Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
REFLECT SCIENTIFIC, INC. AND
CRYOMASTOR ACQUISITION CORPORATION
AND
CRYOMASTOR INC.; X X Xxxx & E L Dain CO - T Tee Dain Family Revocable Trust
U/A Dated 12/17/2001; XXXXXXXX X. XXXXXXXX; AND XXXX X. XXXX
April 19, 2006
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of April 19, 2006, by and among Reflect
Scientific, Inc. a Utah corporation ("Parent"); Cryomastor Acquisition Corp.,
a California corporation and wholly-owned subsidiary of Parent ("Merger
Subsidiary"); Cryomastor Inc., a California company (the "Company"); X X Xxxx
& E L Dain CO - T Tee Dain Family Revocable Trust U/A Dated 12/17/2001 (the
"Dain Trust") and Xxxxxxxx X. Xxxxxxxx ("Xxxxxxxx") the sole Company
Shareholders (collectively, the "Company Shareholders"); and Xxxx X. Xxxx,
individually ("Dain").
WHEREAS, the Company is in the business of manufacturing, marketing and
selling the Cryomastor, a refrigeration and freezer device (the "Business");
and
WHEREAS, the Boards of Directors of Parent and Merger Subsidiary, and
the shareholders of Merger Subsidiary and the Company, have approved the
merger of the Merger Subsidiary with and into the Company (the "Merger") upon
the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants, and agreements contained
herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), the
Merger Subsidiary will be merged with and into the Company in accordance with
the provisions of the California Corporations Code (the "California Code"),
whereupon the separate corporate existence of the Merger Subsidiary will
cease, and the Company will continue as the surviving corporation
(the "Surviving Corporation"). From and after the Effective Time, the
Surviving Corporation will possess all the rights, privileges, powers, and
franchises and be subject to all the restrictions, disabilities, and duties of
the Company and Merger Subsidiary, all as more fully described in the
California Code.
1.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article 5 and Article 6 has been satisfied or waived,
the Company and Merger Subsidiary will file, or cause to be filed, with the
Secretary of State of the State of California, an Agreement of Merger for the
Merger, which Agreement of Merger will be in the form required by and executed
in accordance with the applicable provisions of the California Code. The
Merger will become effective at the time such filing is made or, if agreed to
by Parent, Merger Subsidiary and the Company, such later time or date set
forth in the Agreement of Merger (the "Effective Time").
1.3 Closing.
(a) Unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article
7 hereof, the closing of the Merger (the "Closing") will take place at a
time and on a date (the "Closing Date") to be specified by the parties,
which will be no later than June 30, 2006 (the "Termination Date");
provided, however, that all of the conditions provided for in Articles 5
and 6 hereof shall have been satisfied or waived by such date. The
Closing will be held at the offices of Xxxxxxxxxx & Xxxxxxxxxx, Xxxxx
000, 455 East 000 Xxxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, or such
other place as the parties may agree, at which time and place the
documents and instruments necessary or appropriate to effect the
transactions contemplated herein will be exchanged by the parties.
Except as otherwise provided herein, all actions taken at the Closing
will be deemed to be taken simultaneously.
(b) At Closing, Parent or its designee shall pay to Company
Shareholders (as defined in Section (1.5) as consideration for all
shares of Company Common Stock (as defined in Section (1.4) the
aggregate sum of Seven Hundred Thousand Dollars ($700,000.00), to be
divided pro rata, in accordance with their respective interests in the
Company; and Parent shall issue individually and separately 1,530,000
shares of common stock of Parent to the Dain Trust, and 1,470,000 shares
of common stock of Parent to Xxxxxxxx. The shares of Common Stock of
Parent referred to in this Agreement shall mean United States Securities
and Exchange Commission Rule 144 "restricted securities" as defined in
Rule 144 of the Securities and Exchange Commission. Additionally,
Parent shall assume and pay, on or before ninety (90) days from the
Closing, the Company's debt to Dain in the amount of Three Hundred
Thousand Dollars ($300,000.00).
(c) Additional Consideration.
(I) Cryomastor Technology. For purposes of this Agreement,
"Cryomastor Technology" shall mean the Intellectual
Property Rights associated with United States Patent
Number 6,804,976 and the so called "Cryomastor" ultra
low temperature refrigeration technology, including
all derivative works related thereto.
(ii) Payments. As further consideration for the Merger,
Parent shall pay to the Company' Shareholders 2.5% of
the of the gross annual revenue earned by Parent or
Merger Subsidiary, or any affiliated entity, in
connection with the license, sale or other
distribution of the Cryomastor Technology ("Cryomastor
Revenue"). The foregoing payment shall not be due or
payable or accrue unless and until the aggregate
Cryomastor Revenue for a fiscal year is projected to
exceed, or actually exceeds, three million dollars
($3,000,000). The foregoing payment shall be paid in
shares of Parent Common Stock (as defined in Section
1.4(a)) valued at the greater of (I) Market Value at
the time of the accrual of the payment; or (ii) $1.80
per share. Market Value shall mean the average of the
bid and asked prices of Parent Common Stock on the OTC
Bulletin Board or any other nationally recognized
medium on which Parent Common Stock is publicly traded
on the date or dates when such percentage payments are
due and payable. The maximum aggregate amount of
shares issuable hereunder shall be Two Million
(2,000,000) shares. Payments shall be paid on a
quarterly basis (within thirty (30) days of the end of
each quarter) based on projected Cryomastor Revenue
(payments based on actual Cryomastor Revenue shall be
paid in one lump sum within thirty (30) days of the
end of the fiscal period in which they were earned).
Portions of the payments so paid shall be adjusted to
reconcile the actual Cryomastor Revenue within thirty
(30) days of the end of the fiscal year in which they
were paid.
(iii) Audit Rights. Parent shall maintain complete and
accurate financial and other records necessary to
comply with this Section 1.3(c). Parent shall submit
written reports on a quarterly basis to the Company
Shareholders of the status of actual and projected
Cryomastor Revenues and the status of payments accrued
hereunder. The Company Shareholders shall have the
right to, through independent accountants of their own
choosing and at their own expense, audit the financial
and other records of the Parent at reasonable times,
at least once per fiscal year, to determine compliance
with this Section 1.3(c). In the event such audit
reveals that Parent has not accurately or adequately
complied with this Section 1.3(c), the costs of said
audit shall be borne by Parent and the maximum amount
payable under Section 1.3(c)(ii) above, shall become
immediately due and payable.
(iv) Sale of Cryomastor Technology. Upon the sale,
divestiture, exclusive license, transfer or similar
transaction which results in the transfer of the
Cryomastor Technology to another entity or party (the
"Transfer"), the Company Shareholders shall have the
option to require that Parent distribute to them in
cash (or other securities or other consideration that
may be received in connection with the Transfer) an
amount equal to the sum of all consideration received
by Parent (or any affiliated entity) in connection
with the Transfer multiplied by a fraction, the
numerator of which shall be the number of shares of
Parent issuable to the Company Shareholders under this
Agreement (including the 3,000,000 shares issued under
Section 1.3(b) and all 2,000,000 shares issuable under
Section 1.3(c)(ii), above, whether or not earned or
accrued) less any shares sold by the Company
Shareholders and the denominator of which shall be the
total number of then outstanding shares of Parent
Common Stock. This amount shall be due and payable
immediately upon the Transfer. Any Transfer involving
the Cryomastor Technology within the first year of
the Closing of this Merger shall require the consent
of the Company Shareholders.
(v) Third Party Beneficiaries. When used in this
Agreement, the "Company Shareholders" means Dain, the
Trustee of the Dain Trust and Xxxxxxxx. The Company'
Shareholders, are third party beneficiaries with
respect to this Section 1.3(c) of this Agreement with
full rights to enforce this Section of the Agreement
against Parent to their benefit.
(vi) Best Efforts. Parent shall use its reasonable efforts
to develop and market the Cryomastor Technology.
(vii) Survival. Notwithstanding anything contained in this
Agreement to the contrary, the obligations of this
Section 1.3(c) shall survive the termination of this
Agreement until the maximum amount payable under
Section 1.3(c)(ii), above has been paid.
1.4 Conversion of Interests. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue
of the Merger and without any action on the part of the Company and/or the
Merger Subsidiary:
(a) All of the shares of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time (except
for Company Common Stock referred to in Section 1.4(c) hereof) will be
converted into the right of Xxxx X. Xxxx the Company Shareholders to
receive the shares of common stock of Parent as described in Paragraph
1.3(b), ("Parent Common Stock"). The amount of Parent Common Stock into
which shares of Company Common Stock is converted is referred to herein
as the "Merger Consideration".
(b) All stock options, warrants, convertible debt, other
convertible securities or other rights to acquire shares of the Company
(collectively the "Company's Convertible Securities") outstanding at the
Effective Time, whether or not exercisable and whether or not vested
(all of which are listed on Schedule1.4(b) hereto), shall be cancelled.
cancelled.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is then owned beneficially
or of record by Parent, Merger Subsidiary, or any direct or indirect
subsidiary of Parent or the Company will be canceled without payment of
any consideration therefor and without any conversion thereof.
Furthermore, at the Effective Time, one (1) share of Company Common
Stock shall be issued to Parent.
(d) Except as expressly set forth herein, each share of any
other equity interest of the Company (other than Company Common Stock)
will be canceled without payment of any consideration therefor and
without any conversion thereof.
(e) Each share of common stock of Merger Subsidiary, par value
$0.0001 per share ("Merger Subsidiary Common Stock"), issued and
outstanding immediately prior to the Effective Time will be canceled as
of the Effective Time.
1.5 Exchange of Company Common Stock.
(a) At the Closing, the Company will arrange for each holder of
record (a "Company Shareholder") of Company Common Stock outstanding
immediately prior to the Effective Time to deliver to the Parent
appropriate evidence of such holder's Company Common Stock ("Company
Certificates"), together with an appropriate assignment signed by such
holders, in exchange for the number of whole shares of Parent Common
Stock into which such interests have been converted as provided in
Section 1.4(a), and the Company Certificate(s) so surrendered will be
canceled.
(b) All shares of Parent Common Stock issued upon the surrender
for exchange of shares of Company Common Stock in accordance with the
terms hereof will be deemed to have been issued in full satisfaction of
all rights pertaining to such Company Common Stock.
(c) As of the Effective Time, the holders of Company
Certificates representing shares of Company Common Stock will cease to
have any rights as Company Shareholders, except such rights, if any, as
they may have pursuant to the California Code. Except as provided
above, until such Company Certificates are surrendered for exchange,
each such Company Certificate will, after the Effective Time, represent
for all purposes only the right to receive certificates representing the
number of whole shares of Parent Common Stock into which Company Common
Stock shall have been converted pursuant to the Merger as provided in
Section 1.4(a).
(d) No fractional shares of Parent Common Stock will be issued
upon the surrender for exchange of Company Certificates.
(e) Immediately prior to Closing, Parent will have outstanding
no more than 27,180,002 shares, plus or minus 10%, of Parent Common
Stock outstanding (assuming the sale of 1,000,000 shares of Parent
Common Stock at $1.00 per each share and 50,000 shares paid to a broker
agent). Immediately after the Closing, there will be 30,180,002 shares,
plus or minus 10%, of the Parent Common Stock issued and outstanding,
not including any shares issued in connection with the Company's
convertible securities (assuming the sale of 1,000,000 shares of Parent
Common Stock at $1.00 per each share and 50,000 shares paid to a broker
agent).
1.6 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Merger Subsidiary as in effect immediately
prior to the Effective Time will be the Articles of Incorporation of the
Surviving Corporation. Following the Closing, the Surviving Corporation shall
change its name to "Cryometrix, Inc."
1.7 Bylaws of the Surviving Corporation. The Bylaws of the Merger
Subsidiary, as in effect immediately prior to the Effective Time, will be the
Bylaws of the Surviving Corporation until thereafter amended in accordance
with applicable law.
1.8 Directors and Officers of the Surviving Corporation and Parent.
(a) Directors and Officers of the Surviving Corporation. The
directors and officers of the Parent, as of the Effective Time, shall be
designated as the directors of the Surviving Corporation.
1.9 Bylaws of the Parent. The Bylaws of the Parent shall be amended
to facilitate the addition of the Company's business, as necessary.
1.10 Dissenting Interests. There are no dissenters' rights of
appraisal under Sections 1300 to 1313 of the California Corporations Code or
otherwise, as all of the Company Shareholders are required to execute and
deliver this Agreement as a condition of the Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE COMPANY SHAREHOLDERS AND
DAIN
The Company, the Company Shareholders and Xxxx X. Xxxx hereby represent
and warrant to Parent as follows:
2.1 Disclosure Schedule. The disclosure schedule attached hereto as
Exhibit 2.1 (the "Company Disclosure Schedule") is divided into sections that
correspond to the sections of this Article 2. The Company Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties
set forth in the remaining sections of this Article 2.
2.2 Corporate Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California with the requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties and assets, is duly qualified or licensed to do business as a
foreign corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or operated
by it or the conduct of its business requires such qualification or licensing,
except in such jurisdictions in which the failure to be so qualified or
licensed and in good standing would not, individually or in the aggregate,
have a Material Adverse Effect (as defined below) on the Company. The Company
Disclosure Schedule contains a list of all jurisdictions in which the Company
is qualified or licensed to do business and includes complete and correct
copies of the Company's articles of incorporation and bylaws. The Company
does not own or control any capital stock of any corporation or any interest
in any partnership, joint venture or other entity.
2.3 Capitalization. The authorized capital securities of the Company
is set forth in the Company Disclosure Schedule. The number of shares of
Company Common Stock outstanding, as of the date of this Agreement and as set
forth in the Company Disclosure Schedule, represent all of the issued and
outstanding capital securities of the Company. All issued and outstanding
shares of Company Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are without, and were not issued in violation of,
preemptive rights. Except a set forth on Schedule 1.4(b), there are no shares
of Company Common Stock or other equity securities of the Company outstanding
or any securities convertible into or exchangeable for such interests,
securities or rights. Other than as set forth on the Company Disclosure
Schedule and pursuant to this Agreement, there is no subscription, option,
warrant, call, right, contract, agreement, commitment, understanding or
arrangement to which the Company is a party, or by which it is bound, with
respect to the issuance, sale, delivery or transfer of the capital securities
of the Company, including any right of conversion or exchange under any
security or other instrument. The Company has no subsidiaries.
2.4 Authorization The Company has all requisite corporate power and
authority to enter into, execute, deliver, and perform its obligations under
this Agreement. This Agreement has been duly and validly executed and
delivered by the Company and is the valid and binding legal obligation of the
Company enforceable against the Company in accordance with its terms, subject
to bankruptcy, moratorium, principles of equity and other limitations limiting
the rights of creditors generally.
2.5 Non-Contravention. Except as set forth in the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement,
and each other agreement to be entered into in connection with this Agreement,
nor the consummation of the transactions contemplated herein will:
(a) violate, contravene or be in conflict with any provision of
the articles of incorporation or bylaws of the Company;
(b) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under any
debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement
or obligation to which the Company is a party or by which the Company or
any of the Company's properties or assets is or may be bound;
(c) result in the creation or imposition of any pledge, lien,
security interest, restriction, option, claim or charge of any kind
whatsoever ("Encumbrances") upon any property or assets of the Company
under any debt, obligation, contract, agreement or commitment to which
the Company is a party or by which the Company or any of the Company's
assets or properties are bound; or
(d) materially violate any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other
similar authoritative matters (referred to herein individually as a
"Law" and collectively as "Laws") of any foreign, federal, state or
local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (referred to herein individually as
an "Authority" and collectively as "Authorities").
2.6 Consents and Approvals. Except as set forth in the Company
Disclosure Schedule, with respect to the Company, no consent, approval, order
or authorization of or from, or registration, notification, declaration or
filing with ("Consent") any individual or entity, including without limitation
any Authority, is required in connection with the execution, delivery or
performance of this Agreement by the Company or the consummation by the
Company of the transactions contemplated herein.
2.7 Financial Statements. The Company Disclosure Schedule contains a
copy of the financial statement of the Company as of the year ended December
31, 2005, and the period ended March 31, 2006 (the "Financial Statements").
Except as disclosed therein or in the Company Disclosure Schedule, the
aforesaid Financial Statements: (I) are in accordance with the books and
records of the Company and have been prepared in conformity with good
accounting practices (except as stated therein or in the notes thereto); and
(ii) are true, complete and accurate in all material respects and fairly
present the financial position of the Company as of the date thereof, and the
income or loss for the period then ended.
2.8 Absence of Undisclosed Liabilities. The Company does not have any
material liabilities, obligations or claims of any kind whatsoever, whether
secured or unsecured, accrued or unaccrued, fixed or contingent, matured or
unmatured, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due (referred to herein individually as a "Liability"
and collectively as "Liabilities"), other than: (a) Liabilities that are fully
reflected or reserved for in the Balance Sheet; (b) Liabilities that are set
forth on the Company Disclosure Schedule; (c) Liabilities incurred by the
Company in the ordinary course of business after the date of the Balance Sheet
and consistent with past practice; (d) Liabilities in an amount not to exceed
$5,000 individually or in the aggregate unless such amounts are disclosed on
the Company Disclosure Schedule; or (e) Liabilities for express executory
obligations to be performed after the Closing under the contracts described in
Section 2.14 of the Company Disclosure Schedule.
2.9 Absence of Certain Changes. Except as set forth in the Company
Disclosure Schedule, since March 31, 2006, the Company has owned and operated
its assets, properties and business in the ordinary course of business and
consistent with past practice. Without limiting the generality of the
foregoing, subject to the aforesaid exceptions:
(a) the Company has not experienced any change that has had or
could reasonably be expected to have a Material Adverse Effect on the
Company; and
(b) the Company has not suffered (I) any loss, damage,
destruction or other property or casualty (whether or not covered by
insurance) or (ii) any loss of officers, employees, dealers,
distributors, independent contractors, customers or suppliers, which had
or may reasonably be expected to result in a Material Adverse Effect on
the Company.
2.10 Assets. Except as set forth in the Company Disclosure Schedule,
the Company has good and marketable title to all of its assets and properties,
whether or not reflected in the Balance Sheet or acquired after the date
thereof (except for properties sold or otherwise disposed of since the date
thereof in the ordinary course of business and consistent with past
practices), that relate to or are necessary for the Company to conduct its
business and operations as currently conducted (collectively, the "Assets"),
free and clear of any mortgage, pledge, lien, security interest, conditional
or installment sales agreement, encumbrance, claim, easement, right of way,
tenancy, covenant, encroachment, restriction or charge of any kind or nature
(whether or not of record) (a "Lien"), other than (I) liens securing specific
Liabilities shown on the Balance Sheet with respect to which no breach,
violation or default exists; (ii) mechanics', carriers', workers' or other
like liens arising in the ordinary course of business; (iii) minor
imperfections of title that do not individually or in the aggregate, impair
the continued use and operation of the Assets to which they relate in the
operation of the Company as currently conducted; and (iv) liens for current
taxes not yet due and payable or being contested in good faith by appropriate
proceedings ("Permitted Liens").
2.11 Receivables and Payables.
(a) Except as set forth on the Company Disclosure Schedule, all
accounts receivable of the Company represent sales in the ordinary
course of business and, to the Company's knowledge, are current and
collectible net of any reserves shown on the Balance Sheet and none of
such receivables is subject to any Lien other than a Permitted Lien.
(b) Except as set forth on the Company Disclosure Schedule, and
with respect to the Interim Financing, there are no current liabilities
and there will be no material current liabilities in an amount greater
than One Thousand Dollars ($1,000.00) at the time of Close.
2.12 Intellectual Property Rights. The Company owns or has the
unrestricted right to use, and the Company Disclosure Schedule contains a
detailed listing of, all patents, patent applications, patent rights,
registered and unregistered trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyrights, internet domain names,
computer programs and other computer software, inventions, know-how, trade
secrets, technology, proprietary processes, trade dress, software and formulae
(collectively, "Intellectual Property Rights") used in, or necessary for, the
operation of its Business as currently conducted or proposed to be conducted.
Except as set forth on the Company Disclosure Schedule, to the Company's
knowledge, the use of all Intellectual Property Rights necessary or required
for the conduct of the Business of the Company as presently conducted and as
proposed to be conducted does not infringe or violate the Intellectual
Property Rights of any person or entity. Except as described on the Company
Disclosure Schedule, to the Company's knowledge: (a) the Company does not own
or use any Intellectual Property Rights pursuant to any written license
agreement; (b) the Company has not granted any person or entity any rights,
pursuant to a written license agreement or otherwise, to use the Intellectual
Property Rights; (c) the Company owns, has unrestricted right to use and has
sole and exclusive possession of and has good and valid title to, all of the
Intellectual Property Rights, free and clear of all Liens and Encumbrances;
and (d) all application, maintenance and other necessary fees are fully paid
with the United States Patent Office and any corresponding foreign agencies.
All license agreements relating to Intellectual Property Rights are binding
and there is not, under any of such licenses, any existing default or event of
default (or event which with notice or lapse of time, or both, would
constitute a default, or would constitute a basis for a claim on non-
performance) on the part of the Company or, to the knowledge of the Company,
any other party thereto.
2.13 Litigation. Except as set forth in the Company Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, or any judgment, decree, decision, injunction, writ or order pending,
noticed, scheduled, or, to the knowledge of the Company, threatened or
contemplated by or against or involving the Company, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
2.14 Contracts and Commitments; No Default.
(a) Except as set forth in the Company Disclosure Schedule, the
Company is not a party to, nor are any of the Assets bound by, any
written or oral:
(I) employment, non-competition, consulting or severance
agreement, collective bargaining agreement, or pension, profit-
sharing, incentive compensation, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay or retirement plan or agreement;
(ii) indenture, mortgage, note, installment obligation,
agreement or other instrument relating to the borrowing of money
by the Company;
(iii) contract, agreement, lease (real or personal
property) or arrangement that (A) is not terminable on less than
30 days' notice without penalty, (B) is not over one year in
length of obligation of the Company, or (C) involves an obligation
of more than $10,000 over its term;
(iv) contract, agreement, commitment or license relating to
Intellectual Property Rights or contract, agreement or commitment
of any other type, whether or not fully performed, not otherwise
disclosed pursuant to this Section 2.14;
(v) obligation or requirement to provide funds to or make
any investment (in the form of a loan, capital contribution or
otherwise) in any person or entity; or
(vi) outstanding sales or purchase contracts, commitments
or proposals that will result in any material loss upon completion
or performance thereof after allowance for direct distribution
expenses, or bound by any outstanding contracts, bids, sales or
service proposals quoting prices that are not reasonably expected
to result in a normal profit.
(b) True and complete copies (or summaries, in the case of oral
items) of all agreements disclosed pursuant to this Section 2.14 (the
"Company Contracts") have been provided to Parent for review. Except as
set forth in the Company Disclosure Schedule, all of the Company
Contracts items are valid and enforceable by and against the Company in
accordance with their terms, and are in full force and effect. The
Company is not in breach, violation or default, however defined, in the
performance of any of its obligations under any of the Company
Contracts, and no facts and circumstances exist which, whether with the
giving of due notice, lapse of time, or both, would constitute such
breach, violation or default thereunder or thereof, and, to the
knowledge of the Company, no other parties thereto are in a breach,
violation or default, however defined, thereunder or thereof, and no
facts or circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such a breach,
violation or default thereunder or thereof.
2.15 Compliance with Law; Permits and Other Operating Rights. Except
as set forth in the Company Disclosure Schedule, the Assets, properties,
business and operations of the Company are and have been in compliance in all
respects with all Laws applicable to the Company's assets, properties,
business and operations, except where the failure to comply would not have a
Material Adverse Effect. The Company possesses all material permits, licenses
and other authorizations from all Authorities necessary to permit it to
operate its business in the manner in which it presently is conducted and the
consummation of the transactions contemplated by this Agreement will not
prevent the Company from being able to continue to use such permits and
operating rights. The Company has not received notice of any violation of any
such applicable Law, and is not in default with respect to any order, writ,
judgment, award, injunction or decree of any Authority.
2.16 Brokers. Other than with respect to Private Equities LLC Inc.,
neither the Company nor, to the knowledge of the Company, any of the its
directors, officers or employees, has employed any broker, finder, investment
banker or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to the Company
for any such fee or commission to be claimed by any person or entity. Any
such fees payable shall be paid by the Company Shareholders from the Merger
Consideration or the cash paid to the Company Shareholders as outlined in
Section 1.3(b).
2.17 Books and Records. The books of account, minute books, stock
record books, and other material records of the Company, all of which have
been made available to Parent, are complete and correct in all material
respects and have been maintained in accordance with reasonable business
practices. The minute books of the Company contain accurate and complete
records of all formal meetings held of, and corporate action taken by, the
directors and officers, the managers and committees of the managers of the
Company. At the Closing, all of those books and records will be in the
possession of the Company.
2.18 Business Generally; Accuracy of Information. No representation or
warranty made by the Company in this Agreement, the Company Disclosure
Schedule, or in any document, agreement or certificate furnished or to be
furnished to Parent at the Closing by or on behalf of the Company in
connection with any of the transactions contemplated by this Agreement
contains or will contain any untrue statement of material fact or omit or will
omit to state any material fact necessary in order to make the statements
herein or therein not misleading in light of the circumstances in which they
are made, and all of the foregoing completely and correctly present the
information required or purported to be set forth herein or therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE MERGER SUBSIDIARY
Parent and the Merger Subsidiary represent and warrant to the Company as
follows:
3.1 Disclosure Schedule. The disclosure schedule attached hereto as
Exhibit 3.1 (the "Parent Disclosure Schedule") is divided into sections that
correspond to the sections of this Article 3. The Parent Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties
set forth in the remaining sections of this Article 3.
3.2 Corporate Organization, Standing and Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Utah; and Merger Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. Each of Parent and Merger Subsidiary has all corporate power
and authority to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and Merger Subsidiary. Parent owns all of the
outstanding capital stock of Merger Subsidiary. The Parent Disclosure Schedule
contains a list of all jurisdictions in which the Parent and Merger Subsidiary
are qualified or licensed to do business and includes complete and correct
copies of the Parent's and Merger Subsidiary's articles of incorporation and
bylaws. Other than the Merger Subsidiary and Reflect Scientific, Inc., a
California corporation and a wholly-owned subsidiary of the Parent, neither
the Parent nor the Merger Subsidiary owns or controls any capital stock of any
corporation or any interest in any partnership, joint venture or other entity.
3.3 Authorization. Each of Parent and the Merger Subsidiary has all
the requisite corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated herein. The Board of Directors of
Parent and the Merger Subsidiary, and Parent as the sole shareholder of the
Merger Subsidiary, have taken all action required by law, their respective
articles of incorporation and bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein. This Agreement is the valid and binding
legal obligation of Parent and the Merger Subsidiary enforceable against each
of them in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
that affect creditors' rights generally.
3.4 Capitalization. The authorized capital securities of the Parent
and Merger Subsidiary are set forth in the Parent Disclosure Schedule. The
number of shares of Parent Common Stock, as of the date of this Agreement and
as set forth in the Parent Disclosure Schedule, represent all of the issued
and outstanding capital securities of the Parent. All issued and outstanding
shares of Parent Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are without, and were not issued in violation of,
preemptive rights. Other than as set forth on the Parent Disclosure Schedule,
there are no shares of Parent Common Stock or other equity securities of
Parent outstanding or any securities convertible into or exchangeable for such
interests, securities or rights. Other than as set forth on the Parent
Disclosure Schedule and pursuant to this Agreement, there is no subscription,
option, warrant, call, right, contract, agreement, commitment, understanding
or arrangement to which Parent is a party, or by which it is bound, with
respect to the issuance, sale, delivery or transfer of the capital securities
of Parent, including any right of conversion or exchange under any security or
other instrument.
3.5 Non-Contravention. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated herein will:
(a) violate any provision of the articles of incorporation or
bylaws of Parent or the Merger Subsidiary; or
(b) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to, any right
of termination, cancellation, imposition of fees or penalties under, any
debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement
or obligation to which Parent or the Merger Subsidiary is a party or by
which Parent or the Merger Subsidiary or any of their respective
properties or assets is or may be bound;
(c) result in the creation or imposition of any Encumbrance upon
any property or assets of Parent or the Merger Subsidiary under any
debt, obligation, contract, agreement or commitment to which Parent or
the Merger Subsidiary is a party or by which Parent or the Merger
Subsidiary or any of their respective assets or properties is or may be
bound; or
(d) violate any Law of any Authority.
3.6 Consents and Approvals. No Consent is required by any person or
entity, including without limitation any Authority, in connection with the
execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement, or the consummation of the transactions contemplated herein, other
than any Consent which, if not made or obtained, will not, individually or in
the aggregate, have a Material Adverse Effect on the business of Parent or
Merger Subsidiary.
3.7 Valid Issuance. The Parent Common Stock to be issued in
connection with the Merger will be duly authorized and, when issued, delivered
and paid for as provided in this Agreement, will be validly issued, fully paid
and non-assessable.
3.8 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company
accurate and complete copies (excluding copies of exhibits) of each
report, registration statement and definitive proxy and information
statements filed by Parent with the SEC (collectively, with all
information incorporated by reference therein or deemed to be
incorporated by reference therein, the "Parent SEC Documents"). All
statements, reports, schedules, forms and other documents required to
have been filed by Parent with the SEC have been so filed on a timely
basis. As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing): (I) each of the Parent SEC Documents complied in
all material respects with the applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the
Parent SEC Documents: (I) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes
to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-QSB of the SEC); and (iii) fairly present, in
all material respects, the consolidated financial position of Parent and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of operations of Parent and its consolidated
subsidiaries for the periods covered thereby. All adjustments
considered necessary for a fair presentation of the financial statements
have been included.
3.9 No Liabilities. Parent does not have any Liabilities, except for
(I) Liabilities expressly stated in the most recent balance sheet included in
the Parent SEC Documents or the notes thereto, or (ii) Liabilities which do
not exceed $5,000 in the aggregate.
3.10 No Assets. As of the Closing, Parent will not have any assets or
operations of any kind, except as identified in the most recent balance sheet
and notes thereto included in the Parent SEC Documents or the Parent
Disclosure Schedule. Except as set forth in the Parent Disclosure Schedule,
Parent has good and marketable title to all of its Assets, free and clear of
any and all Liens, other than (I) liens securing specific Liabilities shown on
the Balance Sheet with respect to which no breach, violation or default
exists; (ii) mechanics', carriers', workers' or other like liens arising in
the ordinary course of business; (iii) minor imperfections of title that do
not individually or in the aggregate, impair the continued use and operation
of the Assets to which they relate in the operation of Parent as currently
conducted; and (iv) liens for current taxes not yet due and payable or being
contested in good faith by appropriate proceedings ("Permitted Liens").
3.11 Absence of Certain Changes. Except as set forth in the Parent SEC
Documents, Parent has owned and operated its assets, properties and business
in the ordinary course of business and consistent with past practice. Without
limiting the generality of the foregoing, subject to the aforesaid exceptions,
Parent has not experienced any change that has had or could reasonably be
expected to have a Material Adverse Effect on the Parent.
3.12 Litigation. Except as disclosed in the Parent SEC Documents,
there is no legal, administrative, arbitration, or other proceeding, suit,
claim or action of any nature or investigation, review or audit of any kind,
or any judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled, or, to the knowledge of the Parent or the Merger Subsidiary,
threatened or contemplated by or against or involving the Parent, its assets,
properties or business or its directors, officers, agents or employees (but
only in their capacity as such), whether at law or in equity, before or by any
person or entity or Authority, or which questions or challenges the validity
of this Agreement or any action taken or to be taken by the parties hereto
pursuant to this Agreement or in connection with the transactions contemplated
herein.
3.13 Contracts and Commitments; No Default. The Parent is not a party
to, nor are any of its Assets bound by, any contract (a "Parent Contract")
that is not disclosed in the Parent SEC Documents. Except as disclosed in the
Parent SEC Documents, none of the Parent Contracts contains a provision
requiring the consent of any party with respect to the consummation of the
transactions contemplated by this Agreement. The Parent is not in breach,
violation or default, however defined, in the performance of any of its
obligations under any of the Parent Contracts, and no facts and circumstances
exist which, whether with the giving of due notice, lapse of time, or both,
would constitute such breach, violation or default thereunder or thereof, and,
to the knowledge of the Parent, no other parties thereto are in a breach,
violation or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of
time, or both, would constitute such a breach, violation or default thereunder
or thereof.
3.14 No Broker or Finder. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Parent.
3.15 Intercompany And Affiliate Transactions; Insider Interests.
Except as expressly identified in the Parent SEC Documents or in the Consent
of Directors of Parent approving the Merger which has been executed and
provided to the Company prior to execution, there are, and during the last two
years there have been, no transactions, agreements or arrangements of any
kind, direct or indirect, between the Parent, on the one hand, and any
director, officer, employee, stockholder, or affiliate of the Parent, on the
other hand, including, without limitation, loans, guarantees or pledges to, by
or for the Parent or from, to, by or for any of such persons, that are
currently in effect.
3.16 Compliance with Law; Permits and Other Operating Rights. Except
as set forth in the Parent Disclosure Schedule, the Assets, properties,
business and operations of Parent are and have been in compliance in all
respects with all Laws applicable to the Parent's assets, properties, business
and operations, except where the failure to comply would not have a Material
Adverse Effect. Parent possesses all material permits, licenses and other
authorizations from all Authorities necessary to permit it to operate its
business in the manner in which it presently is conducted and the consummation
of the transactions contemplated by this Agreement will not prevent Parent
from being able to continue to use such permits and operating rights. Parent
has not received notice of any violation of any such applicable Law, and is
not in default with respect to any order, writ, judgment, award, injunction or
decree of any Authority.
3.17 Business Generally; Accuracy of Information. No representation or
warranty made by Parent or Merger Subsidiary in this Agreement, the Parent
Disclosure Schedule, or in any document, agreement or certificate furnished or
to be furnished to the Company at the Closing by or on behalf of Parent or
Merger Subsidiary in connection with any of the transactions contemplated by
this Agreement contains or will contain any untrue statement of material fact
or omit or will omit to state any material fact necessary in order to make the
statements herein or therein not misleading in light of the circumstances in
which they are made, and all of the foregoing completely and correctly present
the information required or purported to be set forth herein or therein.
ARTICLE 4
COVENANTS OF THE PARTIES
4.1 Conduct of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Company and Parent will each conduct its business and operations according to
its ordinary and usual course of business consistent with past practices.
Without limiting the generality of the foregoing, and, except as otherwise
expressly provided in this Agreement or as otherwise disclosed on the Parent
Disclosure Schedule or Company Disclosure Schedule, respectively, prior to the
Closing Date, without the prior written consent of the other party, not to be
unreasonably delayed, Parent and the Company will not:
(a) amend its articles of incorporation or bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock of any class, or securities convertible into capital stock
of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(d) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, redeem or otherwise acquire any shares of
its capital stock or other securities, alter any term of any of its
outstanding securities;
(e) (I) except as required under any employment agreement,
increase in any manner the compensation of any of its directors,
officers or other employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or permitted
by any existing plan, agreement or arrangement to any such director,
officer or employee, whether past or present; or (iii) commit itself to
any additional pension, profit-sharing, bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or to any employment agreement or
consulting agreement (arising out of prior employment ) with or for the
benefit of any person, or, except to the extent required to comply with
applicable law, amend any of such plans or any of such agreements in
existence on the date of this Agreement;
(f) hire any additional personnel;
(g) incur, assume, suffer or become subject to, whether directly
or by way of guarantee or otherwise, any Liabilities which, individually
or in the aggregate, exceed $10,000 in the case of Parent or $5,000 in
the case of the Company;
(h) make or enter into any commitment for capital expenditures
in excess of $10,000 in the case of Parent or $5,000 in the case of the
Company;
(I) pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of
its officers or directors or any affiliate or associate of any of its
officers or directors;
(j) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment, or take any action or
omit to take any action which will cause a breach, violation or default
(however defined) under any contract, except in the ordinary course of
business and consistent with past practice;
(k) acquire any of the business or assets of any other person or
entity;
(l) permit any of its current insurance (or reinsurance)
policies to be cancelled or terminated or any of the coverage thereunder
to lapse, unless simultaneously with such termination, cancellation or
lapse, replacement policies providing coverage equal to or greater than
coverage remaining under those cancelled, terminated or lapsed are in
full force and effect;
(m) enter into other material agreements, commitments or
contracts not in the ordinary course of business or in excess of current
requirements;
(n) settle or compromise any suit, claim or dispute, or
threatened suit, claim or dispute (other than any settlement or
compromise having no effect upon the Company, its assets, operations or
financial position); or
(o) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in
this Agreement untrue or incorrect in any material respect.
Nothing herein shall prevent the Company from operating its business in
the ordinary course and consistent with past practice.
4.2 Full Access. Throughout the period prior to Closing, each party
will afford to the other and its directors, officers, employees, counsel,
accountants, investment advisors and other authorized representatives and
agents, reasonable access to the facilities, properties, books and records of
the party in order that the other may have full opportunity to make such
investigations as it will desire to make of the affairs of the disclosing
party. Each party will furnish such additional financial and operating data
and other information as the other will, from time to time, reasonably
request, including without limitation access to the working papers of its
independent certified public accountants; provided, however, that any such
investigation will not affect or otherwise diminish or obviate in any respect
any of the representations and warranties of the disclosing party.
4.3 Confidentiality. Each of the parties hereto agrees that it will
not use, or permit the use of, any of the information relating to any other
party hereto furnished to it in connection with the transactions contemplated
herein ("Information") in a manner or for a purpose detrimental to such other
party or otherwise than in connection with the transaction, and that they will
not disclose, divulge, provide or make accessible (collectively, "Disclose"),
or permit the Disclosure of, any of the Information to any person or entity,
other than their respective directors, officers, employees, investment
advisors, accountants, counsel and other authorized representatives and
agents, except as may be required by judicial or administrative process or, in
the opinion of such party's counsel, by other requirements of Law; provided,
however, that prior to any Disclosure of any Information permitted hereunder,
the disclosing party will first obtain the recipients' undertaking to comply
with the provisions of this Section with respect to such information. The
term "Information" as used herein will not include any information relating to
a party that the party disclosing such information can show: (I) to have been
in its possession prior to its receipt from another party hereto; (ii) to be
now or to later become generally available to the public through no fault of
the disclosing party; (iii) to have been available to the public at the time
of its receipt by the disclosing party; (iv) to have been received separately
by the disclosing party in an unrestricted manner from a person entitled to
disclose such information; or (v) to have been developed independently by the
disclosing party without regard to any information received in connection with
this transaction. Each party hereto also agrees to promptly return to the
party from whom it originally received such information all original and
duplicate copies of written materials containing Information should the
transactions contemplated herein not occur. A party hereto will be deemed to
have satisfied its obligations to hold the Information confidential if it
exercises the same care as it takes with respect to its own similar
information.
4.4 Filings; Consents; Removal of Objections. Subject to the terms
and conditions herein provided, the parties hereto will use their best efforts
to take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not
in limitation of the foregoing, it is the intent of the parties to consummate
the transactions contemplated herein at the earliest practicable time, and
they respectively agree to exert commercially reasonable efforts to that end,
including without limitation: (I) the removal or satisfaction, if possible, of
any objections to the validity or legality of the transactions contemplated
herein; and (ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby.
4.5 Further Assurances; Cooperation; Notification.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, at any time after the Closing, at the
reasonable request of Parent and without further consideration, the
Company will execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as Parent
may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby.
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of any
event which it reasonably believes will or may result in a failure by
such party to satisfy the conditions specified in this Article 4.
4.6 Supplements to Disclosure Schedule. Prior to the Closing, each
party will supplement or amend its respective Disclosure Schedule with respect
to any event or development which, if existing or occurring at or prior to the
date of this Agreement, would have been required to be set forth or described
in the Disclosure Schedule or which is necessary to correct any information in
the Disclosure Schedule or in any representation and warranty of the Company
which has been rendered inaccurate by reason of such event or development.
4.7 Public Announcements. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein
without the prior written consent of the other parties, which consent will not
be unreasonably withheld or delayed; provided, however, that any of the
parties hereto may at any time make any announcements that are required by
applicable Law so long as the party so required to make an announcement
promptly upon learning of such requirement notifies the other parties of such
requirement and discusses with the other parties in good faith the exact
proposed wording of any such announcement.
4.8 Satisfaction of Conditions Precedent. Each party will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to them, and to cause the
transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all material consents and
authorizations of third parties and to make filings with, and give all notices
to, third parties that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
4.9 Waiver of Dissenters Rights. The Company shall use its best
efforts to obtain from all holders of Company Common Stock a written consent
to the Merger for purposes of effecting such holders' waiver of their rights
to dissent from the Merger and to be paid the fair value of their Company
Common Stock in accordance with Sections 1300 to 1313 of the California
Corporations Code.
4.10 Excluded Assets. Prior to the Effective Time, the Company shall
transfer those certain assets described on Schedule 4.10, attached hereto, out
of the Company and such assets are to be excluded from the Merger.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE PARENT
AND MERGER SUBSIDIARY
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Parent and Merger Subsidiary to effect the transactions
contemplated herein will be subject to the satisfaction at or prior to the
Closing, or waiver by Parent, of each of the following conditions:
5.1 Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement, including without
limitation in the Company Disclosure Schedule initially delivered to Parent as
Exhibit 2.1 (and not including any changes or additions delivered to Parent
pursuant to Section 4.6), will be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of such time, except
for changes specifically permitted or contemplated by this Agreement, and
except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they will be true and
correct at the Closing with respect to such date or period.
5.2 Performance. The Company will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Company on
or prior to the Closing.
5.3 Required Approvals and Consents.
(a) All action required by law and otherwise to be taken by the
Company Shareholders to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and Parent will have received copies
thereof.
5.4 Agreements and Documents. Parent and Merger Subsidiary will have
received the following agreements and documents, each of which will be in full
force and effect:
(a) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections
5.1, 5.2, 5.3, 5.5, 5.6 and 5.7 have been duly satisfied;
(b) a Merger written consent in the form of Exhibit 5.4(b)
attached hereto executed by all of the holders of the outstanding shares
of Company Common Stock; and
(c) an Investment Letter in the form of Exhibit 5.4(c) attached
hereto and incorporated herein by reference signed by each of the Company
Shareholders.
(d) the Employment Agreements in the form of Exhibit 5.4(d)
attached hereto and incorporated herein by referenced signed by Xxxx X.
Xxxx, Xxxxxxxxx X. Xxxx and Xxxxxxxx X. Xxxxxxxx.
5.5 Adverse Changes. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of the
Company since March 31, 2006, except as set forth on Schedule 5.5 attached
hereto.
5.6 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will
have been instituted or threatened which delays or questions the validity or
legality of the transactions contemplated hereby or which, if successfully
asserted, would, in the reasonable judgment of Parent, individually or in the
aggregate, otherwise have a Material Adverse Effect on the Company's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
5.7 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby
or any of the conditions to the consummation of such transaction.
5.8 Appropriate Documentation. The Parent will have received, in a
form and substance reasonably satisfactory to Parent, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 5 as Parent may
reasonably request.
5.9 Funding Condition. The Parent shall have raised gross proceeds of
$1,000,000 from the sale of 1,000,000 shares of its "restricted" common stock
at a price of $1.00 per share to "accredited investors" as outlined in its
Confidential Private Placement Offering Memorandum dated April 18, 2006,
through the "best efforts" of Alpine Securities Corporation, a registered
broker/dealer, or such other broker/dealers as the Parent shall engage for
such offering, by June 30, 2006.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
Notwithstanding anything in this Agreement to the contrary, the
obligation of the Company to effect the transactions contemplated herein will
be subject to the satisfaction at or prior to the Closing of each of the
following conditions:
6.1 Representations and Warranties True. The representations and
warranties of Parent contained in this Agreement will be true, complete and
accurate in all material respects as of the date when made and at and as of
the Closing, as though such representations and warranties were made at and as
of such time, except for changes permitted or contemplated in this Agreement,
and except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they will be true and
correct at the Closing with respect to such date or period.
6.2 Performance. The Parent will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Parent at or
prior to the Closing.
6.3 Required Approvals and Consents.
(a) All action required by law and otherwise to be taken by the
directors and stockholders of the Parent to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and the Company will have received copies
thereof.
6.4 Agreements and Documents. The Company will have received the
following agreements and documents, each of which will be in full force and
effect:
(a) a certificate executed on behalf of Parent by its Chief
Executive Officer confirming that the conditions set forth in Sections
6.1, 6.2, 6.3, 6.5, 6.6 and 6.7 have been duly satisfied;
(b) resolutions of the board of directors of Parent and the
board of directors and sole stockholder of Merger Subsidiary in the form
of Exhibit 6.4(b) attached hereto, approving the transactions
contemplated by this Agreement, including the Merger and the issuance of
the Merger Consideration;
6.5 Adverse Changes. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of Parent
since December 31, 2005.
6.6 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will
have been instituted or threatened which delays or questions the validity or
legality of the transactions contemplated hereby or which, if successfully
asserted, would, in the reasonable judgment of the Company, individually or in
the aggregate, otherwise have a Material Adverse Effect on Parent's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
6.7 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby
or any of the conditions to the consummation of such transaction.
6.8 Appropriate Documentation. The Company will have received, in a
form and substance reasonably satisfactory to Company, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 6 as the Company may
reasonably request.
6.9 Payment. The amounts as outlined in Section 1.3(b) to be paid as
consideration to the Company Shareholders will have been paid
6.10 Employment Agreements. Contemporaneously with the signing of this
Agreement and dated the Closing Date, Parent will have separately delivered to
and separately executed the Employment Agreements in the form of Exhibit
5.4(d) attached hereto and incorporated herein by referenced signed by Xxxx X.
Xxxx, Xxxxxxxxx X. Xxxx and Xxxxxxxx X. Xxxxxxxx.
6.11 Interim Financing. The Company will have received and executed
with Parent a separate agreement providing for interim financing in the amount
of Two Hundred Thousand Dollars ($200,000.00). Such agreement shall be in a
form substantially similar to that attached hereto as Exhibit 6.11.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Closing by the written consent of the Company and
Parent.
7.2 Termination by Either the Company or Parent. This Agreement may
be terminated by either the Company or Parent if the Closing is not
consummated by the Termination Date (provided that the right to terminate this
Agreement under this Section 7.2 will not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Closing to occur on or before such date).
7.3 Termination by Parent. This Agreement may be terminated at any
time prior to the Closing by Parent if any of the conditions provided for in
Article 5 have not been met or waived by Parent in writing prior to the
Closing.
7.4 Termination by the Company. This Agreement may be terminated
prior to the Closing by action of the Company if any of the conditions
provided for in Article 6 have not been met or waived by the Company in
writing prior to the Closing.
7.5 Procedure and Effect of Termination. In the event of termination
of this Agreement and abandonment of the transactions contemplated hereby by
the Company or Parent pursuant to this Article 7, written notice thereof will
be given to all other parties and this Agreement will terminate and the
transactions contemplated hereby will be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided
herein:
(a) Each of the parties will, upon request, redeliver all
documents, work papers and other material of the other parties relating
to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same;
(b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action
or omission of such party or any representative, agent, employee or
independent contractor thereof; and
(c) All filings, applications and other submissions made
pursuant to the terms of this Agreement will, to the extent practicable,
be withdrawn from the agency or other person to which made.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Expenses. The Parent and the Company will each bear their own
costs and expenses relating to the transactions contemplated hereby, including
without limitation, fees and expenses of legal counsel, accountants,
investment bankers, brokers or finders, printers, copiers, consultants or
other representatives for the services used, hired or connected with the
transactions contemplated hereby.
8.2 Survival. The representations and warranties of the parties shall
survive the Closing for a period of three (3) years.
8.3 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended or modified by the parties hereto at any time with
respect to any of the terms contained herein; provided, however, that all such
amendments and modifications must be in writing duly executed by all of the
parties hereto.
8.4 Waiver of Compliance; Consents. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial
exercise of a right or remedy will preclude any other or further exercise
thereof or of any other right or remedy hereunder. Whenever this Agreement
requires or permits the consent by or on behalf of a party, such consent will
be given in writing in the same manner as for waivers of compliance.
8.5 No Third Party Beneficiaries. Nothing in this Agreement will
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
8.6 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (I) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date
of transmission, if sent by facsimile, telecopy, telegraph, telex or other
similar telegraphic communications equipment, or to such other person or
address as the Company will furnish to the other parties hereto in writing in
accordance with this subsection.
If to the Company prior to the Merger: With a copy to:
Cryomastor, Inc. Xxxxxxx X. Xxxxxxxxxx, Esq.
P. O. Box 1418 Sweeney, Mason, Xxxxxx &
Xxxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxxxxx, a PLC
or 000 Xxxxxxxxxx Xxxxxx; Xxxxx 000X
0000 Xxxxxxx Xxxx Xxx Xxxxx, Xxxxxxxxxx 00000
Xxxxxxxxx, Xxxxxxxxxx 00000 Fax: (000) 000-0000
Attn: Xxxx X. Xxxx, CEO
Fax: (000) 000-0000
Xxxxxxxx X. Xxxxxxxx Xxxx X. Xxxx
P. O. Box 1175 P. O. Box 1418
0000 Xxxxxx Xxxxx Xxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Tres Xxxxx, Xxxxxxxxxx 00000-0000 or
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
or to such other person or address as either the Company or the Company
Shareholders will furnish to the other parties hereto in writing in accordance
with this subsection.
If to any Company Shareholder following the Merger, to the address set
forth in the representation letter executed and delivered by such shareholder
pursuant to Section 5.4(b) hereto.
If to the Parent or Merger Subsidiary With a copy to:
prior to the Merger: Xxxxxxx X. Xxxxxxxxxx, Esq.
Reflect Scientific, Inc. Xxxxxxxxxx & Xxxxxxxxxx
000 Xxxxx Xxxxx Xxxxxx 455 East 000 Xxxxx #000
Xxxxxxxx Xxxx, XX 00000 Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Office of the President Fax: 000-000-0000
Fax: 000- 000-0000
or to such other person or address as Parent will furnish to the other parties
hereto in writing in accordance with this subsection.
8.7 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder will be assigned
(whether voluntarily, involuntarily, by operation of law or otherwise) by any
of the parties hereto without the prior written consent of the other parties.
8.8 Governing Law. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the
internal substantive laws of the State of California (without regard to the
laws of conflict that might otherwise apply) as to all matters, including
without limitation matters of validity, construction, effect, performance and
remedies.
8.9 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
8.10 Headings. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and will
not constitute a part hereof.
8.11 Entire Agreement. This Agreement, the Disclosure Schedule and the
exhibits and other writings referred to in this Agreement or in the Disclosure
Schedule or any such exhibit or other writing are part of this Agreement,
together they embody the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated by this Agreement and
together they are referred to as this "Agreement" or the "Agreement." There
are no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transaction or transactions
contemplated by this Agreement. Provisions of this Agreement will be
interpreted to be valid and enforceable under applicable Law to the extent
that such interpretation does not materially alter this Agreement; provided,
however, that if any such provision becomes invalid or unenforceable under
applicable Law such provision will be stricken to the extent necessary and the
remainder of such provisions and the remainder of this Agreement will continue
in full force and effect.
8.12 Definition of Material Adverse Effect. "Material Adverse Effect"
with respect to a party means a material adverse change in or effect on the
business, operations, financial condition, properties or liabilities of that
party; provided, however, that a Material Adverse Effect will not be deemed to
include (I) changes as a result of the announcement of this transaction, (ii)
events or conditions arising from changes in general business or economic
conditions or (iii) changes in generally accepted accounting principles.
This space intentionally left blank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
REFLECT SCIENTIFIC, INC. CRYOMASTOR, INC.
By: /s/Xxx Xxxxx By: /s/ Xxxx Xxxx
Xxx Xxxxx, President By: Xxxx Xxxx
Its: CEO
CRYOMASTOR ACQUISITION CORP. DAIN FAMILY REVOCABLE TRUST U/A
DATED 12/17/2001
By: /s/Xxx Xxxxx By: /s/ Xxxx X. Xxxx
Xxx Xxxxx, President Xxxx X. Xxxx, Co-Trustee
By: /s/Xxxxxxxxx X. Xxxx
Xxxxxxxxx X. Xxxx, Co-Trustee
/s/Xxxxxxxx X. Xxxxxxxx /s/Xxxx X. Xxxx
Xxxxxxxx X. Xxxxxxxx, Individually Xxxx X. Xxxx, Individually
EXHIBITS
EXHIBIT 2.1
Company Disclosure Schedule
EXHIBIT 3.1
Parent Disclosure Schedule
EXHIBIT 5.4(b)
Written Consent of the Company and all Company Shareholders
UNANIMOUS WRITTEN CONSENT
OF BOARD OF DIRECTORS AND SHAREHOLDERS OF
CRYOMASTOR, INC.
The undersigned, being all of the directors and shareholders of
CRYOMASTOR, INC., a California corporation, acting pursuant to the provisions
of Section 307 and 603 of the California Corporations Code, hereby unanimously
adopt the following resolutions:
APPROVAL OF AGREEMENT OF MERGER
WHEREAS, there has been presented to the undersigned a
form of Agreement of Merger (the "Agreement of
Merger") between REFLECT SCIENTIFIC, INC., a Utah
corporation ("RSI"), CRYOMASTOR ACQUISITION
CORPORATION, a California corporation ("CAC"), and
this corporation pursuant to which CAC would be merged
with and into this corporation and the shares of
outstanding common stock of this corporation would be
exchanged for $700,000 in cash, 3,000,000 shares of
the common stock of RSI and an additional 2,000,000
shares of common stock of RSI, subject to certain
conditions set forth in the Agreement of Merger (the
"Merger"). Additionally, as part of the Merger, RSI
would assume and pay the balance of the corporation's
debt to Xxxx X. Xxxx;
WHEREAS, it is deemed in the best interests of this
corporation and its shareholders that the terms and
conditions of the Agreement of Merger be approved and
performed and the Merger effected;
RESOLVED, that the Agreement of Merger is hereby
approved as to form;
RESOLVED FURTHER, that the Merger, under the terms and
conditions set forth in the Agreement of Merger, is
hereby approved;
RESOLVED FURTHER, that the execution and delivery of
the Agreement of Merger, subject to such changes and
modifications as the officers of this corporation may
consider necessary or appropriate, is hereby
authorized and approved; and
RESOLVED FURTHER, that upon the execution and delivery
of the Agreement of Merger, the officers of the
Company, and each of them, are hereby authorized to
execute such other agreements and certificates,
instruments and documents as may be necessary or
appropriate to consummate the transactions
contemplated by the Agreement of Merger.
Dated: April 17, 2006
_/s/ Xxxx X. Xxxx
XXXX X. XXXX, Shareholder and Director
__/s/ Xxxxxxxx X. Xxxxxxxx
XXXXXXXX X. XXXXXXXX, Shareholder
and Director
__/s/ Xxxxxxxxx X. Xxxx
XXXXXXXXX X. XXXX, Director
Exhibit 5.4(c)
Investment Letters signed by all of the Company Shareholders
Atlas Stock Transfer
0000 Xxxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxx Xxxx, President
Reflect Scientific, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxx Xxxxx, President
Re: Exchange of shares of common stock of Cryomastor, Inc., a
California corporation ("Cryomastor") for shares of common stock
of Reflect Scientific, Inc., a Utah corporation ("Reflect" or the
"Company")
Gentlemen:
The undersigned represents and warrants the following as a
condition to the closing of the Agreement and Plan of Merger (the "Merger
Agreement") by and between Cryomastor, Reflect and Reflect's wholly-owned
subsidiary, Cryomastor Acquisition Corp., a California corporation
("Cryomastor Acquisition"):
(I) He/It is not relying on any representation or warranty of
Reflect whatsoever, except those representations and
warranties contained in the Merger Agreement;
(ii) He/It has conducted his/her/its own investigation of the
risks and merits of an investment in Reflect, and to the
extent desired, including, but not limited to a review of
Reflect's books and records, financial and otherwise, its
annual, quarterly and current reports and any registration
statements filed with the Securities and Exchange Commission
and has had the opportunity to discuss this documentation
with the directors and executive officers of Reflect; to ask
questions of these directors and executive officers; and
that to the extent requested, all such questions have been
answered to his/her/its satisfaction;
(iii) He/It, by reason of the education, experience, business
acumen or other educational factors related to his/her/its
principals, is a "sophisticated investor," or an "accredited
investor," as those terms are known or defined under
applicable United States securities laws, rules and
regulations, and/or is fully capable of evaluating the risks
and merits associated with the execution of the Merger
Agreement and the acquisition of Reflect's common stock,
without qualification;
(iv) He/It has full power and authority to execute and deliver
the Merger Agreement, without qualification;
(v) He/It is acquiring the common stock for his/her/its account,
and not for the account of or in concert with any other
person or entity, and there are no arrangements,
understandings or agreements, written or oral, respecting
the subsequent resale of any of the common stock; and
(vi) He/It is not an "affiliate" of Reflect.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
___________________________________________________
___________________________________________________
___________________________________________________
If joint tenancy with full rights of
survivorship is desired, put the initials
JTRS after your names.
Thank you very much.
Dated this ________ day of _________, 2006.
Very truly yours,
__________________________________
__________________________________
(title or capacity)
Exhibit 5.4(d)
Employment Agreements
The Employment Agreements are attached as Exhibit 6.10 hereto.
Exhibit 6.4(b)
Consent of Directors of Parent
and
Consent of Directors and Sole Stockholder of Subsidiary
CONSENT OF DIRECTORS
OF
REFLECT SCIENTIFIC, INC.
The undersigned, being all of the duly elected and incumbent
directors of Reflect Scientific, Inc., a Utah corporation (the "Company"),
acting pursuant to Section16-10a-821 of the Utah Revised Business Corporation
Act, do hereby unanimously consent to and adopt the following resolutions,
effective as of the date hereof unless indicated otherwise:
RECITALS
WHEREAS, the Company has agreed to enter into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which the Company has
formed a wholly-owned subsidiary under the laws of the State of California
("Subsidiary") and Subsidiary and Cryomastor, Inc., a California corporation
("Cryomastor"), will merge (the "Merger"); and
WHEREAS, the Merger Agreement provides, among other things, that
(I) Cryomastor shall continue as the surviving company; (ii) the aggregate
total of the issued and outstanding shares of capital stock of Cryomastor (the
"Cryomastor Common Stock") shall be converted into an aggregate total of
3,000,000 shares of common stock of the Company (the "Reflect Common Stock");
and (iii) there will be no other outstanding securities of Cryomastor at the
Effective Time, as defined in the Merger Agreement; and
WHEREAS, the Merger shall be consummated by filing a short form
merger agreement and certificate of the officers of the constituent entities
with the Secretary of State of the State of California; and
WHEREAS, during the course of its deliberations regarding the
Merger, the Board of Directors has considered a number of factors relevant to
the Merger, such as Cryomastor's business history, financial condition and
intellectual property, the terms of the Merger, and historical information
concerning Cryomastor's business, financial performance and condition,
operations, technology, management and competitive position; and has also
considered a number of the Company's key needs, including, but not limited to:
* the Company's desire to expand its services offerings, either
through internal development or by licensing or acquiring
complementary or new technologies; and
* the Company's desire to attract and retain talented technical
personnel to compliment these new developments or technologies;
and
WHEREAS, in addition, the Board has assessed the value of the
Merger to the Company's shareholders in light of various factors and potential
benefits of the Merger, including:
* the current intrinsic value of the combined companies;
* the strategic and financial advantages to the combined businesses
that may result from the Merger, such as potential improvements in
their ability to access financial markets and acquisition
purposes;
* the potential for future appreciation of the Company's common
stock; and
* the potential risks associated with the Merger; and
WHEREAS, a condition of the Merger Agreement is the completion of
the sale by the Company of not less than 1,000,000 shares of its common stock
that are "restricted securities" as defined in Rule 144 of the Securities and
Exchange Commission (the "SEC"), to be offered at a price of $1.00 per share
for aggregate gross proceeds of $1,000,000 (the "Minimum Offering"), and then
with the offering continuing to no later than June 30, 2006, as the
combination of the Company, the Subsidiary and Cryomastor (the "Reorganized
Company"), for up to a maximum of 1,500,000 shares at a price of $1.00 per
share for aggregate gross proceeds of $1,500,000 (the "Maximum Offering")
(collectively, the "Offering");
WHEREAS, Alpine Securities Corporation, a registered broker/dealer
whose principal place of business is in Salt Lake City, Utah ("Alpine"), has
agreed to act as one of the Placement Agents for the Company in the aforesaid
Offering; and First Utah Bank has agreed to act as the Escrow Agent for the
proceeds of the Offering, to ensure that the funds that are required to be
paid to the shareholders and one creditor of Cryomastor under the Merger
Agreement are in fact paid by the Escrow Agent to such Cryomastor shareholders
and such creditor, as a condition to the closing of the Merger;
NOW THEREFORE, BE IT
RESOLVED, that the Company's action of forming a wholly-owned
subsidiary under the laws of the State of California, under the
name "Cryomastor Acquisition Corp." ("Subsidiary") for the sole
purpose of merging with Cryomastor is hereby adopted, ratified and
approved;
FURTHER, RESOLVED, that the Articles of Incorporation for
Subsidiary are as presented to a meeting of the Board of
Directors, a copy of which is attached hereto as Exhibit A, and
that Xxx Xxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxx were elected as
directors and executive officers of Subsidiary on incorporation,
and that Xxx Xxxxx was the incorporator therein;
FURTHER, RESOLVED, that the Company's action to subscribe to
purchase 1,000 shares of Subsidiary in consideration of expenses
paid by the Company for incorporation thereof, estimated at
$1,000, is hereby adopted, ratified and approved, and that the
directors and executive officers of the Company were and they
hereby are authorized to execute any and all documents required or
necessary to incorporate Subsidiary, to elect the directors and
executive officers and to subscribe for such shares;
FURTHER, RESOLVED, that Subsidiary merge with Cryomastor as
contemplated by the terms of the Merger Agreement;
FURTHER, RESOLVED, that the Merger Agreement, the Merger and the
transactions contemplated by the Merger Agreement are hereby
approved;
FURTHER RESOLVED, that it is hereby determined by the Board
that it is in the best interests of the Company and its
shareholders to complete the Merger with Cryomastor upon the
terms and subject to the conditions set forth in the Merger
Agreement, and it is hereby determined by the Board that the
Merger is advisable and fair to the Company and its
shareholders;
FURTHER RESOLVED, that the execution and delivery of the
Merger Agreement, subject to such changes and modifications
as the officers of the Company may consider necessary or
appropriate, is hereby authorized and approved, and the
officers of the Company are, and each of them hereby is,
authorized and directed to execute and deliver on behalf of
the Company the Merger Agreement and such other agreements
and such other certificates, instruments and documents as
may be necessary or appropriate to consummate the
transactions contemplated by the Merger (collectively, the
"Ancillary Documents"); and
FURTHER RESOLVED, that all prior actions by the officers of
the Company with respect to the preparation and negotiation
of the Merger Agreement, the Merger and the Ancillary
Documents, and otherwise effecting the purposes and intent
of the same, are hereby ratified, confirmed and approved;
and
FURTHER, RESOLVED, that Xxxxxxx X. Xxxxxxxxxx, Esq., be and he
hereby is authorized and directed to prepare a Confidential
Private Placement Memorandum (the "PPM) for the Offering outlined
above for the sale of the Company's shares to be offered only to
"accredited investors" as that term is defined in Rule 501 of
Regulation D of the SEC, pursuant to the PPM; that the shares to
be offered thereunder are hereby authorized to be offered, all in
accordance with the terms and provisions of the PPM; that any
officer is authorized to execute and deliver any documents
required to offer such shares or to comply with the Company's
obligations as outlined in the PPM; and that all shares be fully
paid on full payment and issuance;
FURTHER, RESOLVED, that the Participating Broker's Agreement of
the Company with Alpine is hereby adopted, ratified and approved,
and any officer is authorized to execute and deliver the same on
the Company's behalf; and
FURTHER, RESOLVED, that the Escrow Agreement of the Company with
First Utah Bank is hereby adopted, ratified and approved, and any
officer is authorized to execute and deliver the same on the
Company's behalf.
Dated: 4/18/2006 /s/ Xxx Xxxxx
Xxx Xxxxx
Dated: 4/18/2006 /s/ Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Dated: 4/18/2006 /s/ Xxx Xxxx
Xxx Xxxx
JOINT CONSENT OF DIRECTORS AND SOLE STOCKHOLDER
OF
CRYOMASTOR ACQUISITION CORP.
The undersigned, being all of the duly elected and incumbent
directors and the sole stockholder of Cryomastor Acquisition Corp., a
California corporation (the "Company"), acting pursuant to the provisions of
the General Corporation Law of the State of California and the Bylaws of the
Company, do hereby unanimously consent to and adopt the following resolutions,
effective as of the latest date hereof unless indicated otherwise:
RECITALS
WHEREAS, the Reflect Scientific, Inc., a Utah corporation and the
sole stockholder of the Company (the "Parent"), has agreed to enter into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which the
Parent was required to form the Company as a wholly-owned subsidiary under the
laws of the State of California, and pursuant to which the Company and
Cryomastor, Inc., a California corporation ("Cryomastor"), will merge (the
"Merger"); and
WHEREAS, the Merger Agreement provides, among other things, that
(I) Cryomastor shall continue as the surviving company; (ii) the aggregate
total of the issued and outstanding shares of capital stock of Cryomastor (the
"Cryomastor Common Stock") shall be converted into an aggregate total of
3,000,000 shares of common stock of the Parent (the "Reflect Common Stock");
and (iii) there will be no other outstanding securities of Cryomastor at the
Effective Time, as defined in the Merger Agreement; and
WHEREAS, the Merger shall be consummated by filing a short form
merger agreement and certificate of the officers of the constituent entities
with the Secretary of State of the State of California; and
WHEREAS, during the course of its deliberations regarding the
Merger, the Board of Directors has considered a number of factors relevant to
the Merger, such as Cryomastor's business history, financial condition and
intellectual property, the terms of the Merger, and historical information
concerning Cryomastor's business, financial performance and condition,
operations, technology, management and competitive position; and has also
considered a number of the Parent's key needs, including, but not limited to:
* the Parent's desire to expand its services offerings, either
through internal development or by licensing or acquiring
complementary or new technologies; and
* the Parent's desire to attract and retain talented technical
personnel to compliment these new developments or technologies;
NOW, THEREFORE, BE IT
FURTHER, RESOLVED, that the Company merge with Cryomastor as
contemplated by the terms of the Merger Agreement;
FURTHER, RESOLVED, that the Merger Agreement, the Merger and the
transactions contemplated by the Merger Agreement are hereby
approved;
FURTHER RESOLVED, that it is hereby determined by the Board
that it is in the best interests of the Company and its sole
shareholder to complete the Merger with Cryomastor upon the
terms and subject to the conditions set forth in the Merger
Agreement, and it is hereby determined by the Board that the
Merger is advisable and fair to the Company and its sole
shareholder;
FURTHER RESOLVED, that the execution and delivery of the
Merger Agreement, subject to such changes and modifications
as the officers of the Company may consider necessary or
appropriate, is hereby authorized and approved, and the
officers of the Company are, and each of them hereby is,
authorized and directed to execute and deliver on behalf of
the Company the Merger Agreement and such other agreements
and such other certificates, instruments and documents as
may be necessary or appropriate to consummate the
transactions contemplated by the Merger (collectively, the
"Ancillary Documents"); and
FURTHER RESOLVED, that all prior actions by the officers of
the Company with respect to the preparation and negotiation
of the Merger Agreement, the Merger and the Ancillary
Documents, and otherwise effecting the purposes and intent
of the same, are hereby ratified, confirmed and approved.
DIRECTORS:
Dated: 4/18/2006 /s/ Xxx Xxxxx
Xxx Xxxxx
Dated: 4/18/2006 /s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Dated: 4/18/2006 /s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
SOLE SHARHOLDER:
REFLECT SCIENTIFIC, INC.
By /s/ Xxx Xxxxx
Xxx Xxxxx, President
EXHIBIT 6.10
Employment Agreements
Employment Agreement
This Employment Agreement is effective as of ______________ between
Reflect Scientific, Incorporated ("Employer") and Xxxx X. Xxxx ("Employee").
Recitals
WHEREAS, the Employee has acquired expert and unique skills and
abilities and an extensive background in and knowledge of the Employer's
industry, specifically, in the area of cryogenic sciences and technologies;
and
WHEREAS, the Employer desires the services of the Employee, and is
therefore willing to engage his services on the terms and conditions stated
below; and
WHEREAS, the Employee desires to be employed by the Employer and is
willing to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
1. Employee's Duties and Authority. The Employer shall employ the Employee
as: Technical Director
2. Other Business Activities. During employment, the Employee shall
devote his/her work efforts to the performance of this Agreement and shall
not, without the Employer's prior written consent, render to others, services
for compensation, or engage in any other business activity that would
materially interfere with the performance of his duties under this Agreement.
Notwithstanding the foregoing, Employee shall be permitted to perform services
for All Temp Engineering, Inc., a California corporation ("All Temp
Engineering"), subject to the limitations set forth in Section 3, below, and
so long as such services do not materially interfere with the performance of
his duties under this Agreement.
2.1 Reasonable Time and Effort Required. During his/her employment,
the Employee shall devote such time, interest, and effort to the
performance of this Agreement as may be fair and reasonable.
3. Non-Competition During Employment. During the employment term, the
Employee shall not, in any fashion participate or engage in any activity or
other business competitive with the Employer's business. The Employee's
failure to comply with the provisions of the preceding sentence shall give the
Employer the right (in addition to all other remedies the Employer may have)
to terminate any benefits or compensation that the Employee may be otherwise
entitled to following termination of this Agreement. For purposes of this
Agreement, All Temp Engineering business is not considered a competing
business, provided that All Temp Engineering does not provide any products
that compete with the products encompassed by U. S. Patent No. 6,804,974 or
those to be developed by Employer as envisioned by Cryomastor, Inc., a
California corporation and predecessor of Employer.
4. Term of Employment. This Agreement is not a guaranty of uninterrupted
employment. The term of this Agreement shall extend Thirty Six Months (36
months) from the date of the last signature affixed hereto unless the Employee
is terminated as provided in this Agreement or this Agreement is extended by
mutual written consent of the parties.
5. Place of Employment. During the employment term the Employee shall
perform the services required at the Employer's offices, located in Hollister,
California. The Employee acknowledges that the Employer may from time to time
require the Employee to travel temporarily to other locations on the
Employer's business.
6. Salary. The Employer shall pay a basic salary to the Employee at the
rate of $175,000 per year payable in equal biweekly installments.
6.1 Incentive Compensation. . In addition to the basic salary provided
for above, the Employer shall pay to Employee incentive compensation
based upon the Company's earnings before interest and taxes ("EBIT"),
calculated in accordance with Generally Accepted Accounting Principles
("GAAP"). Annually, the Employee and the Employer shall develop an
operating plan ("Plan") for the Company's "Cryomastor" operations and
Employee shall receive incentive compensation based upon the percentage
achievement of the goals in the Plan. Employer shall maintain complete
and accurate financial and other records necessary to comply with this
Section 6.1. Employee shall have the right to, through independent
accountants of Employee's own choosing and at Employee's expense, to
audit the financial and other records of Employer at reasonable times,
at least once per fiscal year, to determine compliance with this Section
6.1.
7. Additional Benefits. The Employee shall receive the following benefits:
7.1 Vacation. Employee shall receive four (4) weeks annual vacation
time.
7.2 Medical/Health Insurance. For the first twelve (12) months of
employment, the Employee shall have access to Employer's group insurance
for Medical and Dental coverage at prevailing rates. Following this
period and providing the Employer achieves positive cash flow, the
Employer agrees to develop a co-pay plan where these rates are partially
or fully offset by Employer contribution.
8. Expenses. The Employer shall reimburse the Employee for reasonable
expenses incurred in connection with the Employee's performance of his/her
duties including travel expenses, food, and lodging while away from home,
pursuant to the Employer's reimbursement policies and Employee Handbook
guidelines.
9. Employee's Right of Ownership. All inventions conceived or developed by
the Employee during the term of this Agreement shall remain the property of
the Employer, provided, however, that as to such inventions with respect that
the equipment, supplies, facilities, or trade secret information of the
Employer was not used and do not relate to the business of the Employer or to
the Employer's actual or demonstrably anticipated research and development, or
that result from any work performed by the Employee for the Employer, shall
remain the property of the Employee.
10. Employer Termination
10.1 Termination For Cause. The Employer may terminate this Agreement
at any time without notice if the Employee commits any material act of
dishonesty, wrongfully discloses confidential information, is guilty of
gross carelessness or misconduct, or unjustifiably neglects his duties
under this Agreement, or acts in any way that has a direct, substantial,
and adverse effect on the Employer's reputation.
10.2 Involuntary Termination of Agreement. The Employer may terminate
this Agreement without cause after the first year of the term, if the
business fails to attain its specific business goals, objectives or
milestones as specified in the Plan and the Employer's board of
directors has determined that it should discontinue operations;
otherwise, Employer may terminate Employee without cause after the first
year of the term if Employer pays severance in the amount of six (6)
months salary.
11. Employee Termination
11.1 Termination on Resignation. The Employee may terminate this
Agreement by giving the Employer six months' prior written notice of
resignation.
11.2 Termination on Disability. If, during the period of employment,
the Executive becomes unable due to mental or physical illness or injury
to perform his duties under this Agreement in his normal and regular
manner, this Agreement shall be then terminated.
11.3 Termination on Death. If the Employee dies during the period of
employment this Agreement shall then be terminated.
11.4 Termination or Assignment on Sale, Merger or Change of Control.
In the event of a Winding Up, merger where the Employer is not the
surviving entity, a sale of all or substantially all of the Employer's
assets, or a sale of all or substantially all of the Cryomastor
operating assets, the Employer may, at its sole option (1) assign this
Agreement and all rights and obligations under it to any business entity
that succeeds to all or substantially all of the Employer's business
through that merger or sale of assets, or (2) on at least 30 days' prior
written notice to the Employee, terminate this Agreement effective on
the date of the merger or sale of assets.
12. Restrictive Covenants
12.1 Non-disclosure After Termination. Because of his/her employment
by the Employer, the Employee will have access to trade secrets and
confidential information about the Employer, its products, its
customers, and its methods of doing business. In consideration of
his/her access to this information, the Employee agrees that for a
period of five years after termination of his/her employment, he/she
will not disclose such trade secrets or confidential information.
12.2 Non-Competition After Termination. For a period of one year
following the termination of the Employee's employment, the Employee
shall not, directly or indirectly, as an employee, employer, consultant,
advisor, agent, principal, partner, officer, director or in any other
individual or representative capacity, engage or participate in any
business or activity that is competitive in any manner whatsoever with
the activities and business of the Employer; nor shall the Employee,
during the twelve months following termination of the Employee's
employment induce or attempt to induce any employee of the Employer to
leave such employ for the purpose of joining any organization in
competition with the Employer.
13. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be three arbitrators, one to be chosen
directly by each party at will, and the third arbitrator to be selected by the
two arbitrators so chosen. Each party shall pay the fees of the arbitrator
he/she selects and of his/her own attorneys, and the expenses of his/her
witnesses and all other expenses connected with presenting his/her case.
Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, administrative fees, the fee of the third
arbitrator, and all other fees and costs, shall be borne equally by the
parties. Notwithstanding the foregoing, the prevailing party in any
arbitration or action brought to enforce or interpret this Agreement shall be
entitled to an award of its attorney's fees and costs in addition to such
other relief as may be granted.
14. Entire Agreement. This Agreement contains the entire Agreement between
the parties and supersedes all prior oral and written Agreements,
understandings, commitments, and practices between the parties. No amendments
to this Agreement may be made except by a writing signed by both parties.
15. Choice of Law; Venue. The formation, construction, and performance of
this Agreement shall be construed in accordance with the laws of California.
Venue for any action brought to enforce or interpret this Agreement shall be
proper in the courts or arbitration venues within the State of California,
County of Santa Xxxxx.
16. Notices. Any notice to the Employer required or permitted under this
Agreement shall be given in writing to the Employer, either by personal
service or by registered or certified mail, postage prepaid, addressed to
Office of the President, Reflect Scientific, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx
Xxxx, Xxxxxxxxxx, 00000. Any such notice to the Employee shall be given in a
like manner and, if mailed, shall be addressed to the Employee at his/her home
address then shown in the Employer's files. For the purpose of determining
compliance with any time limit in this Agreement, a notice shall be deemed to
have been duly given (1) on the date of service, if served personally on the
party to whom notice is to be given, or (2) on the second business day after
mailing, if mailed to the party to whom the notice is to be given in the
manner provided in this section.
17. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
Executed by the parties as of the day and year first written above.
REFLECT SCIENTIFIC, INC.
Dated: ______________. By /s/
Its______________________________________
EMPLOYEE
Dated: ______________. /s/
Xxxx X. Xxxx
Employment Agreement
This Employment Agreement is effective as of ______________ between
Reflect Scientific, Incorporated ("Employer") and Xxxxxxxxx X. Xxxx
("Employee").
Recitals
WHEREAS, the Employee has acquired expert and unique skills and
abilities and an extensive background in and knowledge of the Employer's
industry, specifically, in the area of cryogenic sciences and technologies;
and
WHEREAS, the Employer desires the services of the Employee, and is
therefore willing to engage his services on the terms and conditions stated
below; and
WHEREAS, the Employee desires to be employed by the Employer and is
willing to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
1. Employee's Duties and Authority. The Employer shall employ the Employee
as: Manager, Sales and Marketing.
2. Other Business Activities. During employment, the Employee shall
devote his/her work efforts to the performance of this Agreement and shall
not, without the Employer's prior written consent, render to others, services
for compensation, or engage in any other business activity that would
materially interfere with the performance of his duties under this Agreement.
Notwithstanding the foregoing, Employee shall be permitted to perform services
for All Temp Engineering, Inc., a California corporation ("All Temp
Engineering"), subject to the limitations set forth in Section 3, below, and
so long as such services do not materially interfere with the performance of
his duties under this Agreement.
2.1 Reasonable Time and Effort Required. During his/her employment,
the Employee shall devote such time, interest, and effort to the
performance of this Agreement as may be fair and reasonable.
3. Non-Competition During Employment. During the employment term, the
Employee shall not, in any fashion participate or engage in any activity or
other business competitive with the Employer's business. The Employee's
failure to comply with the provisions of the preceding sentence shall give the
Employer the right (in addition to all other remedies the Employer may have)
to terminate any benefits or compensation that the Employee may be otherwise
entitled to following termination of this Agreement. For purposes of this
Agreement, All Temp Engineering business is not considered a competing
business, provided that All Temp Engineering does not provide any products
that compete with the products encompassed by U. S. Patent No. 6,804,974 or
those to be developed by Employer as envisioned by Cryomastor, Inc., a
California corporation and predecessor of Employer.
4. Term of Employment. This Agreement is not a guaranty of uninterrupted
employment. The term of this Agreement shall extend Thirty Six Months (36
months) from the date of the last signature affixed hereto unless the Employee
is terminated as provided in this Agreement or this Agreement is extended by
mutual written consent of the parties.
5. Place of Employment. During the employment term the Employee shall
perform the services required at the Employer's offices, located in Hollister,
California. The Employee acknowledges that the Employer may from time to time
require the Employee to travel temporarily to other locations on the
Employer's business.
6. Salary. The Employer shall pay a basic salary to the Employee at the
rate of $125,000 per year payable in equal biweekly installments.
6.1 Incentive Compensation. . In addition to the basic salary provided
for above, the Employer shall pay to Employee incentive compensation
based upon the Company's earnings before interest and taxes ("EBIT"),
calculated in accordance with Generally Accepted Accounting Principles
("GAAP"). Annually, the Employee and the Employer shall develop an
operating plan ("Plan") for the Company's "Cryomastor" operations and
Employee shall receive incentive compensation based upon the percentage
achievement of the goals in the Plan. Employer shall maintain complete
and accurate financial and other records necessary to comply with this
Section 6.1. Employee shall have the right to, through independent
accountants of Employee's own choosing and at Employee's expense, to
audit the financial and other records of Employer at reasonable times,
at least once per fiscal year, to determine compliance with this Section
6.1.
7. Additional Benefits. The Employee shall receive the following benefits:
7.1 Vacation. Employee shall receive four (4) weeks annual vacation
time.
7.2 Medical/Health Insurance. For the first twelve (12) months of
employment, the Employee shall have access to Employer's group insurance
for Medical and Dental coverage at prevailing rates. Following this
period and providing the Employer achieves positive cash flow, the
Employer agrees to develop a co-pay plan where these rates are partially
or fully offset by Employer contribution.
8. Expenses. The Employer shall reimburse the Employee for reasonable
expenses incurred in connection with the Employee's performance of his/her
duties including travel expenses, food, and lodging while away from home,
pursuant to the Employer's reimbursement policies and Employee Handbook
guidelines.
9. Employee's Right of Ownership. All inventions conceived or developed by
the Employee during the term of this Agreement shall remain the property of
the Employer, provided, however, that as to such inventions with respect that
the equipment, supplies, facilities, or trade secret information of the
Employer was not used and do not relate to the business of the Employer or to
the Employer's actual or demonstrably anticipated research and development, or
that result from any work performed by the Employee for the Employer, shall
remain the property of the Employee.
10. Employer Termination
10.1 Termination For Cause. The Employer may terminate this Agreement
at any time without notice if the Employee commits any material act of
dishonesty, wrongfully discloses confidential information, is guilty of
gross carelessness or misconduct, or unjustifiably neglects his duties
under this Agreement, or acts in any way that has a direct, substantial,
and adverse effect on the Employer's reputation.
10.2 Involuntary Termination of Agreement. The Employer may terminate
this Agreement without cause after the first year of the term, if the
business fails to attain its specific business goals, objectives or
milestones as specified in the Plan and the Employer's board of
directors has determined that it should discontinue operations;
otherwise, Employer may terminate Employee without cause after the first
year of the term if Employer pays severance in the amount of six (6)
months salary.
11. Employee Termination
11.1 Termination on Resignation. The Employee may terminate this
Agreement by giving the Employer six months' prior written notice of
resignation.
11.2 Termination on Disability. If, during the period of employment,
the Executive becomes unable due to mental or physical illness or injury
to perform his duties under this Agreement in his normal and regular
manner, this Agreement shall be then terminated.
11.3 Termination on Death. If the Employee dies during the period of
employment this Agreement shall then be terminated.
11.4 Termination or Assignment on Sale, Merger or Change of Control.
In the event of a Winding Up, merger where the Employer is not the
surviving entity, a sale of all or substantially all of the Employer's
assets, or a sale of all or substantially all of the Cryomastor
operating assets, the Employer may, at its sole option (1) assign this
Agreement and all rights and obligations under it to any business entity
that succeeds to all or substantially all of the Employer's business
through that merger or sale of assets, or (2) on at least 30 days' prior
written notice to the Employee, terminate this Agreement effective on
the date of the merger or sale of assets.
12. Restrictive Covenants
12.1 Non-disclosure After Termination. Because of his/her employment
by the Employer, the Employee will have access to trade secrets and
confidential information about the Employer, its products, its
customers, and its methods of doing business. In consideration of
his/her access to this information, the Employee agrees that for a
period of five years after termination of his/her employment, he/she
will not disclose such trade secrets or confidential information.
12.2 Non-Competition After Termination. For a period of one year
following the termination of the Employee's employment, the Employee
shall not, directly or indirectly, as an employee, employer, consultant,
advisor, agent, principal, partner, officer, director or in any other
individual or representative capacity, engage or participate in any
business or activity that is competitive in any manner whatsoever with
the activities and business of the Employer; nor shall the Employee,
during the twelve months following termination of the Employee's
employment induce or attempt to induce any employee of the Employer to
leave such employ for the purpose of joining any organization in
competition with the Employer.
13. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be three arbitrators, one to be chosen
directly by each party at will, and the third arbitrator to be selected by the
two arbitrators so chosen. Each party shall pay the fees of the arbitrator
he/she selects and of his/her own attorneys, and the expenses of his/her
witnesses and all other expenses connected with presenting his/her case.
Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, administrative fees, the fee of the third
arbitrator, and all other fees and costs, shall be borne equally by the
parties. Notwithstanding the foregoing, the prevailing party in any
arbitration or action brought to enforce or interpret this Agreement shall be
entitled to an award of its attorney's fees and costs in addition to such
other relief as may be granted.
14. Entire Agreement. This Agreement contains the entire Agreement between
the parties and supersedes all prior oral and written Agreements,
understandings, commitments, and practices between the parties. No amendments
to this Agreement may be made except by a writing signed by both parties.
15. Choice of Law; Venue. The formation, construction, and performance of
this Agreement shall be construed in accordance with the laws of California.
Venue for any action brought to enforce or interpret this Agreement shall be
proper in the courts or arbitration venues within the State of California,
County of Santa Xxxxx.
16. Notices. Any notice to the Employer required or permitted under this
Agreement shall be given in writing to the Employer, either by personal
service or by registered or certified mail, postage prepaid, addressed to
Office of the President, Reflect Scientific, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx
Xxxx, Xxxxxxxxxx, 00000. Any such notice to the Employee shall be given in a
like manner and, if mailed, shall be addressed to the Employee at his/her home
address then shown in the Employer's files. For the purpose of determining
compliance with any time limit in this Agreement, a notice shall be deemed to
have been duly given (1) on the date of service, if served personally on the
party to whom notice is to be given, or (2) on the second business day after
mailing, if mailed to the party to whom the notice is to be given in the
manner provided in this section.
17. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
Executed by the parties as of the day and year first written above.
REFLECT SCIENTIFIC, INC.
Dated: ______________. By /s/
Its
EMPLOYEE
Dated: ______________. /s/
Xxxxxxxxx X. Xxxx
Employment Agreement
This Employment Agreement is effective as of ______________ between
Reflect Scientific, Incorporated ("Employer") and Xxxxxxxx X. Xxxxxxxx
("Employee").
Recitals
WHEREAS, the Employee has acquired expert and unique skills and
abilities and an extensive background in and knowledge of the Employer's
industry, specifically, in the area of cryogenic sciences and technologies;
and
WHEREAS, the Employer desires the services of the Employee, and is
therefore willing to engage his services on the terms and conditions
stated below; and
WHEREAS, the Employee desires to be employed by the Employer and is
willing to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
1. Employee's Duties and Authority. The Employer shall employ the Employee
as: Director of Manufacturing.
2. Other Business Activities. During employment, the Employee shall
devote his/her work efforts to the performance of this Agreement and shall
not, without the Employer's prior written consent, render to others, services
for compensation, or engage in any other business activity that would
materially interfere with the performance of his duties under this Agreement.
Notwithstanding the foregoing, Employee shall be permitted to perform services
for All Temp Engineering, Inc., a California corporation ("All Temp
Engineering"), subject to the limitations set forth in Section 3, below, and
so long as such services do not materially interfere with the performance of
his duties under this Agreement.
2.1 Reasonable Time and Effort Required. During his/her employment,
the Employee shall devote such time, interest, and effort to the
performance of this Agreement as may be fair and reasonable.
3. Non-Competition During Employment. During the employment term, the
Employee shall not, in any fashion participate or engage in any activity or
other business competitive with the Employer's business. The Employee's
failure to comply with the provisions of the preceding sentence shall give the
Employer the right (in addition to all other remedies the Employer may have)
to terminate any benefits or compensation that the Employee may be otherwise
entitled to following termination of this Agreement. For purposes of this
Agreement, All Temp Engineering business is not considered a competing
business, provided that All Temp Engineering does not provide any products
that compete with the products encompassed by U. S. Patent No. 6,804,974 or
those to be developed by Employer as envisioned by Cryomastor, Inc., a
California corporation and predecessor of Employer.
4. Term of Employment. This Agreement is not a guaranty of uninterrupted
employment. The term of this Agreement shall extend Thirty Six Months (36
months) from the date of the last signature affixed hereto unless the Employee
is terminated as provided in this Agreement or this Agreement is extended by
mutual written consent of the parties.
5. Place of Employment. During the employment term the Employee shall
perform the services required at the Employer's offices, located in Hollister,
California. The Employee acknowledges that the Employer may from time to time
require the Employee to travel temporarily to other locations on the
Employer's business.
6. Salary. The Employer shall pay a basic salary to the Employee at the
rate of $175,000 per year payable in equal biweekly installments.
6.1 Incentive Compensation. . In addition to the basic salary provided
for above, the Employer shall pay to Employee incentive compensation
based upon the Company's earnings before interest and taxes ("EBIT"),
calculated in accordance with Generally Accepted Accounting Principles
("GAAP"). Annually, the Employee and the Employer shall develop an
operating plan ("Plan") for the Company's "Cryomastor" operations and
Employee shall receive incentive compensation based upon the percentage
achievement of the goals in the Plan. Employer shall maintain complete
and accurate financial and other records necessary to comply with this
Section 6.1. Employee shall have the right to, through independent
accountants of Employee's own choosing and at Employee's expense, to
audit the financial and other records of Employer at reasonable times,
at least once per fiscal year, to determine compliance with this Section
6.1.
7. Additional Benefits. The Employee shall receive the following benefits:
7.1 Vacation. Employee shall receive four (4) weeks annual vacation
time.
7.2 Medical/Health Insurance. For the first twelve (12) months of
employment, the Employee shall have access to Employer's group insurance
for Medical and Dental coverage at prevailing rates. Following this
period and providing the Employer achieves positive cash flow, the
Employer agrees to develop a co-pay plan where these rates are partially
or fully offset by Employer contribution.
8. Expenses. The Employer shall reimburse the Employee for reasonable
expenses incurred in connection with the Employee's performance of his/her
duties including travel expenses, food, and lodging while away from home,
pursuant to the Employer's reimbursement policies and Employee Handbook
guidelines.
9. Employee's Right of Ownership. All inventions conceived or developed by
the Employee during the term of this Agreement shall remain the property of
the Employer, provided, however, that as to such inventions with respect that
the equipment, supplies, facilities, or trade secret information of the
Employer was not used and do not relate to the business of the Employer or to
the Employer's actual or demonstrably anticipated research and development, or
that result from any work performed by the Employee for the Employer, shall
remain the property of the Employee.
10. Employer Termination
10.1 Termination For Cause. The Employer may terminate this Agreement
at any time without notice if the Employee commits any material act of
dishonesty, wrongfully discloses confidential information, is guilty of
gross carelessness or misconduct, or unjustifiably neglects his duties
under this Agreement, or acts in any way that has a direct, substantial,
and adverse effect on the Employer's reputation.
10.2 Involuntary Termination of Agreement. The Employer may terminate
this Agreement without cause after the first year of the term, if the
business fails to attain its specific business goals, objectives or
milestones as specified in the Plan and the Employer's board of
directors has determined that it should discontinue operations;
otherwise, Employer may terminate Employee without cause after the first
year of the term if Employer pays severance in the amount of six (6)
months salary.
11. Employee Termination
11.1 Termination on Resignation. The Employee may terminate this
Agreement by giving the Employer six months' prior written notice of
resignation.
11.2 Termination on Disability. If, during the period of employment,
the Executive becomes unable due to mental or physical illness or injury
to perform his duties under this Agreement in his normal and regular
manner, this Agreement shall be then terminated.
11.3 Termination on Death. If the Employee dies during the period of
employment this Agreement shall then be terminated.
11.4 Termination or Assignment on Sale, Merger or Change of Control.
In the event of a Winding Up, merger where the Employer is not the
surviving entity, a sale of all or substantially all of the Employer's
assets, or a sale of all or substantially all of the Cryomastor
operating assets, the Employer may, at its sole option (1) assign this
Agreement and all rights and obligations under it to any business entity
that succeeds to all or substantially all of the Employer's business
through that merger or sale of assets, or (2) on at least 30 days' prior
written notice to the Employee, terminate this Agreement effective on
the date of the merger or sale of assets.
12. Restrictive Covenants
12.1 Non-disclosure After Termination. Because of his/her employment
by the Employer, the Employee will have access to trade secrets and
confidential information about the Employer, its products, its
customers, and its methods of doing business. In consideration of
his/her access to this information, the Employee agrees that for a
period of five years after termination of his/her employment, he/she
will not disclose such trade secrets or confidential information.
12.2 Non-Competition After Termination. For a period of one year
following the termination of the Employee's employment, the Employee
shall not, directly or indirectly, as an employee, employer, consultant,
advisor, agent, principal, partner, officer, director or in any other
individual or representative capacity, engage or participate in any
business or activity that is competitive in any manner whatsoever with
the activities and business of the Employer; nor shall the Employee,
during the twelve months following termination of the Employee's
employment induce or attempt to induce any employee of the Employer to
leave such employ for the purpose of joining any organization in
competition with the Employer.
13. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be three arbitrators, one to be chosen
directly by each party at will, and the third arbitrator to be selected by the
two arbitrators so chosen. Each party shall pay the fees of the arbitrator
he/she selects and of his/her own attorneys, and the expenses of his/her
witnesses and all other expenses connected with presenting his/her case.
Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, administrative fees, the fee of the third
arbitrator, and all other fees and costs, shall be borne equally by the
parties. Notwithstanding the foregoing, the prevailing party in any
arbitration or action brought to enforce or interpret this Agreement shall be
entitled to an award of its attorney's fees and costs in addition to such
other relief as may be granted.
14. Entire Agreement. This Agreement contains the entire Agreement between
the parties and supersedes all prior oral and written Agreements,
understandings, commitments, and practices between the parties. No amendments
to this Agreement may be made except by a writing signed by both parties.
15. Choice of Law; Venue. The formation, construction, and performance of
this Agreement shall be construed in accordance with the laws of California.
Venue for any action brought to enforce or interpret this Agreement shall be
proper in the courts or arbitration venues within the State of California,
County of Santa Xxxxx.
16. Notices. Any notice to the Employer required or permitted under this
Agreement shall be given in writing to the Employer, either by personal
service or by registered or certified mail, postage prepaid, addressed to
Office of the President, Reflect Scientific, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx
Xxxx, Xxxxxxxxxx, 00000. Any such notice to the Employee shall be given in a
like manner and, if mailed, shall be addressed to the Employee at his/her home
address then shown in the Employer's files. For the purpose of determining
compliance with any time limit in this Agreement, a notice shall be deemed to
have been duly given (1) on the date of service, if served personally on the
party to whom notice is to be given, or (2) on the second business day after
mailing, if mailed to the party to whom the notice is to be given in the
manner provided in this section.
17. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
Executed by the parties as of the day and year first written above.
REFLECT SCIENTIFIC, INC.
Dated: ______________. By /s/
Its______________________________________
EMPLOYEE
Dated: ______________. /s/
Xxxxxxxx X. Xxxxxxxx
EXHIBIT 6.11
Interim Financing Agreement
INTERIM FINANCING NOTE
January 25, 2006
In accordance with the non-binding terms of that certain Letter of Intent
dated December 16, 2005 and between Reflect Scientific, a corporation
organized and existing under the laws of Utah, with offices at 000 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000 (herein referred to as "Reflect") and
Cryomastor Incorporated, with offices located in Hollister, California,
(herein referred to as "Cryomastor"), Reflect, by this Note, establishes
Interim Financing as in the Letter of Intent and hereby loans and delivers
(the "Loan") to Cryomastor the amount of Two Hundred Thousand Dollars
($200,000.00) (the "Funds") under the following terms and conditions.
Use of Funds: The sole use of the Funds shall be to support the design,
development and production of up to ten (10) production units of the
Cryomastor product. Cryomastor will use commercially reasonable efforts to
produce equipment of commercial quality in construction and suitable for
demonstration use in customer laboratories, trade shows, and conferences.
Allowable uses of the Funds include, but shall not be limited to payments for
manufacturing labor, physical plant utilities, procurement of raw materials
and finished assemblies, packaging and other necessary goods and services.
Cryomastor agrees it will not use the Funds for leases or purchases of capital
equipment and manufacturing space and/or the addition of Cryomastor employees.
The funds may be used specifically, but without limitation, for the
Cryomastor, Inc. Hollister, CA operation to start the outsourcing of
manufacturing of Cryomastors units and associated parts and labor costs,
payment of All Temp Engineering shop costs associated with such manufacturing
efforts, such as, but not limited to vacuum testing and LN2 costs, and
Cryomastor selling and trade show costs.
Upon the execution of a definitive Plan of Merger and subsequent closing as
contemplated in the Letter of Intent, the principal amount of the Loan, gross
proceeds from all sales of prototype and test market units and their cost of
goods and the associated overhead (excluding officer salaries) will be
included in and accounted for as part of the Cryomastor business being
acquired. Upon such closing, all obligations of any Guarantors to the Loan
shall be fully terminated.
Internal Credit Transfer to Reflect. Following closing of the Plan of Merger
and receipt of its associated funding Cryomastor will credit Reflect an amount
equal to the original Interim Financing Note ($200,00.00). Pursuant to this
provision, if the merger is closed the funds loaned hereunder will be treated
as an advance against future capital contributions by RSI to borrower. This
provision has no effect if the merger is not closed.
Payment Schedule: In the event that the Plan of Merger is not closed, the Loan
will be repaid to Reflect on or before December 31, 2006 with accrued interest
on the outstanding principal at an annualized rate of 5 percent from the date
acknowledged by Reflect and Cryomastor that the Plan of Merger will not close.
Such interest shall be calculated using a straight line method and will not
include compounding.
Default: If any of the following events shall occur, Reflect shall provide
written notice ("Notice") to Cryomastor of its intent to declare a default
under this Note. Cryomastor shall have thirty (30) days (the "Cure Period")
from the date of Notice to cure the default. If the default is not cured at
the end of Cure Period, the entire unpaid balance of both principal and
interest to the date of default shall immediately become due and payable and
the total of such unpaid balance shall thereafter bear interest at the rate of
twelve (12%) per annum until paid in full:
I) Failure by Cryomastor to make payment of principal or interest
when due; or
ii) A default under any other provision of this Note which is not
cured within the Cure Period; or
iii) The liquidation, dissolution, death or incompetency of the
undersigned Cryomastor officers or any individual, corporation,
partnership or other entity guaranteeing or providing security for
the payment of this Note; or
iv) The filing of a petition under any bankruptcy insolvency or
similar law by Cryomastor or by any of its officers.
Default Interest: The outstanding balance of any amount owing under this Note
which is not paid when due shall bear interest at the rate of twelve (12%) per
annum above the rate that would otherwise be in effect under this Note.
Usury Clause: Notwithstanding any other provision of this Note, interest under
this Note shall not exceed the maximum rate permitted by law; and if any
amount is paid under this Note as interest in excess of such maximum rate,
then the amount so paid will not constitute interest but will constitute a
prepayment on account of the principal amounts of this Note. If, at any time,
the interest rate under this Note would, but for the provision of the
preceding sentence, exceed the maximum rate permitted by law, then the
outstanding principal balance of this Note shall, on demand of Reflect, become
immediately due and payable.
Prepayment: Cryomastor may prepay all or any portion of the principal of this
Note at any time without premium or penalty. Any such prepayment shall be
applied against the remaining principal due under this Note.
Delay; Waiver: The failure or delay by Reflect in exercising any of its rights
hereunder shall not constitute a waiver thereof. Cryomastor may not waive any
of its rights except by an instrument in writing signed by Reflect
Attorney's Fees; Governing Law: In the event suit is instituted to collect
this Note, Cryomastor agrees to pay all costs of collection, including such
reasonable attorney's fees as may be awarded by the court. This Note shall be
governed by and construed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as follows.
For REFLECT SCIENTIFIC For CRYOMASTOR INCORPORATED
/s/ Xxx Xxxxx 1-25-16 /s/ Xxxx Xxxx 1-25-2006
Signature and Date Signature and Date
Printed Name Printed Name
President CEO
Title Title
Interim Financing Note Personal Guaranty
This Loan Guaranty (herein referred to as "Guaranty") is executed on
January 25, 2006 by Xxxx Xxxx and Xxxx Xxxxxxxx (herein referred to as
"Guarantor") in favor of Cryomastor, Incorporated, a California Corporation
with its principal place of business in Hollister, California (herein referred
to as "Debtor").
The Debtor has entered into an Interim Financing Note with Reflect
Scientific, Incorporated, a Utah Corporation (herein referred to as "Lender"),
of even date herewith and attached hereto as Exhibit A (herein referred to
alternatively as the "Loan" and "Loan Agreement").
This guaranty is given by the Guarantor to Lender to induce the Lender
to provide Interim Financing to the Debtor under the terms and conditions
defined in the Loan Agreement. The Debtor is and will be subject to certain
obligations, Agreements, duties and covenants pursuant to that transaction
(collectively "Debtor's Obligations").
The Guarantor hereby unconditionally guarantees each and every one of
the Debtor's Obligations, both present and future, pursuant to or in
connection with the Loan, including, without limitation, any and all payment
obligations under this Guaranty.
This is not a continuing guarantee, but shall guarantee the specific
obligations of the Loan Agreement (the "Debtor's Obligations") described
above, and no other obligations, past, present or future of the Debtor.
This Guaranty will automatically expire upon the closing of the merger
of Debtor and Lender/Cryomastor Acquisition Corporation.
I have carefully reviewed this contract and agree to and accept its
terms and conditions. I am executing this Agreement as of the day and year
first above written.
Guarantor:
__/s/ Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
__/s/ Xxxx Xxxx
Xxxx Xxxx
