STOCK EXCHANGE AGREEMENT
THIS AGREEMENT is made this ___ day of November, 2004, by and between
XXXXXXX X. XXXXX (the "Seller") and PTS, INC., a Nevada corporation ("PTS").
WHEREAS, the Seller owns 2,500,000 shares of the issued and outstanding
shares of the common stock, par value $0.001 per share, of GLOVE BOX, INC., a
Nevada corporation (the "GBI Common Stock"); and
WHEREAS, the Seller desires to transfer all of its right, title and
interest in the GBI Common Stock to PTS in exchange for shares of the Series B
convertible and redeemable preferred stock of PTS, par value $0.001 per share
(the "PTS Preferred Stock") as hereinafter provided; and
WHEREAS, PTS desires to acquire all of the shares of the GBI Common Stock
from the Seller;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties hereto agree as follows:
1. The Stock Exchange. Upon the terms and subject to the conditions
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set forth in this Agreement, the Seller shall exchange, sell, assign, and
transfer to PTS at the closing of this Agreement (the "Closing"), free and clear
of all liens and encumbrances, and PTS shall accept from the Seller at the
Closing all shares of the GBI Common Stock owned by the Seller. In
consideration therefor, PTS shall deliver to the Seller at the Closing,
2,500,000 shares of PTS Preferred Stock valued at approximately $12,500.00. The
PTS Preferred Stock is subject to the Certificate of Designation Establishing
Series B Preferred Stock of PTS, Inc. described in Attachment A hereto.
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2. Restrictive Legend. All shares of the PTS Preferred Stock to be
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delivered to the Seller hereunder shall be issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), inasmuch as such shares to be issued to the Seller will be
issued for investment purposes without a view to distribution. In addition, at
the time of the Closing, the Seller will have had access to information
concerning PTS and its business prospects, as required by the Securities Act.
Furthermore, the Seller acknowledges that there has been no general solicitation
or advertising for the purchase of the shares of the PTS Preferred Stock covered
by this Agreement. The securities are to be issued to the Seller after thorough
discussions that comprise less than 35 Non-Accredited Investors as defined in
the Securities Act. Finally, PTS's stock transfer agent will be instructed not
to transfer any of such shares, unless such shares are registered for resale or
there is an exemption with respect to their transfer.
All shares of the PTS Preferred Stock to be delivered to the Seller
hereunder shall bear a restrictive legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT."
Notwithstanding anything herein contained to the contrary, in the event
that any shares of the PTS Preferred Stock are converted into shares of the
common stock of PTS, par value $0.001 per share (the "PTS Common Stock"), such
shares of the PTS Common Stock shall be subject to the registration rights
described in the Registration Rights Agreement described in Attachment B hereto.
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3. Representations and Warranties of the Seller. Where a representation
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contained in this Agreement is qualified by the phrase "to the best of the
Seller's knowledge" (or words of similar import), such expression means that,
after having conducted a due diligence review, the Seller believes the statement
to be true, accurate, and
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complete in all material respects. Knowledge shall not be imputed nor shall it
include any matters which such person should have known or should have been
reasonably expected to have known. The Seller represents and warrants to PTS as
follows:
(a) Power and Authority. The Seller has full power and authority to
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execute, deliver, and perform this Agreement and all other agreements,
certificates or documents to be delivered in connection herewith, including,
without limitation, the other agreements, certificates and documents
contemplated hereby (collectively the "Other Agreements").
(b) Binding Effect. Upon execution and delivery by the Seller, this
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Agreement and the Other Agreements shall be and constitute the valid, binding
and legal obligations of the Seller, enforceable against the Seller in
accordance with the terms hereof and thereof, except as the enforceability
hereof or thereof may be subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(c) Effect. Neither the execution and delivery of this Agreement or
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the Other Agreements nor full performance by the Seller of his obligations
hereunder or thereunder will violate or breach, or otherwise constitute or give
rise to a default under, the terms or provisions of the Articles of
Incorporation, or the Bylaws of GBI, or, subject to obtaining any and all
necessary consents, of any contract, commitment or other obligation of GBI or
necessary for the operation of the business of GBI (the "Business") following
the Closing or any other material contract, commitment, or other obligation to
which GBI is a party, or create or result in the creation of any encumbrance on
any of the property of GBI. GBI is not in violation of its Articles of
Incorporation, Bylaws, or of any indebtedness, mortgage, contract, lease, or
other agreement or commitment.
(d) No Contracts, Arrangements, etc. There are no contracts,
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arrangements, understandings or relationships (legal or otherwise) among any of
the parties to this Agreement, or any other person with respect to any other
securities of GBI, including but not limited to transfer or voting of any of
securities of GBI, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies, naming the persons with whom such contracts,
arrangements, understandings or relationships have been entered into.
(e) No Consents. No consent, approval or authorization of, or
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registration, declaration or filing with any third party, including, but not
limited to, any governmental department, agency, commission or other
instrumentality, will, except such consents, if any, delivered or obtained on or
prior to the Closing, be obtained or made by the Seller prior to the Closing to
authorize the execution, delivery and performance by the Seller of this
Agreement or the Other Agreements.
(f) Capitalization. GBI is authorized by its Articles of
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Incorporation to issue 500 million shares of the GBI Common Stock. As of the
date of this Agreement, there are 10 million shares of the GBI Common Stock duly
and validly issued and outstanding, fully paid, and non-assessable. There are no
other classes of capital stock, outstanding options, contracts, commitments,
warrants, preemptive rights, agreements or any rights of any character affecting
or relating in any manner to the issuance of the GBI Common Stock or other
securities or entitling anyone to acquire the GBI Common Stock or other
securities of GBI.
(g) Stock Ownership. The Seller has good, absolute, and marketable
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title to 2,500,000 shares of the issued and outstanding GBI Common Stock. The
Seller has the complete and unrestricted right, power and authority to cause the
exchange, transfer, and assignment of the shares of the GBI Common Stock
pursuant to this Agreement. The delivery of the GBI Common Stock to PTS as
herein contemplated will vest in PTS good, absolute and marketable title to all
of the capital stock in GBI Common Stock as described herein, free and clear of
all liens, claims, encumbrances, and restrictions of every kind, except those
restrictions imposed by applicable securities laws or this Agreement.
(h) Organization and Standing of GBI. GBI is a duly organized and
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validly existing Nevada corporation in good standing, with all requisite
corporate power and authority to carry on the Business as presently conducted.
GBI has not qualified to do business in any other jurisdiction.
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(i) No Subsidiaries. GBI has no subsidiaries.
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(j) Liabilities. Except as set forth on Schedule 3(j) to this
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agreement, GBI does not have any liabilities.
(k) Financial Statement. The Seller has furnished PTS an audited
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balance sheet of GBI as of December 31, 2003, and the related statement of
income and retained earnings for the period covered thereby (the "Financial
Statement"). The Financial Statement (i) is in accordance with the books and
records of GBI; (ii) fairly presents the financial condition of GBI at such date
and the results of its operations for the period therein specified; (iii) was
prepared in accordance with generally accepted accounting principles applied
upon a basis consistent with prior accounting periods; and (iv) with respect to
all contracts and commitments of GBI, reflects adequate reserves for all
reasonably anticipated losses and costs in excess of anticipated income.
Specifically, but not by way of limitation, the Financial Statement discloses
all of the debts, liabilities, and obligations of any nature (whether absolute,
accrued, contingent, or otherwise and whether due or to become due) of GBI on
the dates therein specified (except such debts, liabilities, and obligations as
are not required to be reflected therein in accordance with generally accepted
accounting principles).
(l) Present Status. Since the date reflected on the Financial
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statement, GBI has not (i) incurred any material obligations or material
liabilities, absolute, accrued, contingent, or otherwise, except current trade
payables; (ii) discharged or satisfied any liens or encumbrances, or paid any
obligations or liabilities, except current Financial Statement liabilities and
current liabilities incurred since the dates reflected on the Financial
Statement, in each case, in the ordinary course of business; (iii) declared or
made any stockholder payment or distribution or purchased or redeemed any of its
securities or agreed to do so; (iv) mortgaged, pledged, or subjected to lien,
encumbrance, or charge any of its assets except as shall be removed prior to or
at the Closing; (v) canceled any debt or claim; (vi) sold or transferred any
assets of a material value except sales from inventory in the ordinary course of
business; (vii) suffered any damage, destruction, or loss (whether or not
covered by insurance) materially affecting its properties, business, or
prospects; (viii) waived any rights of a material value; (ix) entered into any
transaction other than in the ordinary course of business. Further, since the
date reflected on the Financial Statement, there has not been any change in or
any event or condition (financial or otherwise) affecting the property, assets,
liabilities, operations, or prospects of GBI, other than changes in the ordinary
course of its business, none of which has (either when taken by itself or taken
in conjunction with all other such changes) been materially adverse.
(m) Tax Returns and Audits. As of the date of this Agreement, GBI has
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duly filed all federal, state, and local tax returns as required to be filed by
it (including, but not limited to, all payroll or other employment related tax
returns), and has paid all federal, state and local taxes, including, but not
limited to all payroll and employment taxes, required to be paid with respect to
the periods covered by such returns. GBI has not been delinquent in the payment
of any tax, assessment, or governmental charge, and has not had any tax
deficiencies proposed or assessed against it and has not executed any waiver of
the statute of limitations on the assessment or collection of any tax.
(n) Litigation. Other than as reflected on Schedule 3(n) hereto,
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which is incorporated herein by reference for all purposes, there are no legal
actions, suits, arbitrations, or other legal, administrative or other
governmental proceedings pending or threatened against GBI, and the Seller is
not aware of any facts which to his knowledge may result in any such action,
suit, arbitration, or other proceeding.
(o) Employees. As of the date of this Agreement, GBI has no
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employees.
(p) Compliance with Laws and Regulations. Except as otherwise
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disclosed in Schedule 3(p) attached hereto, to the best of the Seller's
--------------
knowledge, GBI is in material compliance with all laws, ordinances, codes,
restrictions, regulations (environmental and otherwise) and other legal
requirements applicable to the conduct of the Business, the noncompliance with
which would be likely to have a material adverse effect on the Business; and
there are no lawsuits or proceedings pending or, to his knowledge, threatened
with respect to the foregoing.
(q) No Defaults. Other than as reflected on Schedule 3(q) attached
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hereto, to the best of the Seller's knowledge, GBI is not in default under any
provision of any lease, contract, commitment, obligation, note, bond, debenture,
mortgage, indenture, security agreement, guaranty, or other instrument of
indebtedness, and no
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existing condition exists which, with the giving of notice or the passage of
time, or both, would constitute such a default, in either case, which default is
or would be likely to have a material adverse effect on the Business.
(r) Permits and Approvals. Except as otherwise disclosed on Schedule
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3(r) attached hereto, to the best of the Seller's knowledge, GBI has all permits
----
and approvals required for the conduct of the Business and is not in material
default under any permit, approval or qualification, which default is likely to
have a material adverse effect on GBI or the Business, nor is there any existing
condition which, with the giving of notice or the passage of time, or both,
would constitute such a material default; (ii) other than those items listed on
Schedule 3(r) attached hereto, no permit, approval or qualification of any
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government or governmental unit, agency, board, body or instrumentality, whether
federal, state or local, is necessary for the conduct of the Business as same
has been and is being conducted; and (iii) there is no lawsuit or proceeding
pending or threatened with respect to any of the foregoing.
(s) Properties. GBI has good and marketable title in fee simple
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absolute to all real properties and good title to all other properties and
assets used in its business or owned by it (except real and other properties and
assets as are held pursuant to leases or licenses), free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances, other than as
shown on the Financial Statement, including, but not limited to a tax lien for
unpaid real estate taxes. Moreover:
(i) No real property owned, leased, licensed, or used by GBI
lies in an area which is, or to the best of the Seller's knowledge will be,
subject to zoning, use, or building code restrictions which would prohibit, and
no state of facts relating to the actions or inaction of another person or
entity or his ownership, leasing, licensing, or use of that real property in the
business in which GBI is now engaged or the business in which it contemplates
engaging.
(ii) The real and other properties and assets owned, leased, or
licensed by GBI constitute all such properties and assets which are necessary to
the business of GBI as presently conducted or as it contemplates conducting.
(t) Patents and Trademarks. To best of the Seller's knowledge, GBI
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owns, possesses and has good title to all of the copyrights, trademarks,
trademark rights, patents, patent rights, and licenses necessary in the conduct
of the Business. To best of the Seller's knowledge, GBI is not infringing upon
or otherwise acting adversely to the rights of any person, under, or in respect
to, any copyrights, trademarks, trademark rights, patents, patent rights, or
licenses owned by any person or entity, and there is no claim or pending or
threatened action with respect thereto. GBI has the unrestricted right to use
(free and clear of any rights or claims of others) all trade secrets, customer
lists, manufacturing and other processes incident to the manufacture, use or
sale of any and all products presently sold by it.
(u) Compliance with Environmental Laws. Except as otherwise disclosed
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on Schedule 3(u) attached hereto, to the best of the Seller's knowledge, GBI has
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not violated and is not in violation of the Federal Clean Air Act (42 U.S.C.
7401, et seq.), Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.),
the Federal Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901, et
seq.), the Federal Comprehensive Mountain Environmental Responsibility, Clean Up
and Liability Act of 1980 (42 U.S.C. 9601, et seq.), the Federal Toxic Substance
Control Act of 1976 (15 U.S.C. 2601, et seq.) or any state or local laws or
ordinances regulating the subjects covered by the federal statutes identified
above, including rules and regulations thereunder. Prior to the Closing, GBI
either directed, participated in and/or authorized that studies of the
environmental status of GBI's properties and operations of the Business be
prepared, which studies are listed or otherwise described in Schedule 3(u)
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hereto (collectively the "Studies"). The Studies, as well as those other
matters, correspondence, reports and the like disclosed in Schedule 3(u) hereto,
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have been delivered to PTS and PTS's counsel and environmental consultants and
are incorporated herein by reference as though set out herein. The Seller will
hold PTS harmless from any obligations, including fines or penalties, if any,
which may be assessed by any governmental agency, but excluding damages, (i)
that arose or may arise solely from operations by GBI through the Closing, (ii)
that arose or may arise solely from operations by GBI prior to the Closing at
sites other than at its locations, and (iii) with respect to all off site
disposal by GBI prior to the Closing.
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(v) Absence of Certain Changes or Events. Since September 30, 2004,
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there has not been any change in or any event or condition (financial or
otherwise) affecting the property, assets (including cash and all accounts
receivable), liabilities, operations, or prospects of GBI, other than changes in
the ordinary course of its business, none of which has (either when taken by
itself or taken in conjunction with all other such changes) been materially
adverse.
(w) Purchase and Outstanding Bids. No purchase commitments of GBI are
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in excess of normal, ordinary, and usual requirements of its business, or were
made at any price in excess of the then current market price or contained terms
and conditions more onerous than those usual and customary in the industry.
(x) Insurance Policies. There are in full force all policies of fire,
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liability, and other forms of insurance pertaining to the properties and assets
of GBI. Such policies are in an amount and against such losses and risks as are
generally maintained by comparable businesses.
(y) Compensation of Officers and Others. Since September 30, 2004,
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there has not been any change in any compensation, commission, bonus, or other
remuneration payable to any officer, director, agent, employee, or consultant of
GBI, other than in the ordinary course of business.
(z) Inventory. The inventory of GBI which is reflected on the
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Financial Statement and all inventory items which have been acquired since
September 30, 2004, consists of goods of such quality and in such quantities as
are salable in the ordinary course of its business with normal markup at
prevailing market prices. Each item of the inventory was valued at the then
current cost, if possible, and if not, at the then current manufacturer's
regular cost sheet available to distributors. Since September 30, 0000, XXX has
continued to replenish its inventory in a normal and customary manner consistent
with the prior and prudent practice prevailing in the business of GBI.
(aa) Schedule of Assets. As disclosed on Schedule 3(aa) attached
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hereto, is a schedule of assets owned by GBI containing (i) a true and complete
listing of all property owned by GBI; (ii) a true and complete legal description
of all real properties in which GBI has a leasehold interest, together with a
description of each indenture, lease, sublease, or other instrument under which
GBI claims or holds such leasehold interest, each of which is a good and valid
leasehold interest, and all of which are in effect and enforceable according to
their respective terms; (iii) a true and complete list of all patents, patent
applications, patent licenses, trademarks, trademark registrations, and
applications therefor, trade names, copyrights, and copyright registrations and
applications therefor owned by GBI; and (iv) as of September 30, 2004, a true
and complete list of all accounts receivable of GBI, together with information
as to the aging of each such account receivable.
(bb) Status on the Closing. On the Closing, GBI shall have (i) cash
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balances, plus certificates of deposit, equal to not less than $4,500; (ii)
accounts receivable, plus inventory, less accounts payable, equal to not less
than $-0-; and (iii) a stockholders' equity of not less than $4,500. GBI shall
deliver to PTS on the Closing a schedule prepared by the Chief Financial Officer
of GBI stating the amount of the items described in this paragraph as of the
Closing.
(cc) Labor Matters. Except as disclosed in Schedule 3(cc) hereto, to
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the best of the Seller's knowledge, GBI is in material compliance with all
applicable laws, rules or regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, and GBI has
not engaged in any unfair or illegal labor practice which has not been remedied
as of the date hereof. There is no unfair labor practices complaint or charge of
employment discrimination pending or, to the best of the Seller's knowledge,
threatened in writing against GBI with respect to any of the employees before
the National Labor Relations Board, if applicable, the Equal Employment
Opportunity Commission, or any other state, federal or local court or
governmental board, agency or commission. There is no labor strike, dispute,
work slowdown, work stoppage or other job action pending or, to the best of the
Seller's knowledge, threatened against GBI.
(dd) Employment Contracts. Except as disclosed in Schedule 3(dd)
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hereto, GBI has no employment contract, written or otherwise, with any employee
or former employee.
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(ee) Compliance with Law and Other Instruments. The business and
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operations of GBI have been and are being conducted in accordance with all
applicable laws, rules and regulations of all authorities, except those which do
not (either individually or in the aggregate) materially and adversely affect
GBI.
(ff) Contracts. Except as disclosed on Schedule 3(ff) attached hereto
--------- --------------
or on any other schedule attached to this Agreement, GBI is not a party to, or
otherwise bound by any (i) written or oral contract; (ii) employment or
consultant contract not terminable at will without cost or other liability;
(iii) labor union contracts; (iv) bonus, pension, profit sharing, retirement,
share purchase, stock option, hospitalization, group insurance, or similar
employee benefit plan; (v) any real or personal property lease, as lessor or
lessee; (vi) advertising or public relations contract; (vii) purchase, supply or
service contract, which cannot be terminated without cost or expense to GBI if
such termination occurs with less than 30 day's notice; (viii) deed of trust,
mortgage, conditional sales contract, security agreement, pledge agreement,
trust receipt, or any other agreement or arrangement whereby any of the assets
or property of GBI is subject to a lien, encumbrance, charge or other
restriction except such as shall be satisfied prior to the Closing; (ix) license
agreement, whether as licensee or licensor; (x) contract or agreement involving
any expenditure by GBI of more than $2,500.00 in the aggregate; (xi) contract or
agreement which GBI cannot terminate by giving less than 30 day's notice; and
(xii) contract to be performed in whole or in part more than 90 days from the
date thereof and which cannot be terminated without cost or liability to GBI.
Other than as disclosed on Schedule 3(ff) attached hereto, to the best of the
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Seller's knowledge, GBI has in all respects performed all obligations required
to be performed to date, and is not in material default in any respect under any
of the contracts, agreements, leases, documents, or other commitments to which
it is a party or otherwise bound or affected. All parties having material
contracts with GBI are in material compliance therewith, and are not in material
default thereunder.
(gg) Authority. No consent, authorization, approval, order, license,
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certificate, or permit of or from, or declaration of filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by GBI for the execution, delivery, or performance of this Agreement by
GBI. No consent of any party to any contract, agreement, instrument, lease,
license, arrangement, or understanding to which GBI is a party, or to which any
of its properties or assets are subject, is required for the execution, delivery
or performance of this Agreement; and the execution, delivery, and performance
of this Agreement will not violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or result
in a breach of any term of the articles of incorporation (or other charter
document) or bylaws of GBI or violate, result in a breach of, or conflict with
any law, rule, regulation, order, judgment, or decree binding on GBI or to which
any of its operations, business, properties, or assets are subject.
(hh) Records. The books of account and minute books of GBI are
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complete and correct, and reflect all those transactions involving its business
which properly should have been set forth in such books.
(ii) Representations and Warranties True and Complete. All
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representations and warranties of the Seller in this Agreement and the Other
Agreements are true, accurate and complete in all material respects as of the
Closing.
(jj) No Knowledge of Default. The Seller has no knowledge that any
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representations and warranties of PTS contained in this Agreement or the Other
Agreements are untrue, inaccurate or incomplete or that PTS is in default under
any term or provision of this Agreement or the Other Agreements.
(kk) No Untrue Statements. No representation or warranty by the Seller
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in this Agreement or in any writing furnished or to be furnished pursuant
hereto, contains or will contain any untrue statement of a material fact, or
omits, or will omit to state any material fact required to make the statements
herein or therein contained not misleading.
(ll) Reliance. The foregoing representations and warranties are made
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by the Seller with the knowledge and expectation that PTS is placing complete
reliance thereon.
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4. Representations and Warranties of PTS. Knowledge shall not be
----------------------------------------
imputed nor shall it include any matters which such person should have known or
should have been reasonably expected to have known. PTS hereby represents and
warrants to the Seller as follows:
(a) Power and Authority. PTS has full power and authority to execute,
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deliver and perform this Agreement and the Other Agreements.
(b) Binding Effect. Upon execution and delivery by PTS, this
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Agreement and the Other Agreements shall be and constitute the valid, binding
and legal obligations of PTS enforceable against PTS in accordance with the
terms hereof or thereof, except as the enforceability hereof and thereof may be
subject to the effect of (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(c) No Consents. No consent, approval or authorization of, or
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registration, declaration or filing with any third party, including, but not
limited to, any governmental department, agency, commission or other
instrumentality, will, except such consents, if any, delivered or obtained on or
prior to the Closing, be obtained or made by PTS prior to the Closing to
authorize the execution, delivery and performance by PTS of this Agreement or
the Other Agreements.
(d) PTS's Representations and Warranties True and Complete. All
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representations and warranties of PTS in this Agreement and the Other Agreements
are true, accurate and complete in all material respects as of the Closing.
(e) No Knowledge of the Seller's Default. PTS has no knowledge that
--------------------------------------
any of the Seller's representations and warranties contained in this Agreement
is untrue, inaccurate or incomplete in any respect or that the Seller is in
default under any term or provision of this Agreement or the Other Agreements.
(f) No Untrue Statements. No representation or warranty by PTS in
----------------------
this Agreement or in any writing furnished or to be furnished pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits, or
will omit to state any material fact required to make the statements herein or
therein contained not misleading.
(g) Reliance. The foregoing representations and warranties are made
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by PTS with the knowledge and expectation that the Seller is placing complete
reliance thereon.
5. Actions of GBI Pending the Closing. The Seller agrees that from the
-------------------------------------
date hereof through the Closing:
(a) Operations. The Seller will use his best efforts to cause GBI to
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(i) be operated in keeping with its customary practices and in compliance with
all applicable laws, rules and regulations; and (ii) not engage in any
transaction or make any commitment or expenditure except in the ordinary course
of business.
(b) No Change in Corporate Charter. No change will be made in the
----------------------------------
Articles of Incorporation or the Bylaws of GBI, except as may be first approved
in writing by PTS.
(c) No Change in Capital Structure. No change will be made in the
--------------------------------
authorized or issued capital stock of GBI, including the issuance of any bonds,
notes, or other securities, except as may be first approved in writing by PTS.
(d) No Default. GBI shall timely pay and/or not suffer any default
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with respect to any of its contracts, commitments or obligations. GBI shall also
continue to pay as they become due all accounts payable of GBI.
(e) No Contracts. No contract or commitment will be entered into by
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or on behalf of GBI.
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(f) No Liabilities. GBI shall not incur any obligation or liability,
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except as may be first approved in writing by PTS.
(g) Access to Records. The Seller shall cause GBI to afford PTS
-------------------
access, during normal business hours, to all of its business operations,
properties, books, files, and records, and will cooperate in PTS's examination
thereof. No such examination, however, shall constitute a waiver or
relinquishment by PTS of its right to rely upon the Seller's covenants,
representations, and warranties made herein or pursuant hereto. Until the
Closing hereunder or the termination of this Agreement, whichever shall occur
first, and after the termination of this Agreement in the event this Agreement
does not close, PTS will hold in confidence all information so obtained by PTS
as a result of such examination.
(h) Compliance. The Seller shall cause GBI and its officers and
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employees to comply with all applicable provisions of this Agreement.
6. Conditions Precedent to Obligations of PTS. All obligations of PTS
----------------------------------------------
under this Agreement are subject to the fulfillment, prior to or at the Closing,
of the following conditions:
(a) Representations and Warranties True at the Closing. The
-------------------------------------------------------
representations and warranties of the Seller herein shall be deemed to have been
made again as of the Closing, and then be true and correct, subject to any
changes contemplated by this Agreement. The Seller shall have performed all of
the obligations to be performed by him hereunder on or prior to the Closing.
(b) Proof of Authority. PTS's counsel shall have received evidence
--------------------
reasonably sufficient to such counsel that the Seller has all requisite
authorizations necessary for consummation by the Seller of the transactions
contemplated hereby, and there has not been issued, and there is not in effect,
any injunction or similar legal order prohibiting or restraining consummation of
any of the transactions herein contemplated, and no legal or governmental
action, proceeding or investigation which might reasonably be expected to result
in any such injunction or order is pending.
(c) Deliveries at the Closing. The Seller shall have delivered to PTS
-------------------------
at the Closing all of the documents required to be delivered hereunder.
(d) Certification. The Seller shall have delivered to PTS at the
-------------
Closing a certificate dated as of the applicable closing, executed by the
Seller, certifying that the conditions specified in subparagraphs (a), (b), and
(c) of this Paragraph 6 have been fulfilled.
(e) Resignations of Directors and Officers. The Seller shall have
------------------------------------------
delivered to PTS at the Closing, the written resignations of all of the
directors and officers of GBI.
(f) Status of Litigation. With respect to any matters affecting GBI
----------------------
and in litigation as described in Schedule 3(n), PTS shall have the right to
-------------
make an independent review of such matters. If PTS is not satisfied with such
review, then PTS shall have the option to terminate this Agreement.
(g) Corporate Records, etc. The Seller shall have delivered to PTS
------------------------
the originals of the Articles of Incorporation, Bylaws, minute books, and other
corporate governance materials used since the inception of GBI.
(h) Other Matters. All corporate and other proceedings and actions
--------------
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to any such transaction shall be satisfactory in form and substance
to PTS and its counsel, whose approval shall not be unreasonably withheld.
7. Conditions Precedent to Obligations of the Seller. All obligations
-----------------------------------------------------
of the Seller under this Agreement are subject to the fulfillment, prior to or
at the Closing, of the following conditions:
8
(a) Representations and Warranties True at Closing. The
---------------------------------------------------
Representations and warranties of PTS herein shall be deemed to have been made
again at the Closing, and then be true and correct, subject to any changes
contemplated by this Agreement. PTS shall have performed all of the obligations
to be performed by PTS hereunder on or prior to the Closing.
(b) Proof of Authority. The Seller's counsel shall have received
--------------------
evidence reasonably sufficient to such counsel that PTS has all requisite
authorizations necessary for consummation by PTS of the transactions
contemplated hereby, and there has not been issued, and there is not in effect,
any injunction or similar legal order prohibiting or restraining consummation of
any of the transactions herein contemplated, and no legal or governmental
action, proceeding or investigation that might reasonably be expected to result
in any such injunction or order is pending.
(c) Certification. PTS shall have delivered to the Seller at the
-------------
Closing a certificate dated as of the applicable closing, executed by the
President and Secretary of PTS, certifying that the conditions specified in
subparagraphs (a) and (b) of this Paragraph 7 have been fulfilled.
(d) No Orders. There has not been issued, and there is not in effect,
---------
any injunction or similar legal order prohibiting or restraining consummation of
any of the transactions herein contemplated, and no legal or governmental
action, proceeding or investigation which might reasonably be expected to result
in any such injunction or order is pending.
(e) Other Matters. All corporate and other proceedings and actions
--------------
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to any such transaction shall be satisfactory in form and substance
to the Seller and his counsel, whose approval shall not be unreasonably
withheld.
8. The Nature and Survival of Representations, Covenants and Warranties.
---------------------------------------------------------------------
All statements and facts contained in any memorandum, certificate, instrument,
or other document delivered by or on behalf of the parties hereto for
information or reliance pursuant to this Agreement, shall be deemed
representations, covenants and warranties by the parties hereto under this
Agreement. All representations, covenants and warranties of the parties shall
survive the Closing and all inspections, examinations, or audits on behalf of
the parties, shall expire one year following the Closing.
9. Indemnification by the Seller. The Seller agrees to indemnify and hold
-----------------------------
harmless PTS against and in respect to all damages (as hereinafter defined) in
excess of $5,000.00. Damages, as used herein shall include any claim, salary,
wage, action, tax, demand, loss, cost, expense, liability (joint or several),
penalty, and other damage, including, without limitation, counsel fees and other
costs and expenses reasonably incurred in investigating or attempting to avoid
same or in opposition to the imposition thereof, or in enforcing this indemnity,
resulting to PTS from any inaccurate representation made by or on behalf of the
Seller in or pursuant to this Agreement, breach of any of the warranties made by
or on behalf of the Seller in or pursuant to this Agreement, or breach or
default in the performance by the Seller of any of the obligations to be
performed by him hereunder.
Notwithstanding the scope of the Seller's representations and warranties
herein, or of any individual representation or warranty, or any disclosure to
PTS herein or pursuant hereto, or the definition of damages contained in the
preceding sentence, or PTS's knowledge of any fact or facts at or prior to the
Closing, damages shall also include all debts, liabilities, and obligations of
any nature whatsoever (whether absolute, accrued, contingent, or otherwise, and
whether due or to become due) of GBI, as of the date hereof not reflected in the
Financial Statement or any other exhibit furnished hereunder, whether known or
unknown by the Seller; all claims, actions, demands, losses, costs, expenses,
and liabilities resulting from any litigation from causes of action arising
prior to the Closing hereunder involving GBI or any owners thereof other than
the Seller, whether or not disclosed to PTS; all claims, actions, demands,
losses, costs, expenses, liabilities and penalties resulting from (i) GBI's
infringement or claimed infringement upon or acting adversely to the rights or
claimed rights of any person under or in respect to any copyrights, trademarks,
trademark rights, patents, patent rights or patent licenses; or (ii) any claim
or pending or threatened action with respect to the matters described in clause
(i); all claims, actions, demands, losses, costs, expenses, liabilities or
penalties resulting from GBI's failure in any respect to perform any obligation
required by it to be performed at or prior to the date hereof or at or prior to
the Closing, or by reason of any default
9
of GBI, at the date hereof or at the Closing, under any of the contracts,
agreements, leases, documents, or other commitments to which it is a party or
otherwise bound or affected; and all losses, costs, and expenses (including
without limitation all fees and disbursements of counsel) relating to damages.
Notwithstanding anything contained in this Agreement to the contrary, the
right to indemnification described in this paragraph shall expire one year after
the Closing hereunder, except in the case of the proven fraud by the Seller
hereunder as determined by a court of competent jurisdiction in connection with
any such claim for indemnification, in which event such right to indemnification
shall expire one year after the discovery of such fraud.
10. Records of GBI. For a period of five years following the Closing,
--------------
the books of account and records of GBI pertaining to all periods prior to the
Closing shall be available for inspection by the Seller for use in connection
with tax audits.
11. Default by PTS. If the Seller does not default hereunder and PTS
--------------
defaults hereunder, the Seller may elect to terminate this Agreement as well as
any other agreement executed by the Seller in connection with the transactions
contemplated by this Agreement, including but not limited to any independent
nondisclosure agreement or any other independent agreements, whereupon no party
shall be liable to the other hereunder, or the Seller may assert any remedy,
including specific performance, which the Seller may have by reason of any such
default of PTS. From and after the Closing, subject to the terms and provisions
hereof, in the event of a breach by any party of the terms of this Agreement or
any obligation of a party which survives the Closing hereunder, the
non-defaulting party may assert any remedy, either at law or in equity, to which
such non-defaulting party may be entitled.
12. Default by the Seller. If PTS does not default hereunder and the
------------------------
Seller defaults hereunder, PTS may elect to terminate this Agreement as well as
any other agreement executed by PTS in connection with the transactions
contemplated by this Agreement, including but not limited to any independent
nondisclosure agreement or any other independent agreements, whereupon no party
shall be liable to the other hereunder, or PTS may assert any remedy, including
specific performance, which PTS may have by reason of any such default of the
Seller. From and after the Closing, subject to the terms and provisions hereof,
in the event of a breach by any party of the terms of this Agreement or any
obligation of a party which survives the Closing hereunder, the non-defaulting
party may assert any remedy, either at law or in equity, to which such
non-defaulting party may be entitled.
13. Cooperation. PTS and the Seller will each cooperate with the other, at
-----------
the other's request and expense, in furnishing information, testimony, and other
assistance in connection with any actions, proceedings, arrangements, disputes
with other persons or governmental inquiries or investigations involving the
Seller's or PTS's conduct of the Business or the transactions contemplated
hereby.
14. Further Conveyances and Assurances. After the Closing, each party
-------------------------------------
will, without further cost or expense to, or consideration of any nature from
the other, execute and deliver, or cause to be executed and delivered, to the
other, such additional documentation and instruments of transfer and conveyance,
and will take such other and further actions, as the other may reasonably
request as more completely to sell, transfer and assign to consummate the
transactions contemplated hereby.
15. The Closing. The Closing of this Agreement shall be on or before
------------
November 30, 2004, subject to acceleration or postponement from time to time as
the parties hereto may mutually agree. The Closing shall be at 0000 Xxxxxxxxxx
Xxxx, Xxxxxx, Xxxxxxxxxx at 2:00 p.m. Pacific time, unless another hour or place
is mutually agreed upon by the parties hereto.
16. Deliveries at the Closing by the Seller. At the Closing, the Seller
-----------------------------------------
shall deliver to PTS:
(a) Certificates representing 2,500,000 shares of the GBI Common
Stock, which certificates represent all of the issued and outstanding GBI Common
Stock, duly endorsed in favor of PTS free and clear of all liens, claims,
encumbrances, and restrictions of every kind, except those imposed by the
Securities Act and other applicable securities laws.
(b) The proof of authority described in Paragraph 6(b) hereof.
10
(c) The certification described in Paragraph 6(d) hereof.
(d) The resignations of all of the directors and officers of GBI.
(e) The corporate records of GBI.
(f) Any other document which may be necessary to carry out the intent
of this Agreement.
All documents reflecting any actions taken, received or delivered by the
Seller pursuant to this Paragraph 16 shall be reasonably satisfactory in form
and substance to PTS and its counsel.
17. Deliveries at the Closing by PTS. At the Closing, PTS shall deliver to
--------------------------------
the Seller:
(a) Certificates representing 2,500,000 shares of the PTS Preferred
Stock duly endorsed in favor of the Seller free and clear of all liens, claims,
encumbrances, and restrictions of every kind, except those imposed by the
Securities Act and other applicable securities laws.
(b) The Registration Rights Agreement described in Attachment B
------------
hereto.
(c) The proof of authority described in Paragraph 7(b) hereof.
(d) The certification described in Paragraph 7(c) hereof.
(e) Any other document which may be necessary to carry out the intent
of this Agreement.
All documents reflecting any actions taken, received or delivered by PTS
pursuant to this Paragraph 17 shall be reasonably satisfactory in form and
substance to the Seller and his counsel.
18. No Assignment. This Agreement shall not be assignable by any party
--------------
without the prior written consent of the other parties, which consent shall be
subject to such parties' sole, absolute and unfettered discretion.
19. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Seller, addressed to Xx. Xxxxxxx X. Xxxxx at
0000 Xxxxxxxxxx Xxxx, Xxxxxx, Xxxxxxxxxx 00000, telecopier (000) 000-0000, and
e-mail xxxxxxxxx@xxx.xxx, and if to PTS, addressed to Mr. Xxxxx Xxxx at 0000
Xxxxxx Xxxxxxxx Xxxx, Xx. 00, Xxx Xxxxx, Xxxxxx 00000, telecopier (702)
878-0827, and e-mail xxx0000@xxxxx.xxx. Any party may change its address for
purposes of receiving notices pursuant to this Agreement upon 10 days written
notice.
20. Brokerage. The Seller and PTS agree to indemnify and hold harmless
---------
each other against, and in respect of, any claim for brokerage or other
commissions relative to this Agreement, or the transactions contemplated hereby,
based in any way on agreements, arrangements, understandings or contracts made
by either party with a third party or parties whatsoever.
21. Attorney's Fees. In the event that it should become necessary for any
----------------
party entitled hereunder to bring suit against any other party to this Agreement
for enforcement of the covenants contained in this Agreement, the parties hereby
covenant and agree that the party or parties who are found to be in violation of
said covenants shall also be liable for all reasonable attorney's fees and costs
of court incurred by the other party or parties that bring suit.
22. Benefit. All the terms and provisions of this Agreement shall be
-------
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
11
23. Construction. Words of any gender used in this Agreement shall be held
------------
and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.
24. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
25. Cumulative Rights. The rights and remedies of any party under this
------------------
Agreement and the instruments executed or to be executed in connection herewith,
or any of them, shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
26. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
27. Time of the Essence. Time is of the essence of this Agreement.
----------------------
28. Multiple Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
29. Controlling Agreement. In the event of any conflict between the terms
----------------------
of this Agreement or any attachments or schedules referred to herein, the terms
of this Agreement shall control.
30. Governing law; Jurisdiction. This Agreement shall be governed by and
-----------------------------
construed in accordance with the laws of the State of California without regard
to any conflicts of laws provisions thereof. Each party hereby irrevocably
submits to the personal jurisdiction of the United States District Court located
in San Diego, California, as well as of the Superior Courts of the State of
California in San Diego County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
31. Entire Agreement. This instrument and the attachments hereto contain
-----------------
the entire understanding of the parties and may not be changed orally, but only
by an instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
IN WITNESS WHEREOF, this Agreement has been executed in multiple
counterparts on the date first written above.
---------------------------------------------
XXXXXXX X. XXXXX
12
PTS, INC.
By
-------------------------------------------
Xxxxx Xxxx, President
Attachments:
-----------
Attachment A Certificate of Designation Establishing Series B Preferred
Stock of PTS, Inc.
Attachment B Registration Rights Agreement
Schedule 3(n) Litigation
Schedule 3(p) Compliance with Laws and Regulations
Schedule 3(q) Defaults
Schedule 3(u) Compliance with Environmental Laws
Schedule 3(aa) Assets
Schedule 3(cc) Labor Matters
Schedule 3(dd) Employment Contracts
Schedule 3(ff) Contracts
13
ATTACHMENT A
CERTIFICATE OF DESIGNATION ESTABLISHING SERIES B PREFERRED STOCK OF PTS, INC.
XXXX XXXXXX
SECRETARY OF STATE
[GRAPHIC 000 XXXXX XXXXXX XXXXXX, XXXXX 0
XXXXXXX] XXXXXX XXXX, XXXXXX 00000-0000
(000) 000 0000
WEBSITE: XXXXXXXXXXXXXXXX.XXX
FILED# C22677-99
---------------------------------------------- ---------
CERTIFICATE OF DESIGNATION SEP 13 2004
(PURSUANT TO NRS 78.1955) IN THE OFFICE OF
/s/ Xxxx Xxxxxx
---------------------------------------------- XXXX XXXXXX
SECRETARY OF STATE
Important: Read attached instructions before ABOVE SPACE IS FOR
completing form. OFFICE USE ONLY
CERTIFICATE OF DESIGNATION
--------------------------
FOR NEVADA PROFIT CORPORATIONS
------------------------------
(PURSUANT TO NRS 78.1955)
1. Name of corporation: PTS, INC.
--------------------------------------------------------
2. By resolution of the board of directors pursuant to a provision in the
articles of incorporation, this certificate establishes the following regarding
the voting powers, designations, preferences, limitations, restrictions and
relative rights of the following class or series of stock:
Series B Preferred Stock
--------------------------------------------------------------------------------
The board has designated 20,000,000 shares of Series B preferred stock,
--------------------------------------------------------------------------------
$.001 par value, each share of Series B preferred stock can convert into 10
--------------------------------------------------------------------------------
shares of common.
--------------------------------------------------------------------------------
Please "See Attached"
--------------------------------------------------------------------------------
3. Effective date of filing (optional):
------------------------------------
(must not be later than 90 days
after the certificate is filed)
4. Officer Signature: /s/ illegible
-----------------------------------------------------------
FILING FEE: $175.00
IMPORTANT: Failure to include any of the above information and submit the proper
fees may cause this filing to be rejected.
SUBMIT IN DUPLICATE
This for must be accompanied by Nevada Secretary of AM
Appropriate fees. See attached 78.1955 Designation 2003
Fee schedule. Revised on: 11/03/03
ARTICLES OF DESIGNATION
of
SERIES B PREFERRED STOCK
of
PTS, INC.
Pursuant to Section 78.195 of the
Revised Statutes of the State of Nevada
PTS, INC., a corporation organized and existing under the laws of the State
of Nevada (the "Corporation"), does hereby certify that, pursuant to the
authority conferred on its board of directors (the "Board of Directors") by its
articles of incorporation (the "Articles of Incorporation"), as amended, and in
accordance with Section 78.195 of the Revised Statutes of the State of Nevada,
the Board of Directors (or, as to certain matters allowed by law, a duly
authorized committee thereof) adopted the following resolution establishing a
series of 20,000,000 shares of Preferred Stock of the Corporation designated as
"Series B Preferred Stock."
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Corporation (the "Corporation") by the Articles of
Incorporation, a series of Preferred Stock, $.001 par value, of the
Corporation be and hereby is established and created, and that the
designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
CONVERTIBLE PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
-----------------------
designated as "Series B Convertible Preferred Stock," and the number of
shares constituting such series shall be 20,000,000. Such series is
referred to herein as the "Convertible Preferred Stock."
2. Stated Capital. The amount to be represented in stated capital at all times
--------------
for each share of Convertible Preferred Stock shall be $.001.
3. Rank. All shares of Convertible Preferred Stock shall rank prior to all of
----
the Corporation's Common Stock, par value $.001 per share (the "Common
Stock"), now or hereafter issued, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
4. Dividends. No dividend is payable to the holders of shares of Convertible
---------
Preferred Stock.
5. Liquidation Preference.
-----------------------
(a) The liquidation value of shares of this Series, in case of the
voluntary or involuntary liquidation, dissolution or winding-up of the
Company, shall be $.001 per share.
2
(b) In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Company, the holders of shares of this Series
shall be entitled to receive the liquidation value of such shares held
by them until the liquidation value of all shares of Convertible
Preferred Stock shall have been paid in full. Upon payment in full of
the liquidation value to which the holders of shares of the shares of
Convertible Preferred Stock are entitled, the holders of shares of
this Series will not be entitled to any further participation in any
distribution of assets by the Company.
(c) Neither a consolidation or merger of the Company with or into any
other corporation, nor a merger of any other corporation with or into
the Company, nor a sale or transfer of all or any part of the
Company's assets for cash or securities or other property shall be
considered a liquidation, dissolution or winding-up of the Company
within the meaning of this Paragraph 5.
6. Voting Rights. Except as otherwise required by law, each share of
--------------
outstanding Series B Convertible Preferred Stock shall have no voting
right. And no voting rights after convert into common shares.
7. No Redemption. The shares of Convertible Preferred Stock are not
--------------
redeemable.
8. Conversion Provisions.
----------------------
(a) Conversion at Option of Holders. Provided that, and only to the extent
-------------------------------
that, the Corporation has a sufficient number of shares of authorized
but unissued and unreserved Common Stock available to issue upon
conversion, each share of Convertible Preferred Stock shall be
convertible at the option of the holder thereof, at any time, into
fully paid and nonassessable shares of Common Stock and such other
securities and property as hereinafter provided, initially at the rate
of 10 shares of Common Stock for each full share of Series B
Convertible Preferred Stock ("Conversion Ratio").
For the purpose of these Articles of Designation, the term "Common
Stock" shall initially mean the class designated as Common Stock, par
value $.001 per share, of the Corporation as of July 8, 2004 subject
to adjustment as hereinafter provided.
(b) Automatic Conversion. Upon the occurrence of a Recapitalization Event,
--------------------
each outstanding share of Convertible Preferred Stock shall
automatically be converted, without cost, on the terms set forth in
this Section into the number of fully paid and non-assessable shares
of Common Stock as specified by the Conversion Ratio that is in effect
at the time of conversion. A "Recapitalization Event" shall be deemed
to occur upon either (i) effectiveness of a filing in the office of
the Secretary of State of Nevada, or such other state in which the
Corporation is legally domiciled, of an amendment to (or amendment and
restatement of) the Articles of Incorporation or other charter
document of the Corporation that increases the number of authorized
shares of Common Stock to a sufficient number (after taking into
account all shares reserved for issuance by the Board of Directors) so
as to enable the conversion of all outstanding shares of Convertible
Preferred Stock into such number of fully paid and non-assessable
shares of Common Stock as specified by the Conversion Ratio then in
effect, (ii) a
3
change in the number of authorized shares of capital stock that the
Corporation is authorized to issue by any means, including a reduction
in the number of outstanding shares, merger for the purpose of a
change of corporate domicile, or (iii) the effective date of any other
corporate action that enables the conversion of all outstanding shares
of Convertible Preferred Stock into such number of fully paid and
non-assessable shares of Common Stock as specified by the Conversion
Ratio then in effect.
(c) Mechanics of Conversion.
(i) Optional Conversion. Any holder of shares of Series B Convertible
-------------------
Preferred Stock desiring to convert such shares into Common Stock
shall surrender the certificate or certificates for such shares
of Series B Convertible Preferred Stock at the office of the
transfer agent for the Convertible Preferred Stock, which
certificate or certificates, if the Corporation shall so require,
shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation
or in blank, accompanied by irrevocable written notice to the
Corporation that the holder elects so to convert such shares of
Convertible Preferred Stock and specifying the name or names
(with address) in which a certificate or certificates for Common
Stock are to be issued.
(ii) Automatic Conversion. Upon the effectiveness of a
---------------------
Recapitalization Event, the conversion of such shares is
effective, each holder of shares so converted may surrender the
certificate therefore at the office of the Corporation or any
transfer agent for the Convertible Preferred Stock. Upon such
surrender, the Corporation shall issue and deliver to each holder
a certificate or certificates for the number of whole shares of
Common Stock to which such holder is entitled. In lieu of any
fractional shares to which the holder would otherwise be
entitled, the Corporation shall the next highest whole number of
shares of Common Stock.
The conversion of shares of Convertible Preferred Stock shall be
effective simultaneously with the effectiveness of a
Recapitalization Event, whether or not the certificates
representing such shares of Convertible Preferred Stock shall
have been surrendered or new certificates representing the shares
of Common Stock into which such shares have been converted shall
have been issued and the person or persons entitled to receive
the shares of Common Stock insurable upon such conversion shall
be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. Any dividends or
distributions declared but unpaid on the Common Stock to which
the Convertible Preferred Stock is entitled pursuant to Section 4
above, shall be paid on the payment date therefore.
(d) The Conversion Ratio shall be subject to adjustment as follows:
(i) In case the Company shall (A) pay a dividend or make a
distribution in Common Stock, or (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number (but not
smaller number) of shares, the Conversion Ratio in effect
immediately prior thereto shall be adjusted
4
retroactively as provided below so that the Conversion Ratio
thereafter shall be determined by multiplying the Conversion
Ratio at which such shares of this Series were theretofore
convertible by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately
following such action and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior
thereto. Such adjustment shall be made whenever any event listed
above shall occur and shall become effective retroactively
immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in
the case of a subdivision or reclassification.
(ii) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them (for a period expiring within
45 days after the record date therefore) to subscribe for or
purchase shares of Common Stock at a price per share less than
the current market price per share of Common Stock (as determined
in accordance with the provisions of sub clause (iv) of this
clause (d)) at the record date therefore (the "Current Market
Price"), or in case the Company shall issue other securities
convertible into or exchangeable for Common Stock for a
consideration per share of Common Stock deliverable upon
conversion or exchange thereof less than the Current Market
Price; then the Conversion Ratio in effect immediately prior
thereto shall be adjusted retroactively as provided below so that
the Conversion Ratio therefore shall be equal to the price
determined by multiplying the Conversion Ratio at which shares of
this Series were theretofore convertible by a fraction of which
the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such convertible or
exchangeable securities, rights or warrants plus the number of
additional shares of Common Stock offered for subscription or
purchase and of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
shares, convertible or exchangeable securities, rights or
warrants plus the number of additional shares of Common Stock
which the aggregate offering price of the number of shares of
Common Stock so offered would purchase at the Current Market
Price per share of Common Stock (as determined in accordance with
the provisions of sub clause (iv) of this clause (d). Such
adjustment shall be made whenever such convertible or
exchangeable securities rights or warrants are issued, and shall
become effective retroactively immediately after the record date
for the determination of stockholders entitled to receive such
securities. However upon the expiration of any right or warrant
to purchase Common Stock the issuance of which resulted in an
adjustment in the Conversion Ratio pursuant to this sub clause
(ii), if any such right or warrant shall expire and shall not
have been exercised, the Conversion Ratio shall be recomputed
immediately upon such expiration and effective immediately upon
such expiration shall be increased to the price it would have
been (but reflecting any other adjustments to the Conversion
Ratio made
5
pursuant to the provisions of this clause (d) after the issuance
of such rights or warrants) had the adjustment of the Conversion
Ratio made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that
number of shares of Common Stock actually purchased upon the
exercise of such rights or warrants actually exercised.
(iii) In case the Company shall distribute to all holders of its
Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the
continuing corporation) shares of capital stock (other than
Common Stock), evidences of its indebtedness or assets (excluding
cash dividends) or rights to subscribe (excluding those referred
to in sub clause (ii) of this clause (d)), then in each such case
the number of shares of Common Stock into which each share of
this Series shall thereafter be convertible shall be determined
by multiplying the number of shares of Common Stock into which
such share of this Series was theretofore convertible by a
fraction of which the numerator shall be the number of
outstanding shares of Common Stock multiplied by the Current
Market Price per share of Common Stock (as determined in
accordance with the provisions of sub clause (iv) of this clause
(d)) on the date of such distribution and of which the
denominator shall be the product of the number of outstanding
shares of Common Stock and the Current Market Price per share of
Common Stock, less the aggregate fair market value (as determined
by the Board of Directors of the Company, whose determination
shall be conclusive, and described in a statement filed with the
transfer agent for the shares of this Series) of the capital
stock, assets or evidences of indebtedness so distributed or of
such subscription rights. Such adjustment shall be made whenever
any such distribution is made, and shall become effective
retroactively immediately after the record date for the
determination of stockholders entitled to receive such
distribution.
6
(iv) For the purpose of any computation under sub clause (ii) and
(iii) of this clause (d), the Current Market Price per share of
Common Stock at any date shall be deemed to be the average Sale
Price for the thirty consecutive trading days commencing
forty-five trading days before the day in question. As used
herein, "Sale Price" means the closing sales price of the Common
Stock (or if no sale price is reported, the average of the high
and low bid prices) as reported by the principal national or
regional stock exchange on which the Common Stock is listed or,
if the Common Stock is not listed on a national or regional stock
exchange, as reported by national Association of Securities
Dealers Automated Quotation System and if not so reported then as
reported by the Electronic Bulletin Board or the National
Quotation Bureau Incorporated.
(v) No adjustment in the Conversion Ratio shall be required unless
such adjustment would require an increase or decrease of at least
1% in the price then in effect; provided, however, that any
adjustments which by reason of this sub clause (v) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
paragraph 8 shall be made to the nearest cent.
(vi) In the event that, at any time as a result of an adjustment made
pursuant to sub clause (i) or sub clause (iii) of this clause
(d), the holder of any share of this Series thereafter
surrendered for conversion shall become entitled to receive any
shares of the Company other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon
conversion of any share of this Series shall be subject to
adjustment from time to time in a manner and on the terms as
nearly equivalent as practicable to the provisions with respect
to the Common Stock contained in sub clauses (i) through (v) of
this clause (d), and the other provisions of this clause (d) with
respect to the Common Stock shall apply on like terms to any such
other shares.
(vii) Whenever the conversion rate is adjusted, as herein provided,
the Company shall promptly file with the transfer agent for this
Series, a certificate of an officer of the Company setting forth
the conversion rate after such adjustment and setting forth a
brief statement of the facts requiring such adjustment and a
computation thereof. Such certificate shall be conclusive
evidence of the correctness of such adjustment. The Company shall
promptly cause a notice of the adjusted conversion rate to be
mailed to each registered holder of shares of this Series.
(e) If any of the following events occur, namely (i) any reclassification
or change (other than a combination of reclassification into a smaller
number of shares) of outstanding shares of Common Stock issuable upon
conversion of shares of this Series (other than a change in par value,
or from par value to no par value, or from no par value to par value,
or as a result of a subdivision) or (ii) any consolidation or merger
to which the Company is a party (other than a consolidation or merger
to which the Company is the continuing corporation and which does not
result in any classification of, or change (other than a change in
7
par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision) in, outstanding shares of
Common Stock); then the Company or such successor, as the case may be,
shall provide in its Certificate of Incorporation that each share of
this Series shall be convertible into the kind and amount of shares of
stock and other securities or property receivable upon such
reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock issuable upon conversion of each such
share of this Series immediately prior to such reclassification,
change, consolidation or merger. Such Certificate of Incorporation
shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in clause (d). The
Company shall cause notice of the execution of any such event
contemplated by this paragraph to be mailed to each holder of shares
of this Series as soon as practicable.
The above provisions of this clause (e) shall similarly apply to
successive reclassifications, consolidations and mergers.
(f) By duly adopted resolution of its board of directors, the Company at
any time may increase the Conversion Ratio, temporarily or otherwise,
by any amount, but in no event shall such Conversion Ratio require the
issuance of Common Stock for less than the par value of the Common
Stock at the time such reduction is made.
Whenever the Conversion Ratio is increased pursuant to this sub clause
(f), the Company shall mail to the holders a notice of the increased
Conversion Ratio. The notice shall state the increased Conversion
Ratio and the period it will be in effect.
An increase in the Conversion Ratio does not change or adjust the
Conversion Ratio otherwise in effect for purposes of sub clauses (d)
and (e) of this paragraph 8.
9. Protective Provisions.
----------------------
(a) Reservation of Shares; Transfer Taxes; Etc. The Corporation shall at
all times serve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the
Convertible Preferred Stock, such number of shares of its Common Stock
free of preemptive rights as shall from time to time be sufficient to
effect the conversion of all shares of Convertible Preferred Stock
from time to time outstanding. The Corporation shall from time to
time, in accordance with the laws of the State of Nevada, increase the
authorized number of shares of Common Stock if at any time the number
of shares of Common Stock not outstanding shall not be sufficient to
permit the conversion of all the then outstanding shares of
Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require
registration with or approval of any governmental authority under any
Federal or State law before such shares may be issued upon conversion,
the Corporation will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered or approved, as
the case may be. If the Common Stock is listed on the
8
New York Stock Exchange or any other national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and
keep listed on such exchange, upon official notice of issuance, all
shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock.
The Corporation will pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock
on conversion of the Convertible Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of Common
Stock (or other securities or assets) in a name other than that which
the shares of Convertible Preferred Stock so converted were
registered, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the
amount of such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(b) Class Voting Rights. So long as the Convertible Preferred Stock is
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least a majority of all outstanding
Convertible Preferred Stock voting separately as a class, (i) Amend,
alter or repeal (by merger or otherwise) any provision of the Articles
of Incorporation or the By-Laws of the Corporation, as amended, so as
adversely to affect the relative rights, preferences, qualifications,
limitations or restrictions of the Convertible Preferred Stock, (ii)
authorize or issue, or increase the authorized amount of, any
additional class or series of stock, or any security convertible into
stock of such class or series, ranking prior to the Convertible
Preferred Stock in respect of the payment of dividends or upon
liquidation, dissolution or winding up of the Corporation or (iii)
effect any reclassification of the Convertible Preferred Stock. A
class vote on the part of the Convertible Preferred Stock shall,
without limitation, specifically not be deemed to be required (except
as otherwise required by law or resolution of the Corporation's Board
of Directors) in connection with: (a) the authorization, issuance or
increase in the authorized amount of any shares of any other class or
series of stock which ranks junior to, or on a parity with, the
Convertible Preferred Stock in respect of the payment of dividends and
distributions upon liquidation, dissolution or winding up of the
Corporation; or (b) the authorization, issuance or increase in the
amount of any bonds, mortgages, debentures or other obligations of the
Corporation.
The affirmative vote or consent of the holders of a majority of the
outstanding Convertible Preferred Stock, voting or consenting separately as
a class, shall be required to (a) authorize any sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or (b)
approve any merger, consolidation or compulsory share exchange of the
Corporation with or into any other person unless (i) the terms of such
merger, consolidation or compulsory share exchange do not provide for a
change in the terms of the Convertible Preferred Stock and (ii) the
Convertible Preferred Stock is, after such merger, consolidation or
compulsory share exchange on a parity with or prior to any other class or
series of capital stock authorized by the surviving corporation as to
dividends and upon liquidation, dissolution or winding up other than any
class or series of stock of the Corporation prior to the Convertible
Preferred Stock as may have been
9
created with the affirmative vote or consent of the holders of at least
66-2/3% of the Convertible Preferred Stock (or other than a class or series
into which such prior stock is converted as a result of such merger,
consolidation or share exchange).
10. Outstanding Shares. For purposes of this Certificate of Designation, all
-------------------
shares of Convertible Preferred Stock shall be deemed outstanding except
(i) from the date of surrender of certificates representing shares of
Convertible Preferred Stock, all shares of Convertible Preferred Stock
converted into Common Stock; (ii) the effective date of a Recapitalization
Event defined in clause 8(b), and (iii) from the date of registration of
transfer, all shares of Convertible Preferred Stock held of record by the
Corporation or any subsidiary of the Corporation.
11. Certain Definitions. As used in this Certificate, the following terms shall
-------------------
have the following respective meanings:
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under common control with such
specified person. For purposes of this definition, "control" when used with
respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of
voting securities or otherwise; and the term "controlling" and "controlled"
having meanings correlative to the foregoing.
"Common Shares" shall mean any stock of the Company which has no preference
in respect of dividends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding-up of the Company and
which is not subject to redemption by the Company. However, Common Shares
issuable upon conversion of shares of this series shall include only shares
of the class designated as common Shares as of the original date of
issuance of shares of this Series, or shares of the Company of any class or
classes resulting from any reclassification or reclassifications thereof
and which have no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such
class resulting from such reclassifications bears to the total number of
shares of all classes resulting from all such reclassifications.
12. Securities Not Registered Under the Securities Act of 1933. Neither the
--------------------------------------------------------------
shares of Convertible Preferred Stock nor the Common Stock issuable upon
conversion thereof has been registered under the Securities Act of 1933 or
the laws of any state of the United States and may not be transferred
without such registration or an exemption from registration. Each share of
Convertible Preferred Stock and certificate for Common Stock issued upon
the conversion of any shares of Convertible Preferred Stock, and each
preferred stock certificate issued upon the transfer of any such shares of
Convertible Preferred Stock or Common Stock (except as otherwise permitted
by this Section 12), shall be stamped or otherwise imprinted with a legend
in substantially the following form:
10
"The securities represented hereby have not been registered under the
Securities Act of 1933. Such securities may not be sold or transferred in
the absence of such registration or an exemption there from under said
Act."
13. Preemptive Rights. The Convertible Preferred is not entitled to any
------------------
preemptive or subscription rights in respect of any securities of the
Corporation.
14. Severability of Provisions. Whenever possible, each provision hereof shall
---------------------------
be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only the extent
of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of
competent jurisdiction should determine that a provision hereof would be
valid or enforceable if a period of time were extended or shortened or a
particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question
effective and valid under applicable law.
IN WITNESS WHEREOF, PTS, Inc. has caused this certificate to be signed by
its President as of the 10th September, 2004.
PTS, INC.
By: /s/ Xxxxx Xxxx
-------------------------------
Xxxxx Xxxx, Chief Executive Officer
11
ACKNOWLEDGMENT
State of Nevada )
)ss.
County of Xxxxx )
-----
This instrument was acknowledged before me on July 15, 2004 by Xxxxx Xxxx as
President of PTS, Inc.
Signature of notarial officer /s/ Xxxxxxx Xxxxxxxx
Name: Xxxxxxx Xxxxxxxx ------------------------------
[GRAPHIC OMITTED]
Xxxxxxx Xxxxxxxx
Notary Public, State of Nevada
Appointment No. 00-00000-0
(Seal) My Appt. Expires Jun 4, 2005
------------------------------
My commission expires: June 4, 2005
12
ATTACHMENT B
REGISTRATION RIGHTS AGREEMENT
SCHEDULE 3(N)
LITIGATION
SCHEDULE 3(P)
COMPLIANCE WITH LAWS AND REGULATIONS
SCHEDULE 3(Q)
DEFAULTS
SCHEDULE 3(U)
COMPLIANCE WITH ENVIRONMENTAL LAWS
SCHEDULE 3(AA)
ASSETS
SCHEDULE 3(CC)
LABOR MATTERS
SCHEDULE 3(FF)
CONTRACTS
