
thereof(including a U.S possession), and such term shall include any
interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, and
such taxes, charges, fees, levies or other assessments.
(m) "Term Sheet" means that certain letter of agreement and associated
term sheet executed May 12, 1998, by Seller and PowerCold as the
continuing basis for this Agreement and which is attached hereto and
incorporated herein as Exhibit H.
II.
Purchase Price and Payment
2.1 Purchase Price of Assets. The purchase price of the assets sold by
Sellers to Purchaser shall be as follows: a cash payment at Closing of eight
hundred and fifty thousand dollars ($850,000) (the "Cash Purchase Price"); and
additional installment fee payments of five million, nine hundred and fifty
thousand dollars---------00/100 ($5,950,000), together with transfer of twenty<PAGE>
percent (20%) interest in Purchaser. The purchase price does not include any
sales or use taxes. The purchase price shall be allocated as follows:
2.1.1 Payment. Subject to the terms and conditions of this Agreement,
in reliance on the representations, warranties, and agreements of SIR
Worldwide contained herein and in consideration of the aforesaid
assignment and delivery of the CIT assets of SIR Worldwide, Purchaser
will deliver at the Closing, as hereinafter defined, as partial
payment of the purchase price, (i) the sum of eight hundred and fifty
thousand dollars ($850,000) in cash, certified check, or cashier's
check, to be paid to the Escrow Agent, as the Cash Purchase Price;
(ii) Purchaser will assign, convey, endorse, transfer and deliver to
Seller and Seller will acquire twenty percent (20%) interest in and
to Purchaser's stock; (iii) an option to acquire four hundred
thousand (400,000) shares of the common stock of PowerCold, par value
$0.001, at a price of $2.50 per share, for a period not to exceed
two (2) years from the date of Closing. ("the PowerCold Shares"); and
(iv) Fee Payments on Net Sales as set forth in (a) below for sales
of CIT Units subsequent to Closing.
(a) Fee Payments. As additional consideration for this transaction,
Purchaser will compensate SIR Worldwide by means of (i) Ten
Percent Net Fee Payment. A fee payment of ten percent (10%) of
the net gross invoice price on all Channel Ice Technology
Units sold to distributors. For purposes of this subparagraph,
"net gross invoice price" or "net sales" shall mean payments
received from customers less commissions to non-employee agents,
export preparation, inland freight and forwarding fees, ocean
freight, insurance, discounts and all warranty work performed
during relevant period, or (ii) Thirteen Percent Net Sales Fee
Payment. A fee payment of thirteen percent (13%) of the net
gross invoice price on all Channel Ice Technology Units sold at
the base price. For purposes of this subparagraph, "net gross
invoice price" or "net sales" shall mean payments received from
customers less commissions to non-employee agents, export
preparation, inland freight and forwarding fees, ocean freight,
insurance, discounts and all warranty work performed during
relevant period.
(I) All installment fees, royalty, and commission payments will
be paid to SIR Worldwide on a quarterly basis, within
thirty (30) days after receiving payment from a customer.
(b) At Closing and after the initial payment of $850,000, PowerCold
shall have an initial ownership of ten percent (10%) equity
interest in Purchaser.
(c) For each 1 million dollars in CIT Unit sales, PowerCold shall
acquire an additional one percent (1%) equity interest in
Purchaser for each payment of eighty-five thousand dollars
($85,000), up to a maximum ownership interest by PowerCold in
Purchaser of eighty percent (80%).
(I) Upon PowerCold making 41 payments of $85,000, or
$3,485,000, the Escrow Agent shall release all trade
secrets, patents, patent applications, "know-how" and
technology used by Seller in connection with its "CIT
Units" to Purchaser. Until Power Cold possesses 51% of the
outstanding stock of Purchaser, Purchaser shall have an
exclusive license to use, market, manufacture, and sale of
all trade secrets, patents, patent applications, "know-how"
and technology used by Seller in connection with its "CIT
Units", at no cost or expense, pending completion of the
transactions contemplated herein.<PAGE>
(d) The following example illustrates the payment of the purchase
price for the assets acquired herein and proposed payment:
Cash Purchase Price of CIT Assets $ 850,000.00
Additional Installment Fee Payments
on Net Sales (Cumulative Installment
Fee Payments are based upon a maximum
of 70 payments of $85,000 to SIR to
acquire an additional 70% interest in
Purchaser by PowerCold ) $5,950,000.00
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TOTAL $6,800,000.00
(e) The Cash Purchase Price will be allocated as follows:
Item Amount
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Equipment and Other Assets
Listed on Exhibit "A" $ 75,000.00
Patents and Intellectual Property $775,000.00
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Total $850,000.00
2.1.2 Prepayment. Notwithstanding any other provision of this
Agreement, Purchaser shall have the right to prepay any or all
amounts owed under this Agreement, including those referred to
in (e) above.
2.1.3 "Buy-Back. Power Cold shall have the exclusive right of first
refusal and option to acquire from Seller, all right, title, and
interest in and to the twenty percent (20%) interest in
Purchaser's common stock and securities acquired herein, for a
period not to exceed five years and for a price equal to the
then market value or as mutually agreed.
2.2 "Escrow Agent". , is hereby designated
as the escrow agent who shall receive all documents and make all distribution
as required by this Agreement. The Purchaser shall pay to the Escrow Agent on
the date of closing the sum of Eight Hundred and Fifty Thousand -------00/100
Dollars ($850,000) in cash or by check as down payment on the total purchase
price, on or about the date of closing. Escrow Agent shall retain and pay all
debts of Seller as noted on Exhibit "D," pursuant to compliance with California
Bulk Sales law, relating to bulk transfer compliance. The balance or remaining
amount due Seller from Purchaser from the initial deposit of $850,000, shall be
paid by Escrow Agent to Seller. The Seller shall deposit with the Escrow Agent
all assignments, transfer and other documents necessary to provide title, free
and clear of all encumbrances, liens, mortgages, security interests, or
encumbrances of any nature for: all trade secrets, patents, patent
applications, "know-how" and technology used by Seller in connection with its
"CIT Units". The Escrow Agent is authorized and directed upon full and complete
performance of this contract by Purchaser at the time and in the manner as
herein prescribed, to deliver to Purchaser all papers then held under escrow.
The Purchaser and PowerCold shall deposit with the Escrow Agent all
assignments, transfer and other documents necessary to provide title, free and
clear of all encumbrances, liens, mortgages, security interests, or
encumbrances of any nature for: all option certificates and common stock
certificates. The Escrow Agent is authorized and directed upon full and
complete performance of this contract by PowerCold and Purchaser, at the time<PAGE>
and in the manner as herein prescribed, to deliver to PowerCold and Purchaser,
as the case may be, all papers then held under escrow. If however, the
contract shall be forfeited or declared null and void by reason of the default
or breach of any of the covenants herein contained, or by reason of the
Seller's failure to materially perform the agreements, covenants, and
conditions herein designated, the Escrow Agent is hereby directed and
authorized, upon demand of the Purchaser to deliver to Purchaser all funds and
any interest earned thereon held in escrow upon proof submitted by Purchaser of
Seller's failure to comply with any of the material terms and conditions of
this Agreement. Said proof shall be evidenced by leaving with the Escrow Agent
a copy of the notice as hereinafter provided for, and proof of mailing thereof,
either by affidavit of mailing or by certified mail return receipt, or by
affidavit of personal service of said notice upon the Purchaser. The Seller,
Purchaser, and PowerCold will be furnished statements of account and statements
of settlement from the Escrow Agent annually; provided, however, that such
statements shall supplement and not duplicate the preceding ones. The
Accounting records of the Escrow Agent shall at all reasonable times be open to
inspection of the Seller, Purchaser, and PowerCold. Purchaser shall notify
Seller in writing of all material terms and conditions Purchaser alleges Seller
has failed to perform, and Seller shall have fifteen (15) days to cure such
deficiencies.
2.3 Assumption of Liabilities. By its purchase of assets hereunder,
Purchaser neither assumes any outstanding liabilities of Seller nor takes any
property subject to such liabilities. All other liabilities of Seller incurred
at the business and relating to the assets and properties hereby transferred,
shall be discharged by the Seller on or before closing.
IIA.
Operations Subsequent to Closing
2A.1 Payment of Fees, Royalty, and Commissions. All Fees, Royalty, and
Commission payments shall be made to Seller on a quarterly basis, within 30
days following receipt of payment from a customer. A quarterly accounting of
sales, pricing, commissions, and percentage ownership will be provided to
Seller by Purchaser. Seller and Purchaser have the mutual right to audit each
respective party's accounting on an annual basis.
2A.2 Manufacturing Facility. Purchaser shall construct, establish, lease,
purchase, and otherwise acquire a manufacturing and administration facility for
the assets acquired herein, together with all costs and expenses associated
herein.
2A.3 Manufacturing Savings. Any savings in manufacturing costs or value
engineering costs developed by Seller and implemented and accepted by
Purchaser, shall be shared with Seller on a 50:50 basis or as mutually agreed
upon by Seller and Purchaser.
2A.4 Estimated Production. Purchaser estimates performance milestones
for CIT Unit sales of 10 CIT Units for the first full fiscal year following
Closing, and increased by ten (10) CIT Units for the second and each fiscal
year thereafter. Minimum production shall be ten (10) CIT Units during the
first two (2) years following Closing, such minimum production increasing each
year thereafter by two (2) CIT Units per year up to a total minimum production
of twenty-four (24) CIT Units for year ten (10) and thereafter. Buyer will use
its best efforts to sell at least the minimum CIT Units per given year.
2A.5 Royalty and Commission Payments. Purchaser will compensate SIR
Worldwide by means of: (i) Five Percent Net Sales Royalty. A royalty
agreement, to be attached as Exhibit G, which agreement shall provide SIR
Worldwide a royalty payment of five percent (5%) of the net gross invoice price
on all Channel Ice Technology Units and related materials for the life of SIR
Worldwide patents. For purposes of this subparagraph, "net gross invoice price"
or "net sales" shall mean payments received from customers less commissions to<PAGE>
non-employee agents, export preparation costs, inland freight and forwarding
costs, fees (including duties, taxes), ocean freight costs (including fees,
duties, taxes), insurance, discounts and all warranty work performed during
relevant period; and , (ii) Three Percent Net Sales Commission . A commission
payment of three percent (3%) of the net gross invoice price on all Channel
Ice Technology Units and related materials sold and closed directly by SIR
Worldwide and accepted by PowerCold, per assigned territory and/or assigned
product application line of business. For purposes of this subparagraph, "net
gross invoice price" or "net sales" shall mean payments received from customers
less commissions to non-employee agents, export preparation costs, inland
freight and forwarding costs, fees (including duties, taxes), ocean freight
costs (including fees, duties, taxes), insurance, discounts and all warranty
work performed during relevant period.
2A.6 Operational Control. At Closing and upon payment of $850,000 to
Seller, PowerCold shall have sole and unfettered operational control of
Purchaser. Operational control shall include the right to move manufacturing
operations, and administrative headquarters.
III.
Representations of Purchaser
The Purchaser represents and warrants to the Seller as follows:
3.1. Expenses Incurred After Closing. From the date of and after the
closing, Buyer shall be fully responsible for the payment and permanent
handling of utilities, salaries and all other items of expense thereafter
incurred as to the assets.
3.2 Material Facts. No representation or warranty contained herein or in
any writing exhibit, financial statement or other instrument furnished to or to
be furnished to Seller in connection with this Agreement or in connection with
the transactions contemplated hereby contained or shall contain any untrue
statement of any material fact, or omits or shall omit to state immaterial
facts necessary to make any statement contained herein not misleading. All the
representations and warranties contained herein are true and shall be true at
the closing, and each and all of the same shall survive said closing.
IV.
Representations and Warranties of Seller
Seller represents and warrants to Purchaser as follows:
4.1 Authority. Seller has full power and authority to enter into
this Agreement and to carry out the terms and provisions hereof.
4.2 Title. As of the date of closing, Seller has good and
marketable title to all the subject assets sold hereunder, free and clear of
all liens, encumbrances, charges or claims affecting the same of any nature
whatsoever.
4.3 Previous Agreements. Neither the execution, delivery or
performance of this Agreement shall conflict with or result in the breach of
any material term, condition, provision of or constitute a default under any
material agreement, contract instrument or lease to which Seller is a party or
by which Seller is bound.
4.4 Completeness of Assets. That the premises, equipment, stock in
trade, property records, and business records, are all of the CIT assets and
properties used by Seller in the conduct of the business.<PAGE>
4.5 Financial Statements. The Seller has previously furnished the
Purchaser with true and complete copies of their financial statements
(unaudited). That the financial statements and operating statements of Seller
are true and correct in all material respects and present fairly the financial
condition and results of operation of Seller as at and for the period therein
specified, all prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior years.
4.6 Taxes. That Seller has, as of the date of closing, filed and
paid all federal, state and local income, withholding, FICA and FUTA taxes,
excise or franchise tax returns, real estate, unemployment, business and
occupation tax returns, sales and use tax returns and other tax returns
required to be filed by them, in the United States or any foreign jurisdiction
or territory.
4.7 Pending Litigation. That there is no litigation, administrative
proceeding or arbitration pending or threatened against Seller with respect to
the assets or properties to be transferred by Seller pursuant to this
Agreement.
4.8 Employee Benefits. That there are no amounts due any of
Seller's employees for back wages, vacation or vacation pay, as of the date of
closing, which relate to or are connected to this Agreement or the transaction
contemplated herein.
4.9 Inventory. That there has been no substantial change in the
amount or quality of the inventory at the business hereby conveyed, other than
changes occurring in the ordinary course of business, since the preparation of
the Financial Statements and operating statements, dated July 30, 1998. The
inventory shall include all items normally used in the operation of the
business, whether stored on or off the premises. All inventory being purchased
by Purchaser is of good and marketable quality and usable and salable in the
ordinary course of Purchaser's business. All inventory, equipment and fixtures
shall not have suffered any material damage as a result of fire, flood or other
catastrophe whether or not insured against, as of the date of closing.
4.10 Employees. That Seller holds Purchaser harmless from all claims for
wages, vacation and fringe benefits and from all payroll taxes and penalties,
industrial insurance, employment security claims, whether assessed by Federal,
State, or local governmental authorities, with respect to any of its employees,
and Purchaser shall have no responsibility with respect to any employees or
former employees of Seller.
4.11 Building Code. Not Applicable.
4.12 Material Facts. That no representation or warranty contained
herein or in any writing, Exhibit, financial statement or other instrument
furnished to or to be furnished to Purchaser in connection with this Agreement
or in connection with the transactions contemplated hereby contains or shall
contain any untrue statement of any material fact, or omits or shall omit to
state a material fact necessary to make any statements contained herein not
misleading. All such representations shall be true at closing and shall survive
said closing.
4.13 Authority for Transaction Seller is a limited liability company
duly organized, and validly existing and in good standing under the Laws of the
State of California with full corporate power and authority to own or hold
under lease its properties and assets and to carry on its business as presently
conducted. The execution, delivery and performance of this Agreement by Seller
and the due consummation by Seller of the transaction contemplated hereby has
been duly authorized by all necessary corporate action on the part of Seller
and Seller and this Agreement constitutes the legal, valid and binding
obligation of Seller enforceable against them in accordance with its terms.<PAGE>
4.14 Condition of Assets Since December 31, 1997, through the date
hereof, there has not been any material adverse change in the condition of the
assets or the business or the prospects of Seller. The assets purchased
hereunder are in good operating condition and repair, normal wear and tear
excepted.
4.15 Agreements affecting Assets. Except as disclosed in Exhibit D, there
are no agreements, contracts, leases, commitments or any instruments effecting
the purchased assets.
4.16. Compliance with Member Rights. Seller has complied or will
comply with all Member-dissent appraisal right statutes in entering into this
transaction and shall have obtained at or prior to the Closing Date all
necessary authorizations and approvals required for the execution, delivery and
consummation of the transactions provided for in this Agreement.
4.17. Governmental Approval. Seller has all permits, licenses, orders
and approvals of all federal, state, local or foreign governmental or
regulatory bodies required for Seller to conduct its business as presently
conducted. All such permits, licenses, orders and approvals are in full force
and effect and no suspension or cancellation of any of them is threatened, and
none of such permits, licenses, orders or approvals will be affected by the
consummation of the transactions contemplated by this Agreement and all such
permits, licenses, order or approvals, to the extent transferable, are
transferable to Seller. No approval or authorization of or filing with any
governmental authority on the part of Seller is required as a condition to the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
V.
Inspection and Acceptance by Purchaser
Purchaser acknowledges that it has examined and inspected the business and the
assets purchased hereunder, including the inventory and all equipment and other
assets listed on Exhibits A and B hereto and accept such business and its
assets in its present condition and by so doing acknowledges that they are
acceptable to the Purchaser and fit for its intended use. Purchaser
acknowledges that it and its agents have had full access, during normal
business hours, to all properties books, records and corporate documents
pertaining to Seller's business located at 418 South Central Avenue, Suite 204,
Los Angeles, California.
VI.
Indemnification
6.1 SIR Worldwide hereby agrees to indemnify and hold Purchaser,
PowerCold, their officers, directors, employees and agents harmless from and
against the following:
(a) any and all liabilities, losses, damages, claims, costs and expenses
of SIR Worldwide of any nature, whether absolute, contingent or otherwise,
which are not expressly assumed by Purchaser as herein provided, including but
not limited to any and all claims or rights asserted under any environmental
statutes (whether as an "owner", "operator", "generator", "responsible person",
and/or "transporter" as those terms are understood under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980), the right to
dissent by the members of SIR Worldwide, purported members of SIR Worldwide,
claims of SIR Worldwide creditors, Federal or State or Local taxing
authorities, other claimants of SIR Worldwide, claims arising out of and/or
connected to the cancellation, redemption, retirement of SIR Worldwide stock;
(b) Any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty, or non-fulfillment of any covenant
or agreement on the part of SIR Worldwide contained in this Agreement or in any<PAGE>
statement or certificate furnished or to be furnished to SIR Worldwide pursuant
hereto or in connection with the transactions contemplated hereby; and
(c) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses (including reasonable attorneys' fees) incident
to any of the foregoing, including any action taken against SIR Worldwide by
any person under the provisions of the Bulk Sales Law of any state.
(d) SIR Worldwide, as of the date immediately preceding this Agreement,
will indemnify and hold harmless Purchaser and PowerCold, from and against any
and all losses, claims, damages, expenses or liabilities, joint or several, to
which they or any of them may become subject within the meaning of the
Securities and the Securities Exchange Act of 1934 and the Securities act of
1933 (collectively the "Act") or under any other statutes or at common law or
otherwise, and will reimburse and indemnify Purchaser and PowerCold and its
officers and directors for any legal or other expenses including the cost of
any investigation and preparation] reasonably incurred by them or any of them
in connection with investigating or defending any litigation or claim, whether
or not resulting in any liability insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of are based upon any untrue
statement or alleged untrue statement or a material fact contained in any
Prospectus, Private Placement Memorandums, Offering Circulars, Proxy
Statements, and Verbal, Written and other representations in connection with or
related to Limited Partnership Offerings, Joint Ventures, any stock or bond
offering, stock conversion rights granted, investment contracts, or other
security as that term is defined under the Act or any State Security Act [as
amended or as supplemented thereof] or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; or any negligent misrepresentation of any manager or member,
agent, or employee of SIR Worldwide; or any failure to perform any of the
terms or conditions of this agreement. Purchaser and PowerCold agree upon their
receipt of written notice of the commencement of any action against them as
aforesaid, in respect of which indemnity may be sought from SIR Worldwide, its
Manager and Members on account of the indemnity agreement contained in the
subsection, to notify SIR Worldwide promptly in writing of the commencement
thereof. Purchaser and PowerCold agree to notify SIR Worldwide promptly of the
commencement of any litigation or proceeding against it or against any of the
Managers(s) or Members of SIR Worldwide of which it may be advised, in
connection with the issue and sale of any of its securities.
6.2 Channel Freeze Technologies and PowerCold, jointly and severally,
will indemnify' arid hold harmless Seller against and in respect of:
(a) any and all damages or deficiencies resulting from any
misrepresentation, breech of warrant or non-fulfillment of any agreement or
covenant on the part of Channel Freeze Technologies and PowerCold, jointly and
severally, under this Agreement or from any material misrepresentation in, or
material omission from, any certificate or other instrument furnished, or to be
furnished by Channel Freeze Technologies and PowerCold to Seller hereunder:
(b) any and all damages. liabilities or claims arising Out ofthe
operation of Buyer's business after the Closing and use or ownership ofthe
Purchased Assets; and
(c) any and all actions, suits, proceedings, demands, assessments.
judgments costs. and legal and other expense incident to any ofthe foregoing.
(d) In the event that Seller is named as a party defendant in a lawsuit
or other legal proceeding. Buyer shall be given written notice of any such
claim which tray lead to a claim for indemnification pursuant to Section 6.2(a)
and Seller shall make demand under this Section promptly after Seller becomes
aware of such claim. Buyer shall have a reasonable opportunity to resolve such
matter and shall be given reasonable access to Seller's books and records for<PAGE>
such purpose. all at Buyer's expense: provided, however, that Buyer shall have
thirty (30) days from the date of receipt of such written notice (for such
shorter period within which any filing maybe necessary to avoid a default
judgment as indicated in Seller's notice) within which to elect to defend
against any such claim. If such election is declined by Buyer or if Buyer
abandons any such defense once elected, and Seller is still a party in such
claim, Seller stall thereafter be entirely free to defend, consent, settle or
compromise any such claim against Seller in its sole discretion. Buyer shall
reimburse Seller for any money damages Seller is required to pay and as to
which Buyer has indemnified Seller pursuant to Section 6.2(a) and, to the
extent, any judgment, settlement or compromise includes any injunction,
mandamus or other court order or requires the performance of or forbearance
from any action or involves the payment of non-monetary damages. Buyer shall,
to the extent possible, take such actions as may be required to comply
therewith. Notwithstanding Buyer's election to defend against any claim, Seller
shall have the right to participate in such defense, through counsel of its own
choosing and at its sole cost and expense.
VII.
Seller's Conditions to Closing and Purchaser's Covenants.
7.1 Seller's Conditions to Closing. The following shall be conditions to
Seller's obligations at closing:
(a) The Purchaser shall have satisfied its covenants set forth
herein and shall not have breached any provisions of this Agreement.
7.2 Covenants by Purchaser. During the term of this Agreement, the
Purchaser covenants to:
(a) Maintain in a good state of repair all of the assets of the
business purchased herein.
(b) Seller shall have the right to conduct periodic and reasonable
inspection of the CIT assets to assure compliance with the covenant set forth
above.
VIII.
Seller's Covenants and Purchaser's Conditions to Closing
8.1 Covenants by Seller. During the term of this Agreement, the Seller
covenants to:
(a) Seller shall operate the business, from and after the date
of this Agreement to the Closing Date, in such a manner and shall take
such actions as may be necessary to assure that its representations and
warranties contained herein will continue to be true and correct on the
Closing Date;
(b) Seller will use its best efforts to preserve the business
intact and to preserve the goodwill of suppliers, customers and other
having business relations with it in connection with its operation of the
business;
(c) Seller will use its best efforts to continue the operation
of the business, from and after the date of this Agreement to the Closing
Date, in an efficient and orderly manner and will maintain the premises
and equipment in the same condition as they are on the date hereof,
reasonable wear and tear excepted;
(d) Seller will hold Purchaser harmless from all claims for
wages, vacation and fringe benefits and from all payroll taxes and<PAGE>
penalties, industrial insurance, employment security claims, whether
assessed by Federal, State, or local governmental authorities; and
(e) Seller will conduct the business, from and after the date
of this Agreement to the Closing Date, in the ordinary and usual course
and will not make any capital expenditure or commitment for capital
expenditure, or any long-term or unusual commitments, obtain any liens or
judgments or encumbrances with respect to the assets or properties to be
transferred pursuant hereto, without the prior written approval of
Purchaser.
8.2 Conditions to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are subject to the fulfillment at the Closing of
each of the following conditions:
(a) All representations and warranties of Seller contained in
this Agreement shall be true and correct as of the Closing Date, and
Seller shall have fulfilled all of its covenants and agreements
hereunder;
(b) Seller shall have fully performed and complied with all
commitments and conditions hereunder up to the Closing Date;
(c) The premises and the equipment and assets shall not have
suffered any material damage as a result of fire, flood or other
catastrophe, whether or not insured against;
(d) Purchaser and PowerCold shall have received from Seller and
its Members, an opinion, in form and substance satisfactory to
Purchaser and PowerCold, dated the Closing Date, to the effect that:
(i) SIR Worldwide is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of California.
(ii) All the outstanding Membership Interests of SIR
Worldwide have been duly authorized, and are validly issued, fully
paid and nonassessable;
(iii) SIR Worldwide has taken all requisite corporate
action to approve this Agreement and the transactions contemplated
hereby, and this Agreement has been duly authorized, executed and
delivered by SIR Worldwide and constitutes a valid and binding
agreement of SIR Worldwide enforceable in accordance with its terms;
(iv) Members of SIR Worldwide have taken all requisite
corporate action to approve this Agreement and the transactions
contemplated hereby;
(v) To such counsel's knowledge, the execution, delivery
and performance of this Agreement by SIR Worldwide and the
consummation of the transactions contemplated hereby will not
conflict with or result in the breach of any of the terms, conditions
or provisions of any agreement, contract or commitment to which
Purchaser and PowerCold is not also a party which is material to the
business or properties of SIR Worldwide as a whole or constitute a
material default thereunder or give to the others any material right
of termination, cancellation or acceleration thereunder, or otherwise
require any approval which has not been obtained;
(vi) The Members of SIR Worldwide, with respect to this
Agreement, is proposed shall not have exercised their right to
dissent as dissenting members or similar rights under Nevada law.<PAGE>
(vii) Seller has title, free and clear of all
encumbrances, liens, mortgages, security interests, or encumbrances
of any nature for: (i) U.S. Patent No. 5,029,453; (ii) all trade
secrets, patents, patent applications, "know-how" and technology used
by Seller in connection with its "CIT Units" as acquired by Purchaser
herein.
(e) Seller shall have made no sale or other disposition of any of
the purchased assets and shall have maintained and repaired consistent
with past practices the purchased assets and shall not have permitted or
allowed any of the purchased assets to be or become and remain subject to
any pledge, lien, security interest or other encumbrance of any kind.
(f) Seller shall have afforded the Purchaser and its agents full
access, during normal business hours, to all properties books, records and
corporate documents pertaining to Seller business and employees, as may
have been reasonably requested by the Purchaser.
(g) Seller shall have satisfied its covenants set forth herein and
shall not have breached any provisions of this Agreement.
(h) Seller has consulted with legal counsel and accountant of its
choice regarding this Agreement and its terms and conditions, has
consulted with such legal counsel and accountant as to the effect of
Federal and State tax laws, security laws, and corporate laws on this
Agreement.
(i) The Seller shall execute and deliver to Purchaser the Bill of
Sale.
IX.
Transfer of Possession of the Assets/Closing
The transfer of the possession of the assets from Seller to Purchaser shall
occur on the Closing for the consummation of the transactions contemplated by
this Agreement shall unless another date or place is agreed to in writing by
the parties hereto, take place at the offices of PowerCold Corporation, Cibolo,
Texas, or, with the parties consent, via Federal Express or other courier
services, on the date which is no later than the fifth business day after the
last to occur of the following dates: (a) Thirty (30) days after the date the
Members of SIR Worldwide and the shareholders of Purchaser shall have given
their approval; or (b) September 30, 1998; (c) the date on which all the
conditions set forth in Section 8.1 hereof shall have been satisfied, except to
the extent any such conditions shall have been waived by Purchaser or by the
respective Companies. At the Closing, all steps shall be taken and documents
and instruments delivered which are necessary or desirable to consummate the
transactions provided for provided for herein. Risk of loss, and profit, shall
remain with Seller until 9 a.m., Eastern Standard Time, at the Closing Date.
Risk of destruction or impairment of any of the subject assets covered by this
Agreement shall likewise pass as of such date and time. All representations,
warranties, agreements, covenants and obligations herein shall be deemed to
have been relied upon by the other party and shall survive the closing
regardless of any investigation by either party and shall not merge in the
performance of any obligation by any party hereto.
X.
Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements and covenants of the Seller
and the Purchaser contained in this Agreement shall not be discharged or
dissolved upon, but shall survive, the closing.<PAGE>
XI.
Fees and Expenses
Each of the parties will bear its own expenses in connection with the
negotiation and consummation of the transactions contemplated by this
Agreement, and no expenses of Seller or Purchaser relating in any way to the
purchase and sale of the subject assets hereunder shall be charged to or paid
by the other. Notwithstanding the foregoing, Seller and Purchaser each agree
to be responsible for any pay their own attorney's fees incurred at closing.
Seller and Purchaser shall each be responsible for their own attorney's fees
and costs. Purchaser represents and acknowledges that Charles A. Cleveland is
the attorney for Purchaser and PowerCold and Charles A. Cleveland has not ever
been the attorney for Seller or the Members of SIR Worldwide and is not the
attorney for Seller or the Members of SIR Worldwide nor has he ever represented
himself to be the attorney for Seller or the Members of SIR Worldwide. Seller
and Members of SIR Worldwide are aware of their right to seek independent
counsel.
XII.
Payment of Taxes
Purchaser will pay to the United States, and foreign jurisdiction, and the
State of California, Department of Revenue, any California State sales, use,
property, income, business and occupation, excise and other taxes arising by
reason of the sale of the assets. Such taxes to be reported on and paid after
closing.
XIII.
Stock Restriction/Investment Representations
13.1. No Solicitation. SIR Worldwide and each Member of SIR Worldwide
will not (nor will it permit any agent or affiliate to) solicit, initiate or
encourage any Acquisition Proposal or furnish any information to, or cooperate
with, any person, corporation, firm or other entity with respect to an
Acquisition Proposal. As used herein "Acquisition Proposal" means a proposal
for a merger, reorganization or other business combination involving the
Company or for the acquisition of a substantial equity interest in, or a
substantial portion of the assets of CIT SIR Worldwide other than this
Agreement.
13.2. Notwithstanding anything in this Agreement to the contrary: (i)
SIR Worldwide and each Member of SIR Worldwide shall be free to donate its
shares to any bona fide tax-exempt charitable organization; provided, that such
charitable organization shall first agree in writing to be bound by all of the
terms and subject to all of the conditions of this Agreement, (ii) SIR
Worldwide and each Member of SIR Worldwide shall be free to transfer its shares
by sale, bequest, devise, or gift to a member of such Member's family;
provided, that such family member shall first agree in writing to be bound by
all of the terms and subject to all of the conditions of this Agreement, and/or
any Buy-Sell Agreements, (iii) the terms and conditions as set forth in any
Buy-Sell Agreements, (iv) the mutual agreement of any parties to this
Agreement, or (v) the death, disability, or retirement of Members of SIR
Worldwide.
13.3. SIR WORLDWIDE, acknowledges, represents, warrants, and agrees
that:
(a) It is acquiring PowerCold common stock and common stock of
Purchaser to be acquired pursuant to this Agreement for it's own account for
investment, and it has no present intention to sell, distribute or otherwise
dispose thereof;<PAGE>
(b) It has evaluated it's present and anticipated needs and person
requirements and is satisfied that it has adequate means for providing for
these expenses without respect to any income or other benefit which may be
derived from his investment in PowerCold common stock and common stock of
Purchaser and does not anticipate any need to sell, assign, or transfer it's
PowerCold common stock and common stock of Purchaser;
(c) It acknowledges being informed that the PowerCold common stock
and common stock of Purchaser being received by it is not registered under the
Securities Act of 1933 or any state securities law, and it must be held
indefinitely unless it is subsequently registered under the Securities Act of
1933 or Securities Exchange Act of 1934 and applicable state securities laws
or he furnishes to PowerCold and Purchaser an opinion of counsel satisfactory
to PowerCold and Purchaser that registration is not required under the under
such Act or laws;
(d) It has not obtained any representative to review or evaluate
it's acquisition of PowerCold common stock and common stock of Purchaser and,
by reason of it's knowledge and experience in financial and business matters in
general, it is capable of evaluating the merits and risks of this investment;
(e) It has examined this Agreement (including the Exhibits hereto)
and has been given access to all underlying documents related to this
transaction, and is satisfied that it has received such information as it deems
necessary or appropriate as a prudent and knowledgeable investor to verify the
accuracy of such information and to evaluate the merits and risks of acquiring
PowerCold common stock and common stock of Purchaser. It has carefully
evaluated its financial resources, investment condition and the risks attendant
upon this investment, and acknowledges that it is able to bear the economic
risks of this investment;
(f) It realizes that neither the Securities and Exchange Commission,
nor the securities regulatory body of any state has received, considered or
passed upon the accuracy or adequacy of the information and representations
made in this Agreement.
(g) It acknowledges being informed and agrees that certificates for
PowerCold common stock and common stock of Purchaser issued to him will bear
the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 or the securities laws of
any state and may not be sold or otherwise transferred in the absence
of effective registration under such Act and laws, or an opinion of
counsel satisfactory to the corporation that such registration is not
required.
It agrees that he will not transfer or attempt to transfer the PowerCold common
stock and common stock of Purchaser except in compliance with the restrictions
and provisions contained in said legend.
XIV.
Use of Name.
Seller shall, as of the date of closing, execute and deliver to the
Purchaser a consent, assignment, and transfer of all right, title, and interest
of the name "Channel Ice Technologies " as well as all rights in and to any
copyrights, tradenames and trademarks (whether Federal or State) to Seller as
they relate to the business and assets of Seller.
XV.
Benefit.<PAGE>
This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and/or legal representatives.
This Agreement shall not be assignable by the Parties without the prior written
approval of the other Parties, which approval will not be unreasonably
withheld.
XVI.
Notices.
All notices, requests, demands and other communications hereunder shall be
in writing, and shall be deemed to have been duly given if delivered or mailed,
first class, postage pre-paid, to:
If to POWERCOLD, to: Francis L. Simola
POWERCOLD CORPORATION
9408 Meadowbrook Ave.
Philadelphia, PA 19118
and to: Charles A. Cleveland
Suite 304 Rock Pointe Center
North 1212 Washington
Spokane, WA 99201-2401
If to SIRWORLDWIDE to: John S. Scherer
SIR WORLDWIDE, LLC
418 South Central Ave.
Suite 204
Los Angeles, California 90013
and to:
XVII.
Miscellaneous Provisions
17.1 Insurance. Purchaser agree to maintain fire and other casualty
insurance upon all assets to be purchased by Purchaser herein from the date of
closing and shall bear the risk of any loss thereof until said date.
17.2 Additional Documents. The parties hereto agree to execute any
further agreements, documents, affidavits or assurances as Maybe necessary to
consummate and give full force and effect to the terms of this Agreement.
17.3 Performance. Seller acknowledges the right of Purchaser to specific
performance under this Agreement.
17.4 Consulting Arrangement. Purchaser shall be entitled to receive
valuable consulting services from John Scherer, a Member of Seller, for up to
1,000 hours per year for a period not to exceed three (3) years from the date
of closing, Purchaser shall be entitled to receive valuable consulting services
from Jim Brodie, a Member of Seller, for up to 500 hours per year for a period
not to exceed one (1) year from the date of closing, Sellers agree to provide
such consulting services as are reasonably requested by the Buyer, and shall
perform such services as in the capacity of an "independent contractor" for
such compensation as is mutually agreed upon by Seller, Purchaser, Jim Brodie,
and John Scherer.
17.5 Additional Consulting. Seller shall provide advise and support to
Purchaser in conjunction with the development of customer base or end user
pricing of "CIT Units", together appropriated discounted pricing for
distributors.<PAGE>
17.6 Appointment of Director. Subject to the approval of the Directors and
Shareholders of Channel Freeze Technologies, Inc. and PowerCold Corporation,
applicable corporate and federal securities laws and state "Blue Sky" laws,
Seller shall have the option, to select one (1) individual for a position on
the Board of Directors of Channel Freeze Technologies, Inc. for a term subject
to he Articles of Incorporation and ByLaws.
17.7 Maintenance of Patents. Subsequent to Closing, Purchaser shall bear
all costs and expenses in connection with the filing, maintenance, and
protection of patents and patent rights acquired pursuant to this Agreement,
subject to review and approval by Purchaser.
17.8 CIT Distributor Status. By mutual agreement of the Parties, Seller
shall the right to become a distributor with such territory and products as
assigned by Purchaser. Such distributor status shall be as set forth in writing
between Seller and Purchaser.
17.9 Patent Rights and Other Proprietary Information. Sir Worldwide
hereby assigns to Purchaser all of Sir Worldwide's CIT's right, title and
interest in any idea (whether or not patentable or protectable by copyright or
trademark), invention, technology, conceived or developed in whole or in part,
or in which Sir Worldwide may have aided in its development, while associated
or affiliated (in any capacity, whether as officer, shareholder, director,
Member, Manager, agent, employee, consultant, or otherwise) with any
corporation, partnership, joint venture, limited liability corporation, sole
proprietorship, or other business entity, including, without limitation, any
Trade Secrets or Proprietary Information. If any one or more of the
aforementioned are deemed in any way to fall within the definition of "work
made for hire", as such term is defined in 17 U.S.C. Sec. 101, such work shall
be considered "work made for hire", the copyright (and any patent rights) of
which shall be owned solely, completely and exclusively by Purchaser. If any
of the aforementioned are considered to be work not included in the categories
of work covered by the "work made for hire" definition contained in 17 U.S.C.
Sec. 101, such work shall be owned, assigned or transferred completely and
exclusively to Purchaser. Sir Worldwide agree to execute any instruments and to
do all other things reasonably requested by Purchaser or its counsel at any
time in order to more fully vest in Purchaser all ownership rights in those
items hereby transferred by Sir Worldwide to Purchaser. Sir Worldwide further
agree to disclose immediately to Purchaser all Proprietary Information
conceived or developed in whole or in part by them relating to or derived from
their relationship with Purchaser (in any capacity, whether as officer,
shareholder, director, agent, employee, consultant, or otherwise) and to assign
to Purchaser any right, title or interest they may have in such Proprietary
Information. All customer lists, and all features and documentation of SIR
Worldwide programs, designs, equipment, "source codes", software programs
purchased and/or developed, binders, daily reports, results of research and
development, potential research and development, technical memoranda, pricing
policies, business plans, proposals, results of development, and business
techniques and any other information or property of SIR Worldwide is
confidential and proprietary, and acquired by Purchaser herein. Seller will
disclose and assign to Channel Freeze Technologies, Inc. all designs,
improvements, inventions, and discoveries relating to the business of SIR
Worldwide, which shall have originated or is derived in connection with their
association with SIR Worldwide (in any capacity, whether as member, manager,
agent, employee, consultant, or otherwise), which are or was made, first
reduced to practice, devised or conceived by Seller. The foregoing obligation
to disclose and assign to Channel Freeze Technologies, Inc., designs,
improvements, inventions, and discoveries of Seller shall apply whether or not
they are or were first reduced to practice, devised or conceived from and after
the date of this Agreement.
17.10 Non-Compete Provision- Use of Intellectual Property - Channel Ice
Technologies. For a period of sixty (60) consecutive months following the<PAGE>
Closing Date, Seller, its Members, or Managers: If for any reason Seller shall
attempt to sell, license, sell, lease, assign, transfer by any means whatsoever
(including, but not limited to acting in the capacity as an officer, director,
partner, shareholder, owner, promoter, employee, consultant, advisor, agent,
manager, joint venturer, general partner, limited partner of any competing
entity, individual or person), or utilize in any fashion, designs,
improvements, inventions, and discoveries of CIT; then at the sole election of
Channel Freeze Technologies, Sir Worldwide and its Members and Managers shall
pay to PowerCold Corporation fifty-five per cent (55%) of actual annual gross
amounts received by Seller, its Members, or Managers. For purposes of this
Agreement, the "Actual Annual Gross Amounts " shall be computed and determined
based upon the actual annual gross amounts received by Seller, its Members, or
Managers from the sale, lease, license, assignment, transfer by any means
whatsoever, or utilize in any fashion, the designs, improvements, inventions,
and discoveries of CIT, including information referred to in herein, for a
period of fifteen (15) years, and shall be determined without any deductions or
reductions against such gross amounts. Payment will be remitted to PowerCold
Corporation by Seller, its Members, or Managers within fifteen (15) days after
Seller, its Members, or Managers receive amounts from the sale, lease, license,
assignment, transfer by any means whatsoever, or utilize in any fashion, of the
designs, improvements, inventions, and discoveries of CIT, including
information referred to in herein. All amounts due Seller from Seller, its
Members, or Managers pursuant to this paragraph shall bear interest at two
percent (2%) over the rate announced by the U.S. BANK as its prime lending
rate, determined as of the date of the sale, lease, license, assignment,
transfer by any means whatsoever, or utilize in any fashion by Seller, its
Members, or Managers (of the designs, improvements, inventions, and discoveries
of CIT, including information referred to herein), but in no event in excess of
the maximum rate permitted by law, on the outstanding balance due under this
paragraph. The foregoing remedy represents an amount similar to what PowerCold
Corporation would have sold, licensed, or assigned the rights to any designs,
improvements, inventions, and discoveries of CIT to Seller, its Members, or
Managers and shall be in addition to any other remedies provided to Purchaser
hereunder or by law.
Nothing in this agreement is to be interpreted as restraining an Employee's
freedom to provide services to such customer, business, or person as a bona
fide Employee thereof. In the event this provision is found to be
unenforceable, the Court so deciding may reduce the time periods provided for
herein to allow this provision to be enforced.
17.11 Non-Compete Provision- Competition - Channel Ice Technologies.
Seller, its Members, Managers, employees and agents, will not, for a period of
five (5) years from Closing Date, directly or indirectly, take any course of
action to become a competitor, either on its own account or become associated
with any individual, partnership, joint venture, limited liability corporation,
firm or be connected with as an officer, director, consultant, agent, advisor,
promoter, manager, shareholder, employee, manager, joint venturer, member,
owner, or partner engaged in any extent to the same, similar or competitive
business as those carried on or under development or research by Purchaser or
PowerCold Corporation, their successors, assigns, subsidiaries, or affiliates,
as it is now or in the future doing business; nor will it directly or
indirectly own, manage, operate, control, lend money to, endorse the obligation
of, promote, finance, assist in, carry on, through a corporation, partnership,
joint venture, limited liability corporation, sole proprietorship, or
participate in or take any course of action to become affiliated with any
competitor in competition with said business as it is now doing business.
The foregoing remedy shall be in addition to any other remedies provided
to Purchaser hereunder or by law. Any breach of the above covenant not to
compete by said individuals shall entitle the Purchaser, in addition to any
other legal remedies available to it, to apply to any court of competent
jurisdiction to enjoin any violation thereof. Any breach of the above covenant<PAGE>
not to compete by said individuals shall grant to Purchaser the right to set
off against proceeds of this Agreement to be paid to Seller.
XVIII.
Venue and Jurisdiction
It is agreed by the parties hereto that this Agreement, including its
interpretation and its performance, and all proceedings hereunder be construed
in accordance with the laws of the state of Nevada and in any action or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the state of Nevada shall be applicable and
controlling. Any controversy arising out of, connected to, or relating to any
matters herein of the transactions between Purchaser and Seller (including for
purposes of arbitration, officers, directors, employees, controlling persons,
affiliates, professional advisors, agents, of SIR Worldwide), on behalf of the
undersigned, or this Agreement, or the breach thereof, including, but not
limited to any claims of violations of Federal and/or State Securities Acts,
Banking Statutes, Consumer Protection Statutes, Federal and/or State anti-
Racketeering (e.g. RICO) claims as well as any common law claims and any State
Law claims of fraud, negligence, negligent misrepresentations, breach of duty
of good faith and/or conversion shall be settled by arbitration; and in
accordance with this paragraph and judgment on the arbitrator's award may be
entered in any court having jurisdiction thereof in accordance with the
provisions of Nevada Law. In the event of such a dispute, each party to the
conflict shall select an arbitrator, both of whom shall select a third
arbitrator, which shall constitute the three person arbitration board. The
decision of a majority of the board of arbitrators, who shall render their
decision within thirty (30) days of appointment of the final arbitrator, shall
be binding upon the parties. The Superior Court for Carson County, State of
Nevada, shall have jurisdiction to enforce any arbitration award. If any
action is brought upon this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, together with costs of suit. In any action
herein Seller waives personal service of any summons, complaint or other
process and agree that service thereof may be made by certified or registered
mail directed to Seller at the address set forth in section XVII.
XIX.
Bulk Transfer Compliance
Seller and Purchaser hereby acknowledge that if the California Bulk Sales
Act imposes a duty upon Seller under this Agreement, the Seller has requested
the Purchaser to waive the requirements of the Bulk Transfer Provisions of the
Uniform Commercial Code, and the Purchaser hereby waives compliance with the
provisions of any applicable Bulk Transfer Act, including the California Bulk
Sales Act.
XX.
Waiver
No waiver of any of the terms or conditions of this Agreement shall be
binding or effective for any purpose unless expressed in writing and executed
by the party giving the same.
IN WITNESS WHEREOF, the parties have executed this Agreement the first date
above written.
SELLER:
SIR WORLDWIDE, LLC
By: /s/John S. Scherer
----------------------
John S. Scherer
Title: President
ATTEST: /s/T. L. Thomas<PAGE>
PURCHASER:
CHANNEL FREEZE TECHNOLOGIES, INC.
By: /s/George C. Briley
-----------------------
George C. Briley
Title: President
ATTEST: /s/Francis L. Simola
POWERCOLD:
POWERCOLD CORPORATION
By: /s/Francis L. Simola
-----------------------
Francis L. Simola
Title: President
ATTEST: /s/Francis L. Simola<PAGE>
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT to that certain Agreement, dated September 15, 1998,
is made this 29thday of September, 1998, between and among SIR WORLDWIDE, LLC,
a California Limited Liability Company ("SIR" or "Seller"), CHANNEL FREEZE
TECHNOLOGIES, INC., a Nevada Corporation, ("Channel Freeze" or "Purchaser"),
and POWERCOLD CORPORATION, a Nevada Corporation ("PowerCold").
WHEREAS, SIR WORLDWIDE, LLC, a California Limited Liability Company, CHANNEL
FREEZE TECHNOLOGIES, INC., a Nevada Corporation, and POWERCOLD CORPORATION, a
Nevada Corporation, entered into an Agreement effective September 15, 1998.
WHEREAS, SIR, Channel Freeze and PowerCold desire to amend certain
portions of the Agreement dated September 15, 1998;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto amend the Agreement dated September 15, 1998 only as
to the following section II:
II.
Purchase Price and Payment
2.1 Purchase Price of Assets. The purchase price of the assets sold by
Seller to Purchaser shall be as follows: a cash payment at Closing of eight
hundred and fifty thousand dollars ($850,000) (the "Cash Purchase Price"); and
additional installment fee payments of five million, nine hundred and fifty
thousand dollars---------00/100 ($5,950,000), together with transfer of twenty
percent (20%) interest in Purchaser. The purchase price does not include any
sales or use taxes. The purchase price shall be allocated as follows:
Payment. Subject to the terms and conditions of this Agreement, in
reliance on the representations, warranties, and agreements of SIR Worldwide
contained herein and in consideration of the aforesaid assignment and delivery
of the CIT assets of SIR Worldwide, Purchaser will deliver at the Closing, as
hereinafter defined, as partial payment of the purchase price, (i) the sum of
eight hundred and fifty thousand dollars ($850,000) in cash, certified check,
or cashier's check, to be paid to Seller, as the Cash Purchase Price; (ii)
Purchaser will assign, convey, endorse, transfer and deliver to Seller and
Seller will acquire twenty percent (20%) interest in and to Purchaser's stock;
(iii) an option to acquire four hundred thousand (400,000) shares of the common
stock of PowerCold, par value $0.001, at a price of $2.50 per share, for a
period not to exceed two (2) years from the date of Closing. ("the PowerCold
Shares"); and (iii) Fee Payments on Net Sales as set forth in (a) below for
sales of CIT Units subsequent to Closing.
(a) Fee Payments. As additional consideration for this transaction,
Purchaser will compensate SIR Worldwide by means of (i) Ten Percent Net Fee
Payment. A fee payment of ten percent (10%) of the net gross invoice price on
all Channel Ice Technology Units sold to distributors. For purposes of this
subparagraph, "net gross invoice price" or "net sales" shall mean payments
received from customers less commissions to non-employee agents, export
preparation, inland freight and forwarding fees, ocean freight, insurance,
discounts and all warranty work performed during relevant period, or (ii)
Thirteen Percent Net Sales Fee Payment. A fee payment of thirteen percent
(13%) of the net gross invoice price on all Channel Ice Technology Units sold
at the base price. For purposes of this subparagraph, "net gross invoice price"<PAGE>
or "net sales" shall mean payments received from customers less commissions to
non-employee agents, export preparation, inland freight and forwarding fees,
ocean freight, insurance, discounts and all warranty work performed during
relevant period.
(I) All installment fees, royalty, and commission payments will be
paid to SIR Worldwide on a quarterly basis, within thirty (30) days after
receiving payment from a customer.
(b) At Closing and after the initial payment of $850,000, PowerCold
shall have an initial ownership of ten percent (10%) equity interest in
Purchaser.
(c) For each 1 million dollars in CIT Unit sales, PowerCold shall
acquire an additional one percent (1%) equity interest in Purchaser for each
payment of eighty-five thousand dollars ($85,000), up to a maximum ownership
interest by PowerCold in Purchaser of eighty percent (80%).
(d) The following example illustrates the payment of the purchase
price for the assets acquired herein and proposed payment:
Cash Purchase Price of CIT Assets $ 850,000.00
Additional Installment Fee Payments
on Net Sales (Cumulative Installment
Fee Payments are based upon a maximum
of 70 payments of $85,000 to SIR to
acquire an additional 70% interest in
Purchaser by PowerCold ) $5,950,000.00
--------------
TOTAL $6,800,000.00
(e) The Cash Purchase Price will be allocated as follows:
Item Amount
-------- ----------
Equipment and Other Assets
Listed on Exhibit "A" $ 75,000.00
Patents and Intellectual Property $775,000.00
------------
Total $850,000.00
2.1.2 Prepayment. Notwithstanding any other provision of this
Agreement, Purchaser shall have the right to prepay any or all amounts owed
under this Agreement, including those referred to in (e) above.
2.1.3 "Buy-Back". Power Cold shall have the exclusive right of first
refusal and option to acquire from Seller, all right, title, and interest in
and to the twenty percent (20%) interest in Purchaser's common stock and
securities acquired herein, for a period not to exceed five years and for a
price equal to the then market value or as mutually agreed.<PAGE>
2.2 On or before October 1, 1998, and upon the preparation and filing
with the U.S. Patent and Trademark Office ("PTO") of an Assignment Agreement,
attached hereto and incorporated by reference herein, as Exhibit 2.2, the
Purchaser shall pay to Seller the sum of Two Hundred and Fifty Thousand -------
00/100 Dollars ($250,000) in cash or by check as down payment on the total
purchase price. Purchaser shall pay all debts of Seller as noted on Exhibit
"D," pursuant to compliance with California Bulk Sales law, relating to bulk
transfer compliance. After deduction of all debts of Seller on Exhibit "D" and
deduction of the initial payment of $250,000 from the Closing payment of
$850,000, and after Seller providing all parties with verification and
acceptance of all filings with the PTO, the balance or remaining amount due
Seller from Purchaser, shall be paid at Closing. The Seller shall deposit with
the Purchaser all assignments, transfer and other documents necessary to
provide title, free and clear of all encumbrances, liens, mortgages, security
interests, or encumbrances of any nature for: all trade secrets, patents,
patent applications, "know-how" and technology used by Seller in connection
with its "CIT Units". The Purchaser and PowerCold shall deposit with Seller all
assignments, transfer and other documents necessary to provide title, free and
clear of all encumbrances, liens, mortgages, security interests, or
encumbrances of any nature for: all option certificates in and to PowerCold
Common Stock.
2.3 Assumption of Liabilities. By its purchase of assets hereunder,
Purchaser neither assumes any outstanding liabilities of Seller nor takes any
property subject to such liabilities. All other liabilities of Seller incurred
at the business and relating to the assets and properties hereby transferred,
shall be discharged by the Seller on or before closing.
IN ALL OTHER RESPECTS, the Agreement dated September 15, 1998, is
confirmed, ratified and approved.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
29th day of September, 1998. Facsimile signatures shall be considered the same
as an original signature.
SIR WORLDWIDE, LLC
By: /s/John S. Scherer
---------------------
John S. Scherer
Title: Member/Manager
ATTEST:
Member/Manager
CHANNEL FREEZE TECHNOLOGIES, INC.
By: /s/George C. Briley
----------------------
George C. Briley
Title: President
ATTEST:<PAGE>
Secretary
POWERCOLD CORPORATION
By: /s/Francis L. Simola
-----------------------
Francis L. Simola
Title: President
ATTEST:
Secretary<PAGE>
ROYALTY AGREEMENT
THIS ROYALTY AGREEMENT is made effective September 14, 1998, between
CHANNEL FREEZE TECHNOLOGIES, INC., a Nevada Corporation, ("Company" or
"Assignee"), and SIR WORLDWIDE, LLC, a California Limited Liability
Corporation ("Assignor ").
Whereas, Assignor is engaged in the designing, engineering, performing
research and development related to, manufacturing and selling of highly
efficient automated machinery for freezing ice, food, food by-products, non-
foods, freeze-thawed residual products, thermal energy storage, making
recreational snow, and other applications not yet defined which incorporate the
Intellectual Property and is commonly referred to as "Channel Ice" or "Channel
Ice Technologies", but excluding the Intellectual Property of PowerCold. "CIT
Units" or "Channel Ice Technology Units"," (hereinafter known as ""CIT Units"
or "Channel Ice Technology Units"").
Whereas, the "CIT Units" or "Channel Ice Technology Units" are
manufactured by a secret process and formula owned by, and lawfully known only
to, Assignor.
Whereas, Assignor desires to increase the distribution, sale and use of
"CIT Units" or "Channel Ice Technology Units" and to be relieved of the
manufacture, promotion, distribution and sale thereof, which functions Company
desires and is willing to perform.
Now, therefore, in consideration of the above premises, the covenants
hereinafter recited and the faithful performance of the same, and for other
good and valuable consideration, it is agreed as follows:
1. Assignor will disclose, assign and quitclaim their secret method,
secret formula designs, and secret "know-how" for the manufacture of "CIT
Units" or "Channel Ice Technology Units" to Company, so that the Company can
manufacture "CIT Units" or "Channel Ice Technology Units".
2. Assignor hereby grant Company the exclusive right to manufacture and
sell "CIT Units" or "Channel Ice Technology Units" throughout the world in
accordance with said secret method, formula and "know-how", together with
title, free and clear of all encumbrances, liens, mortgages, security
interests, or encumbrances of any nature for: (i) U.S. Patent No. 5,029,453;
(ii) all trade secrets, patents, patent applications, "know-how" and technology
used by Assignor in connection with its "CIT Units".
3. Assignor hereby assign and transfer unto Company the entire right,
title and interest in and to the trademark "CIT Units" or "Channel Ice
Technology Units", all intellectual property, including patents, licenses,
copyrights, "know-how" and assign all rights in and to any patents, licenses,
copyrights, "know-how" (whether Federal or State) as they relate to the
business and assets of Assignor, and the good-will of the business in
connection with which the marks "CIT Units" or "Channel Ice Technology Units",
are used and Company agrees that upon the default of this agreement, that all
said trademark rights and said good-will will revert to Assignor and Company
will forthwith re-assign to Assignor the entire right, title and interest in
and to the said trademark "CIT Units" or "Channel Ice Technology Units", the
good-will of the business in connection with which the mark is used, and any
and all registrations of the trademark "CIT Units" or "Channel Ice Technology<PAGE>
Units" in the United States and foreign countries. Company also agrees that it
will advertise and sell "CIT Units" or "Channel Ice Technology Units", solely
under the trademark "CIT Units" or "Channel Ice Technology Units" and that it
will prominently display the trademark insofar as practical by label or
otherwise upon all inserts and all containers in which "CIT Units" or "Channel
Ice Technology Units", are packaged for sale.
4. Company agrees that it will compensate Assignor as follows: Ten
Percent Net Fee Payment. A fee payment of ten percent (10%) of the net gross
invoice price on all Channel Ice Technology Units sold to distributors; or
(ii) Thirteen Percent Net Sales Fee Payment. A fee payment of thirteen percent
(13%) of the net gross invoice price on all Channel Ice Technology Units sold
at the base price; and (iii) Five Percent Net Sales Royalty. A royalty
agreement, to be attached as Exhibit G, which agreement shall provide SIR
Worldwide a royalty payment of five percent (5%) of the net gross invoice price
on all Channel Ice Technology Units and related materials for the life of SIR
Worldwide patents.
For purposes of this agreement, the following definitions will apply:
(a) "The Business" or "CIT Business" means solely Seller's business of
designing, engineering, performing research and development related to,
manufacturing and selling of highly efficient automated machinery for freezing
ice, food, food by-products, non-foods, freeze-thawed residual products,
thermal energy storage, making recreational snow, and other applications not
yet defined which incorporate the Intellectual Property and is commonly
referred to as "Channel Ice" or "Channel Ice Technologies", but excluding the
Intellectual Property of PowerCold.
(b) "Business Information" means financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and other information relating to the Business.
(c) "CIT Equipment" or "CIT Units" or "Channel Ice Technology Units"
means Channel Ice equipment manufactured by Buyer which is covered by some or
all of the claims of the Patents or Patent Application.
(d) "Intellectual Property" means all of Seller's right, title and
interest in and to (a) the domestic and foreign patents, patent applications,
patent disclosures and improvements thereto relating to the CIT Business as set
forth in Exhibit "A"; (b) domestic and foreign trademarks relating to the CIT
Business; and the good will associated there with and registrations and
applications for registration thereof: and (c) trade secrets and confidential
business in formation (including ideas, formulas' compositions' inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications. designs, plans. Proposals,
technical data and copyright table works used for the CIT Business.
(e) Net Gross Invoice Price" or "Net Sales" means payments received from
customers by Purchaser less commissions to non-employee agents, export
preparation, inland freight and forwarding fees, import and export duties,
tariffs, taxes, accessments, levies and other government charges, ocean
freight, shipping insurance, discounts and all warranty work performed during
relevant warranty period. All such commissions, fees, expenses and other
deductions from payments received from customers by Purchaser or PowerCold to<PAGE>
develop "Net Gross Invoice Price" or "Net Sales" for purposes of this Agreement
must be itemized or separately invoiced by Purchaser.
(f) "List Price" means price as listed for end user or retail sales. For
purposes of this Agreement, all sales are either at "List Price" or
"Distributor Price".
(g) "Distributor Price" means price as listed for distributors for
resale, which is discounted from retail sale price or "List Price". For
purposes of this Agreement, all sales are either at "List Price' or
`Distributor Price".
(h) "Base Price" means the same as "List Price".
(i) "Fee Payment" means additional consideration apart from royalty and
installment payments to be paid to Seller based upon a percentage of sales.
(j) "Installment Payment" means payments to Seller by Purchaser for each
$1,000,000 in sales up to a maximum total "Installment Payments" as specified
in the Agreement. For each installment payment, Purchaser will receive an
additional percentage ownership of Channel Ice Technologies.
(l) "Taxes" mean any and all taxes, charges, fees, levies or other
assessments including gross receipts, excise, real or personal property, sales,
use, service, license, of any taxing authority (whether domestic or foreign,
including any federal, state, county, local or foreign government or any
subdivision or taxing agency thereof(including a U.S possession), and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, and
such taxes, charges, fees, levies or other assessments.
5. Company agrees to keep complete and accurate accounts of all data
required for the computation of the license fee or royalty referred to in
Paragraph 4 hereof, and on or before the last day of June, September, December
and March of each year transmit to Assignor a statement in writing showing in
reasonable detail the amount of the license fee or royalty accruing during the
preceding quarter-annual period, together with the remittance for the amount
accruing for such period. The first quarter-annual period shall comprise the
months of April, May and June; the second quarter-annual period, the months of
July, August and September; the third quarter-annual period, the months of
October, November and December; and the fourth quarter-annual period, the
months of January, February, and March.
6. Company agrees that Assignor, or their authorized agent, from time to
time shall have the right to examine its books and records to such extent as
may be necessary to determine the accuracy or inaccuracy of any royalty
statements submitted by Company to Assignor, provided that Assignor shall pay
the expense thereof and shall not request more than two audits in any one
calendar year. In case of any dispute as to the amount of royalty due,
Assignor may select any independent, nationally known auditing firm, at
Company's expense, to check shipments and verify the account, and Company
agrees to accept and make payment on quantities so certified by said nationally
known firm of auditors.
7. Company agrees to use its best efforts to further the manufacture and
sale of "CIT Units" or "Channel Ice Technology Units", and to maintain an<PAGE>
efficient organization for the manufacture and promotion of the sale of "CIT
Units" or "Channel Ice Technology Units",. The manufacture, pricing and sales
promotion of "CIT Units" or "Channel Ice Technology Units", shall be
completely controlled by Company. Company agrees to maintain adequate product
liability insurance on all "CIT Units" or "Channel Ice Technology Units",
sold.
8. Company agrees that all "CIT Units" or "Channel Ice Technology
Units", will be manufactured by Company.
9. Assignor agree that during the life of this contract, or any
extensions thereof, it will not disclose to any other party the method of
preparation of "CIT Units" or "Channel Ice Technology Units", the formula used
therein and the "know-how" relating to the manufacture of "CIT Units" or
"Channel Ice Technology Units", and will not engage in the distribution of "CIT
Units" or "Channel Ice Technology Units" except through Company.
10. Assignor agrees that if it, or any of its employees, makes, develops
or invents improvements on the method, formula or "know-how" relating to "CIT
Units" or "Channel Ice Technology Units" as disclosed to Company by Assignor,
such improvements shall be maintained strictly secret and promptly be assigned
and disclosed to Company by Assignor and Company will pay Assignor the same
royalties as specified in this contract, Paragraph 4, on any and all such
product made in accordance with any such improvements and sold or shipped by
Company to fill orders. Nothing in this contract shall prevent Company from
developing or marketing any other product not having as its basis the said
process, formula, "know-how" and improvements thereof and which is the result
of developments by any of the partners, any Company employees, or based upon
disclosure to Company by other individuals or firms.
11. Assignor will use its best effort to assist the Company in the
sale, manufacture, and marketing of any lots of "CIT Units" or "Channel Ice
Technology Units" through contacts now available to Assignor.
12. This agreement shall be subject to termination by mutual consent of
Company and Assignor upon default by the other party in the performance of any
of the terms, conditions or covenants of this agreement and failure to remedy
said default within thirty (30) days after notice or demand, or if Company
shall become bankrupt or insolvent or if a receiver shall be appointed for
Company or for the assets of Company, then Assignor may at their option
terminate this agreement forthwith. Termination of this agreement in any
manner shall not discharge the liability of Company for royalties accrued or
unpaid at the time of such termination.
13. Assignor will designate an agent or agents to deal with Company on
all secret matters appertaining to "CIT Units" or "Channel Ice Technology
Units" and will give Company a certified copy of such designation and such
agent or agents shall have the right to inspect Company's laboratory notes
relating to the manufacture of "CIT Units" or "Channel Ice Technology Units".
14. Time is of the essence of this contract, and if the Company shall
fail or refuse to promptly and in manner as herein provided perform any
condition or covenant of this contract on their part to be performed, or should
the Company become insolvent or adjudicated a bankrupt or make a general<PAGE>
assignment for the benefit of their creditors, in any such event the Assignor
shall have the following options:
(a) The Assignor may elect to affirm this contract and sue either at law
or in equity to recover the entire balance then remaining due and unpaid,
together with any and all other amounts due under the terms of this contract;
and enforce any and all security given to them by operation of law to secure
the payment of said amount; or
(b) The Assignor may forfeit this Royalty Agreement and re-enter and take
possession of said "CIT Units" or "Channel Ice Technology Units" and retain all
amounts theretofore paid as a royalty or license fee herein and retain the
benefit of all improvements and all work done upon said "CIT Units" or "Channel
Ice Technology Units" as liquidated damages.
Provided, however, before either option be exercised by the Assignor, they
shall serve upon the Company a written notice specifying the default and
complaint and requiring compliance with the terms of this contract within 30
days after service of said notice.
If the Company shall comply with said notice and the terms of this Royalty
Agreement within said period of time, the default shall be deemed corrected,
but if they shall not comply, then the default shall be deemed complete at the
expiration of said 30 day period and the Assignor may forthwith proceed under
either option.
IN WITNESS WHEREOF, the parties have executed this Agreement the first
date above written
ASSIGNOR:
SIR WORLDWIDE, LLC
By: /s/John S. Scherer
---------------------
John S. Scherer
Title: President
ATTEST: /s/T.L. Thomas
COMPANY:
CHANNEL FREEZE TECHNOLOGIES, INC.
By: /s/George C. Briley
---------------------
George C. Briley
Title: President
ATTEST: /s/Francis L. Simola
<PAGE>
SIR Worldwide, LLC
Refrigeration Solutions For The World
418 S. Central Ave., Suite 204, Los Angeles, CA 90013
Ph: 213-626-5885 Fx:213-626-7185 Email: [email protected]
CERTIFICATION AND OPINION
Be it known that as of this day of September 15,1998, SIR Worldwide, LLC,
a California limited liability company, hereby certifies as follows:
1. SIR Worldwide, LLC, is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
California.
2. All the Membership Interests of SIR Worldwide, LLC, have been duly
authorized, and are validly issued, fully paid and nonassessable.
3. SIR Worldwide, LLC, has taken all requisite corporate action to
approve the attached agreement and the transactions contemplated
thereby, and that the attached agreement has been duly authorized,
executed and delivered by SIR Worldwide, LLC, and constitutes a valid
and binding agreement of SIR Worldwide, LLC, enforeceable in
accordance with its terms.
4. Members of SIR Worldwide, LLC, have taken all requisite corporate
action to approve the attached agreement and the transactions
contemplated thereby.
5. To the knowledge of SIR Worldwide, LLC, the execution, delivery and
performance of the attached agreement by SIR Worldwide, LLC, and the
consummation of the transactions contemplated thereby will not
conflict with or result in the breach of any of the terms, conditions
or provisions of any agreement, contract or commitment to which
Purchased and PowerCold is not also a party which is material to the
business or properties of SIR Worldwide, LLC, as a whole or
constitute a material default thereunder or give to the others any
material right of termination, cancellation or acceleration
thereunder, or otherwise require any approval which has not been
obtained.
6. The Members of SIR Worldwide, LLC, with respect to the attached
agreement is proposed shall not have exercised their right to dissent
as dissenting members or similar rights under Nevada law.
7. SIR Worldwide, LLC, has title, free and clear of all encumbrances,
liens, mortgages, security interests, or encumbrances of any nature
for: (i) U.S. Patent No. 5,029,453; (ii) all trade secrets, patents,
patent applications, "know-how" and technology used by SIR Worldwide,
LLC, in connection with its "CIT Units" as acquired by Purchaser in
accordance with attached agreement.
This written certification and opinion shall be effective as of the date
first set forth above.
/s/John S. Scherer 9/15/98
------------------------------
John S. Scherer, Member Date
SIR WORLDWIDE, LLC<PAGE>
SIR Worldwide, LLC
Refrigeration Solutions For The World
418 S. Central Ave., Suite 204, Los Angeles, CA 90013
Ph: 213-626-5885 Fx:213-626-7185 Email: [email protected]
Resolutions of the Members
of
SIR Worldwide, LLC
The undersigned, constituting all of the Members of SIR Worldwide, LLC, a
California limited liability company (the "Company"), pursuant to Section 6.6
of the Company's Limited Liability Company Operating Agreement, do hereby
consent to and adopt the following resolutions as of September 15, 1998:
Authorization of Sale of Assets and Asset Purchase Agreement:
WHEREAS, there has been presented to the Members an asset purchase
agreement by and among Channel Freeze Technologies, Inc., a Nevada corporation
("Purchaser"), PowerCold Corporation, a Nevada Corporation ("PowerCold"), and
the Company (The "Purchase Agreement") pursuant to which Purchaser and
PowerCold will purchase from the Company certain: (i) equipment and other
assets, (ii) inventories of raw materials and supplies, and (iii) Intellectual
Property and Business Information as defined in the Purchase Agreement
(collectively "Company Assets");
WHEREAS, under the terms of the Purchase Agreement, the consideration for
purchase of the Company Assets shall be an initial payment of $850,000 plus
such additional consideration as set forth in such Purchase Agreement; and
WHEREAS, the Members have determined that the Purchase Agreement and the
transactions contemplated thereby are in the best interest of the Company.
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions of the
Purchase Agreement and the attachments thereto, in the form presented to the
Members and attached hereto as Exhibit A and the transactions contemplated
thereby, be, and the same hereby are, authorized, approved and adopted, and the
Company be, and it hereby is, authorized and directed to enter into the
Purchase Agreement and to consummate the transactions contemplated thereby:
FURTHER RESOLVED, that John S. Scherer, an officer of the Company, and
that any officer of the Company be, and each of them individually hereby is,
authorized and directed to execute and deliver the Purchase Agreement in the
name of and on behalf of the Company, substantially in the form presented to
these Members, with such changes or additions thereto as any executing officer
or officers may deem necessary, appropriate or advisable (the execution thereof
to be conclusive evidence of such officer or officers' approval of any such
changes or addition); and
FURTHER RESOLVED, that John S. Scherer, an officer of the Company, and
that any officer of the Company be, and each of them individually hereby is,
authorized and directed to take or cause to be taken all such actions and to
execute such documents as he or she or they deem necessary or appropriate to
carry out the intent and purpose of the foregoing resolutions.
General Authority and Ratification:
RESOLVED, that John S. Scherer, an officer of the Company, and that any
other officer of the Company be, and each of them individually hereby is,
authorized and directed, in the name of and on behalf of the Company, to
prepare or cause to be prepared and execute, deliver, verify, acknowledge, file
or record any documents, instruments, certificates, statements, papers, or any
amendments thereto, as in their sole judgment may be necessary, appropriate or
advisable in order to effect the transactions contemplated in the Purchase
Agreement and transactions approved herein, and to take such further steps and<PAGE>
do all such further acts or things as in their sole judgment may be cecessary,
appropriate or advisable to carry out the transactions contemplated by the
foregoing resolutions; and
This Written Consent may be executed in counterparts, each of which shall
be an original and all of which, taken together, shall constitute on and the
same instrument, and shall be filed with the minutes of the proceedings of the
Members. This Written Consent shall be effective as of the date first set
forth above.
/s/John S. Scherer 9/15/98 /s/Frans J. Scherer 9/15/98
- ----------------------------- --------------------------------
John S. Scherer, Member Date Frank J. Scherer, Memberer Date
/s/James T. Brodie 9/15/98 /s/Larry (Rank), President 9/15/98
- ----------------------------- -----------------------------------
James T. Brodie, Member Date Cold Investors, LLC Title/Date<PAGE>
OPPENHEIMER WOLFF & DONNELLY LLP
2029 Century Park East
Suite 3800
Los Angeles, CA 90067
(310) 788-5000
FAX (310) 277-1297
July 6, 1998
VIA FACSIMILE
Mr. Frank Scherer
SIR Worldwide, LLC
400 South Central Avenue
Los Angeles, CA 90013
Re: PowerCold Transaction
Docket: 490065-25
Dear Frank:
You have asked that we prepare a letter for your use in connection with
the proposed transaction with PowerCold.
First, I confirm that the listings in the schedule of patents and patent
applications which you supplied are correct. In connection with the most
recent U.S. application, Serial No. 08/854,581, it was filed under the Patent
Cooperation Treaty (PCT) and the PCT Application Serial No. is 98-09433. All
of the available PCT countries, which includes all of the major countries of
the world (with a few exceptions), were specified in the PCT application, so
you have the right to "Enter the National Phase" in each of these countries.
We also note in passing that in most foreign countries periodic annuity
payments or taxes are due, and some of these taxes must be paid by October of
1998 in connection with foreign applications and patents based on the earlier
Channel Ice filings.
I am also pleased to note that this firm and its predecessor, Poms, Smith,
Lande and Rose, have been working with you and your brother, John Scherer, for
more than a decade, and we have been very impressed with the creativity and
originality of the inventions that we have been working on for you. And this
specifically includes the invention and patent rights which we are considering
at the present time.
For completeness, I am attaching an initialed print of the of patent and
patent application schedule, with the PCT patent application number written in.
Best regards,
/s/Alan C. Rose
Alan C. Rose
OPPENHEIMER WOLFF & DONNELLY LLP
ACR\mm
Enclosure<PAGE>
SIR Worldwide, LLC
EXHIBIT G.1
Channel Ice tm by SIR Worldwide, LLC
PATENTS AND PATENT APPLICAITONS
May 1998
# Country Number Application Issue Title
Date Date
- ----------------------------------------------------------------------------
1. Australia 647,137 May 9,1990 (1) Aug. 16, 1994 CHANNEL BLOCK ICE
SYSTEM
2. Canada 2,082,426 May 9,1990 (1) Pending CHANNEL BLOCK ICE
SYSTEM
3. France 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
4. Germany 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
5. Great Britain 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
6. Italy 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
7. Netherlands 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
8. Spain 0527892 May 9,1990 (1) June 4,1997 (2)CHANNEL BLOCK ICE
SYSTEM
9. USA 5,029,453 May 9,1990 July 9, 1991 CHANNEL BLOCK ICE
SYSTEM
10. USA 08/854,581 May 12, 1997 Pending SYSTEM & METHOD FOR
CHANNELED PROCESSING
OF NON-SOLID MATERIALS
11. The World 08/854,581 May 8, 1998 Pending SYSTEM & METHOD FOR
(U.S. #) CHANNELED PROCESSING
OF NON-SOLID MATERIALS
Notes:
1. Application date is priority date applying to respective patent or patent
application and not necessarily the date on which patent application was
actually filed.
2. Issue date is priority date applying to respective patent and not
necessarily the actual date on which patent was issued.<PAGE>
CHANNEL ICE TECHNOLOGIES TRADEMARKS
# Title Application Issue Date Remarks
Date
- ----------------------------------------------------------------------------
1. Channel Ice n.a. n.a. This trademark name has been
properly marked with "TM"
when first appearing in
written documents. No
registered trademark
application has been filed.
2. Greenfreeze May 1997 n.a. U.S. registered trademark was
applied for, however SIR has
been notified Anheiser Busch
applied earlier for a
"Greenfreeze" registered
trademark. SIR Recommends
this application be abandoned
in favor of the "Biofreeze"
trademark to be used for
Channel Ice Technologies
freeze-thaw applications.
3. Biofreeze n.a. n.a. This trademark name has been
properly marked with "TM"
when first appearing in
written documents. No
registered trademark
application has been filed.
4. SIR Snow Cannon n.a. n.a. This trademark name has been
properly marked with "TM"
when first appearing in
written documents. No
registered trademark
application has been filed.<PAGE>
CHANNEL ICE tm TECHNOLOGIES
INVENTORY AND MANUFACTURING FIXED ASSETS
SIR Worldwide, LLC
June 1998
# Description Location Code/Remarks
1. Channel Ice Rancho Cold CI-FA. Aluminum extrusions connections of
test plates, Storage various types to illustrate suitability of
misc. sizes. circuiting and structural characteristics.
2. Routing tool Rancho Cold CI-FA. Custom built routing fixture and
for channel Storage tool for removing webs from extrusions to
plate cause proper flow circuiting.
circuiting.
3. Sign, Channel Rancho Cold CI-FA. High quality plastic presentation
Ice, 2' x 8', Storage sign in excellent condition using Channel
special Ice logo.
plastic.
4. Channel Ice Rancho Cold CI-FA. These two test configurations were
test units, 2 Storage used to test integrity and other
(two). 4(four) characteristics of bottom plate welds with
5 1/2" full weld at perimeter.
channels, 38"
high, 4' long.
5. Channel Plate Taber Metals. CI-FA. This custom extrusion dye was
aluminum designed for making channel plates.
extrusion dye.
6. Channel Ice LA Cold CI-FA. This unit has been used extensively
test Storage. for ice, food, and nonfood freeze and
demonstrator. freeze-thaw testing. Unit is suitable for
5 1/2" sending to remote locations. High side is
channel, 3' separate and required for operating unit.
long.
7. Misc. Rancho Cold Various parts including small partially
inventory. Storage. built Channel Ice demonstrator units,
aluminum extrusions, chains, sprockets,
gear drives, etc.<PAGE>
