AGREEMENT AND PLAN OF REORGANIZATION
By
And
Among
PROCESS TECHNOLOGY SYSTEMS, INC.,
a Nevada Corporation,
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ DRILLING CORPORATION,
a Nevada Corporation,
And
▇▇▇▇▇▇▇ Drilling Stockholders
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
effective as of May 30, 2006, by and between Process Technology Systems, Inc.,
a Nevada corporation ("Process"), W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("Process Shareholders"), ▇▇▇▇▇▇▇ Drilling Corporation, a Nevada corporation
("Company"), and ▇▇▇▇▇▇▇ Family Trust who has signed this Agreement as of the
date hereof and the balance of Company shareholders who will sign at Closing
(are collectively referred to as the "Stockholders").
RECITALS
WHEREAS, the Stockholders are the record and beneficial owner of
40,055,463 shares of common stock of the Company, which represents all of the
issued and outstanding common stock of Company ("Company Stock");
WHEREAS, the Stockholders desires to sell and Process desires to purchase
from Stockholders all of the Company Stock in exchange for an aggregate of
40,055,463 shares of Process common stock ("Process Stock").
WHEREAS, the respective Boards of Directors of Process and the Company
have determined that the exchange is fair to, and in the best interests of,
such entities and have duly approved and adopted this Agreement and the
transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, and in consideration of the representations, warranties, and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated:
1.01. Closing: The consummation of the transactions contemplated by
this Agreement.
1.02. Closing Date shall mean the time and date that the Closing
occurs.
1.03. Company Financial Statements shall consist of an audited
balance sheet, statement of income, statement of cash flows,
and statement of stockholder's equity of the Company for the
period of inception through November 30, 2005, and an
unaudited balance sheet, statement of income, statement of cash
flows, and statement of stockholder's equity for the three
months ended February 28, 2006.
1.04. Company Last Balance Sheet Date shall mean the period ended
February 28, 2006.
1.05. Company Stock shall mean all of the outstanding shares of
capital stock of the Company.
1.06. GAAP: Generally accepted accounting principles.
1.07. Government shall mean any federal, state, local, municipal, or
foreign government or any department, commission, board,
bureau, agency, instrumentality, unit, or taxing authority
thereof.
1.08. Intellectual Property means all (a) licenses, patents, patent
applications, patent disclosures, and improvements hereto, (b)
trademarks, service marks, trade dress, logos, trade names, and
corporate and company names and registrations and applications
for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) computer software,
data, code sources and documentation, and improvements thereto,
(e) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions whether
patentable or unpatentable and whether or not reduced to
practice, know-how, processes and techniques, plans, proposals,
technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and
marketing plans, and customer and supplier lists and
information), (f) other proprietary rights, (g) copies and
tangible embodiments thereof (in whatever form or medium), and
(h) other intellectual and intangible property rights,
including all registrations and applications therefore, and all
continuations, continuations in part, and divisional
applications.
1.09. Knowledge means knowledge after a diligent and reasonable
investigation.
1.10. Material Adverse Effect shall mean any change in the financial
condition or operation of the business that would materially
affect the Company's business adversely, including, but not
limited to, material changes to management, business
conditions, or financial condition
1.11. SEC shall mean the Securities and Exchange Commission.
1.12. SEC Filings shall mean the Form 10-KSB filed February 27, 2006,
and the Form 10-QSB filed April 14, 2006.
ARTICLE II
EXCHANGE
On the basis of the representations, warranties, covenants, and
agreements contained in this Agreement and subject to the terms and conditions
of this Agreement:
2.01. Exchange. The Stockholders shall assign, transfer and convey
at the Closing shares of Company Stock to Process in exchange for shares of
Process Stock to be issued at the rate of one share of Process Stock for one
Share of Company Stock.
2.02. Purchase Price. The purchase price in consideration of the
sale of all the Company Stock shall be shares of Process Stock.
2.03. Tax Consequences. Each party shall be responsible for
ascertaining and resolving its own tax consequences resulting from the
transaction. No party shall make any representation as to any possible tax
consequences arising as the result of the transaction. However, it is
intended that the transaction contemplated hereby will qualify as a tax-free
reorganization.
2.04. Consideration. The Company Stock referred to in Section 2.01
and the consideration to be paid by Process referred to in Sections 2.02 shall
constitute all of the consideration to be paid in connection with the
transactions contemplated by this Agreement.
2.05. The Closing. The "Closing" of the transactions contemplated
by this Agreement shall be negotiated and concluded between Process, the
Company, and the Stockholders on or before June 16, 2006 (the "Closing Date"),
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Stockholders will transfer to Process all of its
right, title and interest in and to the Company now held or hereafter acquired
by them in exchange for the consideration set forth herein. Such ownership
interest in and to the Company will be transferred by the Stockholders to
Process free and clear of any liens, encumbrances or other obligations.
2.06. Subsequent Sale of Company Stock. The Company prior to
Closing, has the right to sell up to 3 million shares of common stock at a
price of $1.00 per share and may pay sales commissions of up to 7% cash and
warrants to purchase up to 210,000 shares of common stock. Any such shares
issued will be exchanged for shares of Process stock at the same ratio that
the Company Stockholders on the date hereof will exchange for Process Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND STOCKHOLDERS
The Company and Stockholders hereby agree, represent, and warrant to
Process, on the date of this Agreement and on the Closing Date, as follows:
3.01. Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada, with all requisite
power and authority to conduct its business and is not in breach of, or in
default with respect to, any term of its Articles of Incorporation, Bylaws or
other organizational documents. The Company has obtained all necessary
consents, authorizations, approvals, orders, licenses, certificates, and
permits of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other tribunals,
to own, lease, license, and use its properties and assets and to carry on the
business in which it is now engaged, except where the failure to do so would
not have a Material Adverse Effect. The Company is duly qualified to
transact the business in which it is engaged in every jurisdiction in which
its ownership, leasing, licensing, or use of property or assets or the conduct
of its business makes such qualification necessary, except where the failure
to do so would not have a Material Adverse Effect.
(b) The Company does not have and has never had any subsidiaries and
does not directly or indirectly own any equity interest in, or any interest
convertible into or exchangeable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity.
3.02. Capitalization. The Stockholders collectively own one hundred
(100%) percent of the issued and outstanding shares of Company Stock, which
constitutes all of the outstanding capital stock of Company. The Company
Stock is not owned or held in violation of any preemptive right of any other
person or entity, is validly authorized, validly issued, fully paid and
non-assessable, and is owned of record and beneficially by the Stockholders.
The shares of Company Stock held by the Stockholders are restricted securities
and are free and clear of all liens, security interests, pledges, charges,
encumbrances, voting agreements, and voting trusts. Except as set forth in
Schedule 3.02, there is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, convertible debt agreement or other right
calling for the issuance of, any shares of capital stock of the Company or any
security or other instrument convertible into, exercisable for, or
exchangeable for capital stock of the Company.
3.03. Due Authorization; Third Party Consents. The Company has the
right, power, legal capacity, and authority to enter into and perform its
obligations under this Agreement, and no approval or consent of any person
other than the Company is necessary in connection with the execution,
delivery, or performance of this Agreement. The execution, delivery, and
performance of this Agreement by the Company has been duly authorized by its
board of directors and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement constitutes a legal and
binding obligation of the Company, and is valid and enforceable against the
Company in accordance with its terms.
3.04. Litigation. Except as set forth on Schedule 3.04, there is not
any suit, action, arbitration, or legal, administrative, or other proceeding
or governmental investigation (formal or informal), pending or to the best of
Company's Knowledge threatened (or any basis therefor known to the Company),
with respect to the Company or the Stockholders (as it relates to the business
of the Company), including but not limited to any action or claim under any
federal, state, local or other governmental act, rule, regulation, or any
interpretations thereof, relating to environmental matters or the protection
of the safety and health of persons connected with the Company's business
(including but not limited to the transportation, treatment, storage,
recycling, disposal, or release into the environment of hazardous or toxic
materials or waste), or any basis on which any proceeding or investigation
against the Company or the Stockholders might reasonably be undertaken or
brought. The Company is not presently engaged in any legal action to recover
monies due to the Company, for damages sustained by the Company, or amounts
owed to the Company. During the two year period immediately preceding the
Closing, the Company has neither received nor been a party to any written
notice of violations, orders, claims, citations, complaints, penalties,
assessments, court, or other proceedings, administrative, civil or criminal,
at law or in equity.
3.05. Employees. The Company does not have or contribute to any
pension, profit-sharing, option, other incentive plan, or other Employee
Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974), or have any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay,
insurance, or other benefits except as set forth in Schedule 3.05. Schedule
3.05 is a list of each employee and consultant and the compensation paid to
each employee and consultant.
3.06. No Violation of Employee Contracts. No current or prior
employee, consultant or Stockholder of the Company has any employment or
consulting agreement with the Company, except as set forth in Schedule 3.06.
To the knowledge of the Company, no employee of the Company is in violation of
any term of any contract, non-competition agreement, or any other contract or
agreement or any restrictive covenant with, or any other common law obligation
to, a former employer relating to the right of any such employee to be
employed by the Company because of the nature of the business conducted by the
Company or of the use of trade secrets or proprietary information of others.
There is neither pending nor, to the Knowledge of the Company, threatened, any
actions, suits, proceedings, or claims with respect to any contract,
agreement, covenant, or obligation referred to in the preceding sentence.
3.07. Contracts, Agreements and Instruments. Schedule 3.07 includes
the following documents of the Company:
3.07.01. True and correct copies of all material contracts,
agreements and other instruments of the Company, as well as verbal
understandings, involving an obligation on the part of the Company
to pay or to render services, individually or in the aggregate, in
excess of $25,000 per year or to receive payments in excess of
$25,000 per year that is not entered in the ordinary course of
business.
3.07.02. True and correct copies of all verbal and written
contracts, arrangements, and understandings with officers,
directors, and five percent or greater shareholders, except as
disclosed in this Agreement.
Except for matters which, in the aggregate, would not have a Material Adverse
Effect or are otherwise disclosed in the Schedules attached hereto or in the
Agreement, to the Knowledge of the Company, no other party to any such
contract, agreement, instrument, leases, or license is now in violation or
breach of, or in default with respect to complying with, any material
provision thereof, and each such contract, agreement, instrument, lease, or
license contained in the Schedules hereto is in full force and effect and is
the legal, valid, and binding obligation of the Company and is enforceable as
to them in accordance with its terms. The Company does not have Knowledge
that any other party to any such contract listed in Schedule 3.07 has given
notice of termination or taken any action inconsistent with the continuance
of such arrangement or understanding, except for matters which, in the
aggregate, would not have a Material Adverse Effect; and the execution,
delivery, and performance of this Agreement will not prejudice any such
arrangement or understanding in any way contained in the Schedules hereto,
except for matters which, in the aggregate, would not have a Material Adverse
Effect. The Company is not a member of a customer or user organization or of
a trade association which relationship would be materially affected by the
execution and performance of this Agreement.
3.08. Consents and Approvals; No Violation. The execution and
delivery and performance of this Agreement by the Company will not (a)
conflict with or result in any breach of any provision of the Articles of
Incorporation, Bylaws or other organization documents of the Company, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority (as defined herein), or where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have a Material
Adverse Effect, (c) result in a material default (with or without due notice
or lapse of time or both) (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, contract, license, agreement or other
instrument or obligation to which the Company is a party or by which the
Company or any of its assets may be bound, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been requested, (d) result in the creation or imposition of any
lien, charge or other encumbrance on the assets of the Company, or (e) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company or any of its assets.
3.09. Financial Statements. The Company has delivered to Process an
unaudited Company balance sheet as of February 28, 2006, and the Company will
deliver the true and correct Company Financial Statements on the Closing Date.
The Company Financial Statements will fairly present in all material respects
the financial position of the Company to which it relates as of its date, and
each of the related consolidated statements of operations and retained
earnings and cash flows or equivalent statements in the Company Financial
Statements (including any related notes and schedules) in accordance with
generally accepted accounting principles.
3.10. Undisclosed Liabilities. There are no undisclosed and/or
contingent liabilities that may bear upon the value of the Company's business
and its financial condition that is not reflected in the Company Financial
Statements.
3.11. Permits and Licenses. The Company has all permits, licenses,
and other similar authorizations necessary for the conduct of its business as
now being conducted by it, and it is not in default in any respect under any
such permits, licenses, or authorizations, except for the absence of which
would not have a Material Adverse Effect. Such permits, licenses, and other
similar authorizations of the Company are as set forth in Schedule 3.11.
Except as set forth in Schedule 3.11, no royalties, commissions, or fees are
payable by the Company to any person by reason of the ownership or use of any
intangible property. The Company is the sole and exclusive owner of all of
its assets, does not use any of its assets by the consent of any other person
and is not required to and does not make any payments to others with respect
thereto. Except as set forth in Schedule 3.11, there are no material licenses,
sub-licenses, or agreements relating to the use of any intangible property of
the Company now in effect, and the Company has no Knowledge that any
intangible property of the Company is being infringed by others. No claim
that would have a Material Adverse Effect on the business of the Company is
pending or, to the Knowledge of the Company, threatened, or has been made
since the Company's inception to the effect that, nor does the Company have
any Knowledge that, the operation of the Company's business or any method,
process, part, or material that the Company employs, conflicts in any material
way with, or infringes in any material way upon any rights of the type
enumerated above, owned by others.
3.12. Properties. The Company has good and valid title to all
properties and assets used in its business or owned by it, free and clear of
all liens, mortgages, security interests, pledges, charges, and encumbrances
(except for liens for current taxes not yet due or disclosed on the Company's
Last Balance Sheet Date).
3.12.01. Attached as Schedule 3.12 is a true and complete list
of all properties and assets owned, leased, or licensed by the Company,
including with respect to such properties and assets leased or
licensed by the Company, a description of such lease or license.
All such properties and assets owned by the Company are reflected on
the Company Last Balance Sheet. All properties and assets owned,
leased, or licensed by the Company are in good and usable condition
(reasonable wear and tear, which is not such as to have a Material
Adverse Effect on the operation of the business of the Company,
excepted).
3.12.02. The properties and assets owned, leased, or licensed
by the Company constitute all such properties and assets which are
necessary to the business of the Company as presently conducted.
3.13. Hazardous Materials. To the best of the Company's Knowledge,
the Company has complied with any and all applicable laws, ordinances, rules,
and regulations related to the possession, transportation, or disposal of
hazardous materials. To the Knowledge of the Company, no employee of the
Company has been exposed to hazardous materials such that exposure could cause
damage to such employee.
3.14. Interest in Competitors. No shareholder, officer or director
of the Company, nor any spouse or child of any shareholder, officer or
director with authority to enter into contracts on behalf of the Company, has
any direct or indirect interest in any competitor, supplier, or customer of
the Company or in any person from whom or to whom the Company leases any real
or personal property, or in any other person with whom the Company is doing
business.
3.15. Tax and Other Liabilities. The Company does not have any
present liability of any nature, accrued or contingent, of the type required
to be reflected on a balance sheet or in appropriate footnotes prepared in
accordance with GAAP, including, without limitation, liabilities for federal,
state, local, or foreign taxes and liabilities to customers or suppliers,
which could have a Material Adverse Effect upon the Company, other than the
following:
i. Liabilities for which full provision has been made on the
Company's Last Balance Sheet; and
ii. Other liabilities arising since the date of the Company's Last
Balance Sheet and prior to the Closing in the ordinary course
of business which are not inconsistent with the
representations and warranties of the Company or any other
provision of this Agreement.
Without limiting the generality of the foregoing, the amounts set forth as
provisions for taxes on the Company Last Balance Sheet are sufficient for all
accrued and unpaid taxes of the Company, whether or not due and payable and
whether or not disputed, under tax laws, as in effect on the date of the
Company's Last Balance Sheet or now in effect, for the period ended on such
date and for all fiscal years prior thereto. The Company has filed all
applicable tax returns required to be filed by it or has obtained applicable
extensions and are not delinquent with respect to such extensions; have paid
(or have established on the Company Last Balance Sheet a reserve for) all
taxes, assessments, and other governmental charges payable or remittable by it
or levied upon it or its properties, assets, income, or franchises, which are
due and payable and have delivered to Process a true and correct copy of any
report as to adjustments received by the Company from any taxing authority
during the past five years and a statement as to any litigation, governmental
or other proceeding (formal or informal), or investigation pending.
3.16. Changes or Events. Since the Company Last Balance Sheet Date:
3.16.01. There has been no event or condition affecting the
Company which would have a Material Adverse Effect on the Company.
3.16.02. The Company has not authorized, declared, paid or
effected any dividend or liquidation or other distribution in respect of
the Company Stock or other equity interest or any direct or indirect
redemption, purchase or other acquisition of any equity interest of
the Company.
3.16.03. The Company has not had any changes in its condition
(financial or otherwise), liabilities, assets, or business or in any
of its business relationships, including relationships with
suppliers or customers, that, when considered individually or in the
aggregate, might reasonably be expected to have a Material Adverse
Effect.
3.16.04. The Company has not experienced any destruction of,
damage to, or loss of any asset (regardless of whether covered by
insurance) that, when considered individually or in the aggregate,
might reasonably be expected to have a Material Adverse Effect.
3.16.05. The Company has not made any changes in accounting
methods or practices (including, without limitation, any change in
depreciation or amortization policies or rates), except for any such
changes as were required by law.
3.16.06. Other than in the ordinary course of business, the
Company has not increased the salary or other compensation payable or to
become payable by the Company to any employee, or the declaration,
payment, or commitment or obligation of any kind for the payment by
the Company of a bonus or other additional salary or compensation to
any such person.
3.16.07. The Company has not sold, leased, transferred, or
assigned any of their assets, tangible or intangible, other than for a
fair consideration in the ordinary course of business;
3.16.08. No party has accelerated, terminated, modified or
cancelled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than
$25,000 to which the Company is a party;
3.16.09. The Company has not made any loans to any person or
entity, or guaranteed any loan;
3.16.10. To the Knowledge of the Company, the Company has not
suffered any loss or any threatened loss of any permit, license,
qualification, special charter or certificate of authority held or
enjoyed or formerly held or enjoyed by the Company which loss has
had or upon occurrence might reasonably be expected to have a
Material Adverse Effect;
3.16.11. The Company has operated its business in the ordinary
course and consistent with past practices so as to preserve its
business organization intact, to retain the services of its
employees and to preserve its goodwill and relationships with
suppliers, creditors, customers, and others having business
relationships with it;
3.16.12. The Company has not issued any note, bond or other
debt security or created, incurred or assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligations;
3.16.13. The Company has not delayed or postponed the payment
of accounts payable and other liabilities outside the ordinary course
of business;
3.16.14. The Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property owned
or licensed by the Company;
3.16.15. The Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees, outside the ordinary course of business; and
3.16.16. The Company has not made any agreement to do any of
the things described in the preceding clauses 3.16.01 through 3.16.15.
3.17 Intellectual Property. The Company does not own or have
pending, nor has it licensed, any Intellectual Property, other than as
described in Schedule 3.17 (the "Company Intellectual Property"). The Company
Intellectual Property has not been the subject of any interference, opposition
or cancellation proceedings. No Stockholder, employee of the Company or
affiliate of the Stockholders, nor any other partnership or enterprise in
which the Stockholders, any employee, or any relative or affiliate had or now
has a 5% or greater ownership interest or other substantial interest,
possesses any Intellectual Property which is used by the Company pursuant to
any agreement or arrangement with such person. The Company has not received
any written notice or written claim of infringement by the Company of the
Intellectual Property of any third party. There is no infringement by others
of the Intellectual Property of the Company.
3.18. No Defaults. The consummation of the transactions
contemplated by this Agreement will not result in or constitute any of the
following: (i) a breach of any term or provision of any other agreement of the
Company that will not be waived or released at Closing; (ii) a default or an
event that will not be waived or released at Closing, and that, with notice or
lapse of time or both, would be a default, breach, or violation of the
Articles of Incorporation or Bylaws of the Company or of any lease, license),
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust, or other agreement, instrument, any Intellectual Property, or
arrangement to which the Company is a party or by which the Company or its
assets are bound; (iii) an event that will not be waived or released at
Closing and that would permit any party to terminate any agreement or to
accelerate the maturity of any indebtedness or other obligation of the
Company; (iv) the creation or imposition of any lien, charge, or encumbrance
on any of the Company's assets; or (v) a violation of any law or any rule or
regulation of any administrative agency or governmental body unrelated to the
business or any order, writ, injunction or decree of any court, administrative
agency or governmental body to which the Company is subject.
3.19. No Prohibited Payments. Neither the Company nor any employee,
or agent of the Company, has made or authorized any payment of funds of the
Company or on behalf of the Company prohibited by law and no funds of the
Company have been set aside to be used for any payment prohibited by law.
3.20. Insurance. The Company maintains insurance coverage necessary
to meet its business needs.
3.21. Completeness of Disclosure. No representation or warranty in
this Agreement and no Appendix, Schedule, Exhibit, or certificate prepared by
the Company pursuant hereto and no statement made or other document prepared
by the Company and furnished to Process by the Company contains any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading.
Each of the Stockholders represents and warrants the following:
3.22. Restricted Stock. Each Stockholder understands and
acknowledges that all of the shares of the common stock of Process to be
issued to them shall be issued under an exemption from registration provided
for under Section 4(2) of the Securities Act of 1933, as amended (the "Act").
Consequently, the Stockholders understand and acknowledge that such common
stock will be "restricted stock" as that term is defined in Rule 144
promulgated under the Act, and that (a) appropriate legends will be imprinted
upon all certificates for the shares of common stock of Process to be issued
to the Stockholders, and (b) appropriate stop transfer orders will be entered
in the stock transfer records of Process. In addition, the Stockholders
represent his/her intention to acquire the shares of Process for his/her own
account, for investment purposes only, and not with a view to any subsequent
resale or distribution thereof.
3.23. Authorization. All action on the part of the individual
Stockholders necessary for the authorization, execution and delivery of this
Agreement by the Stockholders and the Company have been taken.
3.24. Title to the Shares. Each of the Stockholders owns, and is
transferring to Process at the Closing, good, valid and marketable title to
the number of shares of Company Stock set forth opposite the name of the
Stockholders on the signature page hereof, free and clear of all liens,
claims, options and encumbrances whatsoever. Each Stockholder represents that
there are no outstanding options, warrants or rights to purchase or acquire
any of the Company Stock of the individual Stockholders nor is the Company
Stock owned by each Stockholder subject to any voting agreements, pledges,
shareholders agreement or lock-up agreement, or rights of first refusals.
Each of the Stockholders represents that the shares of Company Stock being
transferred represent all the Company securities, of any kind, held by such
Stockholder.
3.25. Purchase Entirely for His Own Account. The Process securities
will be acquired for investment for each of the Stockholders' own account, not
as a nominee or agent, and not with the view to the resale or distribution of
any part thereof, and each of the Stockholders has no present intention of
selling, granting any participation in, or otherwise distributing the Process
securities. Each of the Stockholders have no contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to
such person with respect to any of the securities of Process.
3.26. Disclosure of Information. Each of the Stockholders has
reviewed the SEC Filings and has had the opportunity to ask questions of, and
receive answers from, representatives of Process to obtain additional
information regarding Process.
3.27. Accredited Investor. Each Stockholder hereby represents that
he/she/it is an "accredited investor" as defined in Rule 501 of Regulation D
of the Securities Act of 1933.
3.28. Acceptance of Process Stock. Each Stockholder has read this
Agreement, agrees to be bound by all the terms of this Agreement, and accepts
Process Stock in exchange for Company Stock in the denominations set forth in
Schedule 2.01.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PROCESS
Process and Process Shareholders hereby agree, represent, and warrant to
the Company, on the date of this Agreement and on the Closing Date, as
follows:
4.01. Organization and Qualification.
(a) Process is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, with all requisite power
and authority to conduct its business and is not in breach of, or in default
with respect to, any term of its Articles of Incorporation, Bylaws or other
organizational documents. Process has obtained all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own, lease,
license, and use its properties and assets and to carry on the business in
which it is now engaged, except where the failure to do so would not have a
Material Adverse Effect. Process is duly qualified to transact the business
in which it is engaged in every jurisdiction in which its ownership, leasing,
licensing, or use of property or assets or the conduct of its business makes
such qualification necessary, except where the failure to do so would not have
a Material Adverse Effect.
(b) Process does not have and has never had any subsidiaries and does
not directly or indirectly own any equity interest in, or any interest
convertible into or exchangeable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity.
4.02 SEC Document. Process has made all of its filings with the SEC
that it has been required to make under the Act, and the Securities Exchange
Act of 1934, as amended ("Exchange Act") since January 2003. As of their
respective dates, each of the SEC Filings complied substantially in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder. As of the Closing Date, the
financial statements included in or incorporated by reference into the SEC
Documents, including the related notes and schedules, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are true, correct and complete in all respects, and are
consistent with the books and records of Process.
4.03. Capitalization. The authorized capital stock of Process
consists of 200,000,000 shares of common stock and 12,500,000 shares of
preferred stock, of which 2,000,000 shares of common stock are outstanding,
and 5,835 shares of preferred stock are outstanding. The 5,835 shares of
preferred stock have no right to convert into common stock without board of
director approval, receive any dividends, liquidation preference, or vote on
any corporate matter.
All issued and outstanding shares of Process common stock are validly issued,
fully paid, non-assessable and free of preemptive rights. Except as set forth
herein, (i) there are no options, warrants, convertible securities or any
other obligation that require Process to issue additional shares of capital
stock and (ii) none of the holders of Process common stock have anti-dilution
rights, rights of first refusals, subscription rights or rights to purchase
issuances of additional shares.
4.04. Authority, Binding Agreement. This Agreement has been approved
by the Board of Directors of Process. No consents, authorizations or
approvals, whether of a governmental agency or instrumentality or otherwise,
are necessary in order to enable Process to enter into and perform this
Agreement. This Agreement constitutes legal, valid and binding obligations of
Process and is enforceable against Process in accordance with its terms.
4.05. Litigation. There is not any suit, action, arbitration, or
legal, administrative, or other proceeding or governmental investigation
(formal or informal), pending or to the best of Process' or Process
Shareholders' Knowledge threatened (or any basis therefor known to Process or
Process Shareholders), with respect to Process (as it relates to the business
of Process), including but not limited to any action or claim under any
federal, state, local or other governmental act, rule, regulation, or any
interpretations thereof, relating to environmental matters or the protection
of the safety and health of persons connected with the Process' business
(including but not limited to the transportation, treatment, storage,
recycling, disposal, or release into the environment of hazardous or toxic
materials or waste), or any basis on which any proceeding or investigation
against Process might reasonably be undertaken or brought. Process is not
presently engaged in any legal action to recover monies due to it, for damages
sustained by the Process, or amounts owed to Process. During the two year
period immediately preceding the Closing, Process has neither received nor
been a party to any written notice of violations, orders, claims, citations,
complaints, penalties, assessments, court, or other proceedings,
administrative, civil or criminal, at law or in equity.
4.06. Employees. Process does not have or contribute to any pension,
profit-sharing, option, other incentive plan, or other Employee Benefit Plan
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974), or have any obligation to or customary arrangement with employees for
bonuses, incentive compensation, vacations, severance pay, insurance, or other
benefits.
Process has no employees or consultants.
4.07. No Violation of Employee Contracts. No current or prior
employee, consultant or stockholder of Process has any employment or
consulting agreement with Process. To the Knowledge of Process and Process
Shareholders, no employee of Process is in violation of any term of any
contract, non-competition agreement, or any other contract or agreement or any
restrictive covenant with, or any other common law obligation to, a former
employer relating to the right of any such employee to be employed by Process
because of the nature of the business conducted by Process or of the use of
trade secrets or proprietary information of others. There is neither pending
nor, to the Knowledge of Process or Process Shareholders, threatened, any
actions, suits, proceedings, or claims with respect to any contract,
agreement, covenant, or obligation referred to in the preceding sentence.
4.08. Contracts, Agreements and Instruments. There are no contracts,
agreements and other instruments of Process, as well as verbal understandings,
involving an obligation on the part of Process to pay or to render services,
individually or in the aggregate, in excess of $5,000 per year or to receive
payments in excess of $5,000 per year, except as described in this Agreement.
There are no verbal and written contracts, arrangements, and understandings
with officers, directors, and five percent or greater shareholders.
4.09. Consents and Approvals; No Violation. The execution and
delivery and performance of this Agreement by Process will not (a) conflict
with or result in any breach of any provision of the Articles of
Incorporation, Bylaws or other organization documents of Process, (b) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority (as defined herein), or where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have a Material
Adverse Effect, (c) result in a material default (with or without due notice
or lapse of time or both) (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, contract, license, agreement or other
instrument or obligation to which Process is a party or by which Process or
any of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been requested, (d) result in the creation or imposition of any
lien, charge or other encumbrance on the assets of Process, or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Process or any of its assets.
4.10. Balance Sheet Items. As reported on Process' quarterly report
on Form 10-QSB for the three-month period ended February 28, 2006, Process had
total assets of $0, total liabilities of $95,725, and there are no undisclosed
and/or contingent liabilities (including all taxes, assessments, and other
governmental charges payable by it or levied upon it or its properties,
assets, income, or franchises). Process also does not have any present
liability of any nature, accrued or contingent, of the type required to be
reflected on a balance sheet or in appropriate footnotes prepared in
accordance with GAAP. At Closing, there will be no change to assets and all
liabilities (including undisclosed and/or contingent and taxes) shall be
settled and/or paid in full.
4.11. Permits and Licenses. Except to satisfy the representations
set forth in Section 4.01, Process is not required to have or maintain any
permits, licenses, and other similar authorizations necessary for the conduct
of its business as now being conducted by it, and it is not in default in any
respect under any such permits, licenses, or authorizations. No royalties,
commissions, or fees are payable by Process to any person by reason of the
ownership or use of any intangible property. Process is the sole and
exclusive owner of all of its assets, does not use any of its assets by the
consent of any other person and is not required to and does not make any
payments to others with respect thereto.
There are no material licenses, sub-licenses, or agreements relating to the
use of any intangible property of Process now in effect, and Process and
Process Shareholders have no Knowledge that any intangible property of Process
is being infringed by others. No claim that would have a Material Adverse
Effect on the business of Process is pending or, to the Knowledge of Process
and Process Shareholders, threatened, or has been made since Process's
inception to the effect that, nor does Process and Process Shareholders have
any Knowledge that, the operation of Process's business or any method,
process, part, or material that Process employs, conflicts in any material way
with, or infringes in any material way upon any rights of the type enumerated
above, owned by others.
4.12. Properties. Process has good and valid title to all properties
and assets used in its business or owned by it, free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances.
4.12.01. Set forth in the SEC Filings is a true and complete
list of all properties and assets owned, leased, or licensed by Process,
including with respect to such properties and assets leased or
licensed by Process, a description of such lease or license. All
such properties and assets owned by Process are reflected in its
last balance sheet as reported in the SEC Filings. All properties
and assets owned, leased, or licensed by Process are in good and
usable condition (reasonable wear and tear, which is not such as to
have a Material Adverse Effect on the operation of the business of
Process, excepted).
4.12.02. The properties and assets owned, leased, or licensed
by Process constitute all such properties and assets which are
necessary to the business of Process as presently conducted.
4.13. Hazardous Materials. Process is not in the business of
possession, transportation, or disposal of hazardous materials.
4.14. Changes or Events. Since Process's last balance sheet as
disclosed in its SEC Filings:
4.14.01. There has been no event or condition affecting Process
which would have a Material Adverse Effect on Process.
4.14.02. Process has not authorized, declared, paid or effected
any dividend or liquidation or other distribution in respect of Process
Stock or other equity interest or any direct or indirect redemption,
purchase or other acquisition of any equity interest of Process,
except preferred stock.
4.14.03. Process has not had any changes in its condition
(financial or otherwise), liabilities, assets, or business or in any of
its business relationships, including relationships with suppliers or
customers, that, when considered individually or in the aggregate,
might reasonably be expected to have a Material Adverse Effect.
4.14.04. Process has not experienced any destruction of, damage
to, or loss of any asset (regardless of whether covered by insurance)
that, when considered individually or in the aggregate, might
reasonably be expected to have a Material Adverse Effect.
4.14.05. Process has not made any changes in accounting methods
or practices (including, without limitation, any change depreciation
or amortization policies or rates), except for any such changes as
were required by law.
4.14.06. Other than in the ordinary course of business, Process
has not increased the salary or other compensation payable or to become
payable by Process to any employee, or the declaration, payment, or
commitment or obligation of any kind for the payment by Process of a
bonus or other additional salary or compensation to any such person.
4.14.07. Process has not sold, leased, transferred, or assigned
any of their assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
4.14.08. No party has accelerated, terminated, modified or
cancelled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than
$5,000 to which Process is a party;
4.14.09. Process has not made any loans to any person or
entity, or guaranteed any loan;
4.14.10. To the Knowledge of Process and Process Shareholders,
Process has not suffered any loss or any threatened loss of any
permit, license, qualification, special charter or certificate of
authority held or enjoyed or formerly held or enjoyed by Process
which loss has had or upon occurrence might reasonably be expected
to have a Material Adverse Effect;
4.14.11. Process has operated its business in the ordinary
course and consistent with past practices so as to preserve its business
organization intact, to retain the services of its employees and to
preserve its goodwill and relationships with suppliers, creditors,
customers, and others having business relationships with it;
4.14.12. Process has not issued any note, bond or other debt
security or created, incurred or assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligations;
4.14.13. Process has not delayed or postponed the payment of
accounts payable and other liabilities outside the ordinary course
of business;
4.14.14. Process has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees,
outside the ordinary course of business; and
4.14.15. Process has not made any agreement to do any of the
things described in the preceding clauses 4.14.01 through 4.14.15.
4.15. Intellectual Property. Process does not own any Intellectual
Property.
4.16. No Defaults. The consummation of the transactions
contemplated by this Agreement will not result in or constitute any of the
following: (i) a breach of any term or provision of any other agreement of
Process that will not be waived or released at Closing; (ii) a default or an
event that will not be waived or released at Closing, and that, with notice or
lapse of time or both, would be a default, breach, or violation of the
Articles of Incorporation or Bylaws of Process or of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust, or other agreement, instrument, any Intellectual Property, or
arrangement to which Process is a party or by which Process or its assets are
bound; (iii) an event that will not be waived or released at Closing and that
would permit any party to terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of Process; (iv) the creation
or imposition of any lien, charge, or encumbrance on any of Process's assets;
or (v) a violation of any law or any rule or regulation of any administrative
agency or governmental body unrelated to the business or any order, writ,
injunction or decree of any court, administrative agency or governmental body
to which Process is subject.
4.17. No Prohibited Payments. Neither Process nor any employee, or
agent of Process, has made or authorized any payment of funds of Process or on
behalf of Process prohibited by law and no funds of Process have been set
aside to be used for any payment prohibited by law.
4.18. Insurance. Process represents that it has no insurance
policies.
4.19. Completeness of Disclosure. No representation or warranty in
this Agreement and no Appendix, Schedule, Exhibit, or certificate prepared by
Process pursuant hereto and no statement made or other document prepared by
Process and furnished to the Company by Process contains any untrue statement
of a material fact or omits or will omit any material fact necessary in order
to make the statements contained therein not misleading.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PROCESS AND PROCESS SHAREHOLDERS
The obligations of Process and Process Shareholders under this Agreement
are subject, at the option of Process and Process Shareholders, to the
following conditions:
5.01. Accuracy of Representations and Compliance with Conditions. All
representations and warranties of Company or the Stockholders contained in
this Agreement shall be accurate when made and, in addition, shall be
materially accurate as of the Closing as though such representations and
warranties were then made by Company or such Stockholders on the part of
Company or any of the Stockholders. As of the Closing, the Company and the
Stockholders shall have performed and complied with all covenants and
agreements and satisfied all conditions required to be performed and complied
with by any of them at or before such time by this Agreement.
5.02. Other Closing Documents. Company and the Stockholders shall have
delivered to Process at or prior to the Closing such other documents as
Process may reasonably request in order to enable Process to determine whether
the conditions to their obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
5.03. Review of Proceedings. All actions, proceedings, instruments, and
documents required to carry out this Agreement, or any agreement incidental
thereto and all other related legal matters shall be subject to the reasonable
approval of counsel to Process, and the Company shall have furnished such
counsel for Process such documents as such counsel may have reasonably
requested for the purpose of enabling them to pass upon such matters.
5.04. Legal Action. There shall not have been instituted or threatened
any legal proceeding relating to, or seeking to prohibit or otherwise
challenging the consummation of, the transactions contemplated by this
Agreement or related agreements or to obtain substantial damages with respect
thereto.
5.05. No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, or decree proposed, promulgated, enacted,
entered, enforced, or deemed applicable to the transactions contemplated by
this Agreement by any federal, state, local, or other governmental authority
or by any court or other tribunal, including the entry of a preliminary or
permanent injunction, which, in the reasonable judgment of Process:
5.05.01. Makes any of the transactions contemplated by this
Agreement illegal;
5.05.02. Results in a delay which affects the ability of
Process to consummate any of the transactions contemplated by this
Agreement; or
5.05.03. Otherwise prohibits, restricts, or delays consummation
of any of the transactions contemplated by this Agreement or impairs
the contemplated benefits to Process of the transactions
contemplated by this Agreement.
5.06. Contractual Consents Needed. The parties to this Agreement
shall have obtained at or prior to the Closing all consents required for the
consummation of the transactions contemplated by this Agreement from any party
to any contract, agreement, instrument, lease, license, arrangement, or
understanding to which any of them is a party, or to which any of their
respective businesses, properties, or assets are subject, except where the
failure would not have a Material Adverse Effect.
5.07. Deliveries by Company and Stockholders:
5.07.1. The Company shall deliver a Certificate of President
in the form of Schedule 5.07.1.
5.07.2. ▇▇▇▇▇▇▇ Family Trust shall deliver a Certificate of
Stockholders in the form attached hereto as Schedule 5.07.2
affirming that the representations and warranties in this Agreement
are true and correct as of the Closing Date and that all covenants,
agreements and conditions required by this Agreement have been
performed and satisfied.
5.07.3. The Stockholders in the amount of at least 80% shall
execute this Agreement and deliver at Closing the signature pages of
this Agreement.
5.07.4. Company shall deliver Company Financial Statements
compliant with Regulation S-B.
5.07.5. Certain Stockholders, as reasonably requested by
Process, shall deliver a Lock-Up/Leak-Out Agreement in the
form of Schedule 5.07.5.
5.07.6. Each Stockholder shall deliver Company stock
certificates owned by each Stockholder and duly executed stock
powers in denomination set forth in Schedule 5.07.6.
5.07.7. The Company shall deliver an opinion of counsel,
dated the Closing Date, to Process.
5.07.8. The Company shall deliver to Process Shareholders a
signed Indemnification Agreement and payment as set forth in
Schedule 5.07.8.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDERS
The obligations of the Company and the Stockholders under this Agreement
are subject, at the option of the Company and the Stockholders, to the
following conditions:
6.01. Accuracy of Representations and Compliance with Conditions.
All representations and warranties of Process contained in this Agreement
shall be accurate when made and, in addition, shall be materially accurate as
of the Closing as though such representations and warranties were then made by
Process on the part of Process. As of the Closing, Process shall have
performed and complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with at or before such time
by this Agreement.
6.02. Other Closing Documents. Process shall have delivered to the
Company, at or prior to the Closing, such other documents as the Company may
reasonably request in order to enable the Company to determine whether the
conditions to its obligations under this Agreement have been met and otherwise
to carry out the provisions of this Agreement.
6.03. Review of Proceedings. All actions, proceedings, instruments,
and documents required to carry out this Agreement, or any agreement
incidental thereto and all other related legal matters shall be subject to the
reasonable approval of counsel to the Company and Process shall have furnished
such counsel such documents as such counsel may have reasonably requested for
the purpose of enabling them to pass upon such matters.
6.04. Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or
otherwise challenging the consummation of, the transactions contemplated by
this Agreement or related agreements set forth as an exhibit hereto, or to
obtain substantial damages with respect thereto.
6.05. No Governmental Action. There shall not have been any action
taken, or any law, rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement by any federal, state, local, or other
governmental authority or by any court or other tribunal, including the entry
of a preliminary or permanent injunction, which, in the reasonable judgment of
the Company:
6.05.01. Makes any of the transactions contemplated by this
Agreement illegal;
6.05.02. Results in a delay which affects the ability of the
Company to consummate any of the transactions contemplated by this
Agreement;
6.05.03. Otherwise prohibits, restricts, or delays consummation
of any of the transactions contemplated by this Agreement or impairs
the contemplated benefits to the Company or the Stockholder of the
transactions contemplated by this Agreement.
6.06. Reserved.
6.07. Other Agreements. Agreements set forth as exhibits or
schedules to this Agreement shall have been duly authorized, executed, and
delivered by the Parties thereto at or prior to the Closing, shall be in full
force, valid and binding upon the Parties thereto, and enforceable by them in
accordance with their terms at the Closing, and no party thereto at any time
from the execution thereof until immediately after the Closing shall have been
in violation of or in default in complying with any material provision
thereof.
6.08. Deliveries by Process:
6.08.1. Process shall deliver a Certificate of President of
Process in the form of Schedule 6.08.1.
6.08.2 Process Shareholders shall deliver a certificate
affirming that the representations and warranties in this Agreement
are true and correct as of the Closing Date and that all covenants,
agreements and conditions required by this Agreement have been
performed and satisfied.
6.08.3. Process Shareholders shall deliver a signed
Indemnification Agreement as set forth in Schedule 5.07.8.
6.08.4. Process shall deliver board of directors resolutions
acknowledging that its officers have resigned and be replaced
by the following Company officers: ▇▇▇▇ ▇▇▇▇▇▇▇ III
(CEO/President) and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Secretary).
6.08.5. Process shall deliver board of directors resolutions
acknowledging that the directors of Process shall be ▇▇▇▇
▇▇▇▇▇▇▇ III, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇. post-Closing.
6.08.6. Process shall deliver documents confirming that the
$95,725 of debt is settled and/or paid in full as of the Closing
Date.
6.08.7. Process shall deliver an opinion of counsel, dated
the Closing Date, to the Company.
6.08.8. Process shall deliver piggy-back registration rights
agreements for the affiliates of Process.
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE COMPANY
The Company covenants and agrees as follows:
7.01. Public Statements. Before the Company shall release any
information concerning this Agreement or the transactions contemplated by this
Agreement which is intended for or may result in public dissemination thereof,
the Company shall cooperate with Process, shall furnish drafts of all
documents or proposed oral statements to Process for comment, and shall not
release any such information without the written consent of Process. Nothing
contained herein shall prevent the Company from furnishing any information to
any governmental authority if required to do so by law.
7.02. Information. The Company agrees that it will not, and will
cause it representatives not to, use any information obtained pursuant to this
Agreement, as well as any other information obtained prior to the date hereof
in connection with its consideration of the transactions contemplated hereby
and the entering into of this Agreement, for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. The Company
shall keep confidential, and shall cause its representatives to keep
confidential, all information and documents obtained pursuant to this
Agreement), as well as any other information obtained prior to the date hereof
in connection with its consideration of the transactions contemplated hereby
and the entering into of this Agreement, unless such information (i) was
already known to the Company, (ii) is disclosed with the prior written
approval of the party to which such information pertains, (iii) is already
present in the public domain, or (iv) is required to be disclosed by law.
In the event that this Agreement is terminated or the transactions
contemplated hereby shall otherwise fail to be consummated, the Company shall
promptly cause all copies of documents or extracts thereof containing
information and data as to Process to be returned to Process.
7.03. No Adverse Actions. The Company agrees that it will not take
any action from the date hereof to the Closing inconsistent with its
representations, warranties, and covenants contained herein, except that the
Company intends to change its name to "▇▇▇▇▇▇▇ Tool and Supply".
ARTICLE VIII
COVENANTS AND AGREEMENTS OF PROCESS
Process covenants and agrees as follows:
8.01. Public Statements. Before Process shall release any
information concerning this Agreement or the transactions contemplated by this
Agreement which is intended for or may result in public dissemination thereof,
Process shall cooperate with the Company, shall furnish drafts of all
documents or proposed oral statements to the Company for comment, and shall
not release any such information without the written consent of the Company.
Nothing contained herein shall prevent Process from furnishing any information
to any governmental authority if required to do so by law.
8.02. Information. Process agrees that it will not, and will cause
it representatives not to, use any information obtained pursuant to this
Agreement, as well as any other information obtained prior to the date hereof
in connection with its consideration of the transactions contemplated hereby
and the entering into of this Agreement, for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. Process
shall keep confidential, and shall cause its representatives to keep
confidential, all information and documents obtained pursuant to this
Agreement), as well as any other information obtained prior to the date hereof
in connection with its consideration of the transactions contemplated hereby
and the entering into of this Agreement, unless such information (i) was
already known to Process, (ii) is disclosed with the prior written approval of
the party to which such information pertains, (iii) is already present in the
public domain, or (iv) is required to be disclosed by law.
In the event that this Agreement is terminated or the transactions
contemplated hereby shall otherwise fail to be consummated, Process shall
promptly cause all copies of documents or extracts thereof containing
information and data as to the Company to be returned to the Company.
8.03. No Adverse Actions. Process agrees that it will not take any
action from the date hereof to the Closing inconsistent with its
representations, warranties, and covenants contained herein.
ARTICLE IX
INDEMNIFICATION
9.01. Indemnification by Process Shareholders. Process Shareholders
shall indemnify, defend and hold harmless the Company and Stockholders against
any damage, loss, claim, liability, cost or expense, including reasonable fees
and disbursements of counsel, accountants, experts and other consultants
(collectively, "Damages"), resulting from, arising out of, or based upon any
misstatement or omission from any representation by, or any breach of
warranty, covenant or agreement of Process or the Process Shareholders
contained in this Agreement, including schedules, certificates and documents
delivered by Process and/or Process Shareholders.
9.02. Indemnification Procedures. Promptly after receipt by the
Company (the "Indemnitee"), of notice of any action, suit, proceeding, audit,
claim or potential claim (any of which is hereinafter individually referred to
as a "Circumstance"), which could give rise to a right to indemnification for
Damages pursuant to Section 9.01, the Indemnitee shall give the Process
Shareholders (the "Indemnitor") written notice describing the Circumstance in
reasonable detail; provided, that failure of Indemnitee to give such notice to
the Indemnitor shall not relieve the Indemnitor from any of its
indemnification obligations hereunder unless (and then only to the extent)
that the failure to give such notice prejudices the defense of the
Circumstance by the Indemnitee. Indemnitor shall pay such obligation and
assume such liability in full unless it disputes such Circumstance within ten
(10) days from the date of notice provided to Indemnitor.
9.03. Termination. Indemnification obligations of Process and
Process Shareholders terminate twelve months after the date of the signing of
this Agreement provided, however, that the Indemnification period will be
extended if there is a claim made during the twelve-month period.
9.04. Indemnification Agreement. This indemnification obligation
shall be embodied in an agreement which is attached hereto as Schedule 5.07.7.
ARTICLE X
MISCELLANEOUS
10.01. Expenses. Process and the Company shall each be solely
responsible for and bear all of its own respective expenses, including,
without limitation, expenses of legal counsel, accountants, financial and
other advisors, incurred at any time in connection with pursuing or
consummating the definitive agreements and the Transaction contemplated
herein.
10.02. Brokerage and Other Fees. Each party shall be responsible for
the fees of their respective brokers and/or professionals (including, without
limitation, legal and accounting fees) engaged to assist in the preparation,
negotiation and counseling with respect, and relating, to this Agreement and
consummation of the transactions contemplated herein, as well as their
respective out-of-pocket expenses.
10.03. Further Actions. At any time and from time to time, the
parties agree, at their expense, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the
purposes of this Agreement.
10.04. Understanding and Advice of Counsel. The Company, the
Stockholders, and Process have had the assistance of separate counsel
(including, without limitation, tax counsel) in carefully reviewing,
discussing and considering all terms of this Agreement; and, with the benefit
of such advice by counsel, who has read and considered this Agreement, have
agreed to execute the same. This Agreement shall not be construed against or
unfavorably to any party because of such party's involvement in the
preparation or drafting of this Agreement.
10.05. Modification. The Agreement and the schedules and exhibits
hereto set forth the entire understanding of the parties with respect to the
subject matter hereof supersede all existing agreements among them concerning
such subject matter, and may be modified only by a written instrument duly
executed by the Parties.
10.06. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be delivered by
personal delivery or by overnight delivery or mailed by certified mail, return
receipt requested (or by the most nearly comparable method if mailed from or
to a location outside of the United States), or delivered against receipt to
the party to whom it is to be given at the address of such party set forth on
the signature page to this Agreement. Any notice or other communication given
by certified mail (or by such comparable method) shall be deemed given at the
time of receipt thereof.
10.07. Waiver. Any waiver by any party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing
and, in the case of a corporate party, be authorized by a resolution of the
Board of Directors or by an officer of the waiving party.
10.08. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of each party's respective successors,
assigns, heirs, and personal representatives.
10.09. No Third-Party Beneficiaries. Except for the Investors which
are third-party beneficiaries to this Agreement, this Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement.
10.10. Severability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
10.11. Headings. The headings of this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
10.12. Counterparts, Governing Law; Venue. This Agreement may be
executed in any number of counterparts (facsimile signatures are sufficient),
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas without giving
effect to conflict of laws. Venue of any dispute concerning this Agreement
shall be exclusively in ▇▇▇▇▇▇ County, Texas.
10.13. Survival of Representations and Warranties. All
representations, warranties, covenants and agreements made by any party to
this Agreement shall survive for a period of twelve months after the Closing,
and upon expiration of such period, such representations and warranties shall
expire.
10.14. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise.
10.15. Post-Closing. The parties agree to execute, deliver, and take
action post-closing as necessary to effectuate any transaction herein
contemplated.
10.16. Exclusivity. The parties agree to discontinue all
negotiations with all prospective third parties concerning any acquisition,
merger, reorganization, disposition, investment or change of control
transaction ("Transaction") concerning the Company or Process until June 30,
2006, and the parties will not permit any of their respective affiliates,
officers, employees, agents or representatives, as applicable, to, directly or
indirectly, solicit, discuss, accept, approve, respond to, or engage in any
negotiations with respect to any Transaction. Each party will immediately
notify the other of the receipt of any inquiry, notice, or proposal relating
to any Transactions and will provide the other party with copies of any such
notice, inquiry or proposal relating to such Transactions.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective as of the date written in the preamble of this Agreement.
Process Technology Systems, Inc., ▇▇▇▇▇▇▇ Drilling Corporation,
a Nevada Corporation a Nevada a Nevada Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ III
-------------------------------- -------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. President ▇▇▇▇ ▇▇▇▇▇▇▇ III, President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PROCESS SHAREHOLDERS: ▇▇▇▇▇▇▇ FAMILY TRUST
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ III, Trustee
--------------------------------- --------------------------------
Number of Shares of Process Stock__ Number of Shares of Company Stock
--------------------------------- ---------------------------------
Address: ________________________ Address: ________________________
________________________ ________________________
/s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Number of Shares of Process Stock__
-----------------------------------
Address: __________________________
____________________________
OTHER ▇▇▇▇▇▇▇ STOCKHOLDERS:
Print Name: ____________________________
Address: _______________________________
_______________________________