ASSET PURCHASE
AGREEMENT
between
PERMIAN ENERGY SERVICES, L.P.
as
Seller
and
FEDERAL SECURITY PROTECTION SERVICES, INC.
as
Purchaser
<page>
TABLE OF CONTENTS
1. Purchase and Sale of
Assets.
1
1.1. Purchased
Assets
1
1.2. Excluded
Assets
2
1.3. Purchase
Price for Assets: Allocations
3
1.4. Inventory
3
1.5. Payment of
Aggregate Price
3
2. Liabilities of Permian
3
3. Creditor Matters
3
4. Assembly of Purchased
Assets
3
5. Customer and Supplier
Lists and Records
3
6. Adjustment of Purchase
Price
3
7. Approvals, Permits,
Licenses and Authorizations 3
8. Brokerage Commissions
3
9. Representations and
Warranties
4
9.1.
Representations and Warranties of Permian and Clark 4
9.1.1. Ownership
of Permian
4
9.1.2. Due
Organization; Name and Address;
Good Standing, Authority of Permian 4
9.1.3.
Authorization and Validity of Agreements
4
9.1.4. Agreement
Not in Conflict with Other
Instruments; Required Approvals Obtained 4
9.1.5. Disclaimer
of Fraudulent Intent
5
9.1.6 Unencumbered
Title to Purchased Assets
5
9.2 Representations and Warranties
of the Federal
5
9.2.1. Due
Organization; Good Standing; Power
5
9.2.2.
Authorization and Validity of Documents
5
10. Particular Covenants
5
10.1. Risk of Loss
5
10.2. Full Access
5
10.3. Furnishing of
Certain Information
6
11. Closing
6
11.1. Time, Date and
Place
6
11.2. Permian's
Conditions to Close
6
11.3. Federal's
Conditions to Close
6
11.4. Actions to Be
Taken at the Closing
7
11.5. Contemporaneous
Transfer
7
11.6. Operation of TPU
Business
7
i
<page>
12. Indemnification by Permian to
Federal
8
12.1. Indemnification
by Permian and R. J. Clark
8
12.2 Survival of
Obligation to Indemnify
8
12.3 Notice and
Procedure
8
13. Expenses of Transactions
9
14. Miscellaneous
9
14.1. Survival of
Representations, Warranties and Agreements 9
14.2. Notices
9
14.3. Entire Agreement
10
14.4. Assignability
10
14.5. Binding Effect;
Benefit
10
14.6. Severability
10
14.7. Amendment; Waiver
10
14.8. Section Headings
10
14.9. Counterparts and
Facsimile Signatures
10
14.10. Applicable Law;
Jurisdiction and Venue;
Service of Process
11
14.11. Legal Expenses
11
14.12. Remedies
11
14.13. Further Assurances
11
14.14. Use of Genders
11
SCHEDULES
1.1.2 - Assumed Contracts
1.1.4 - Intangible Property Rights
1.1.5 - Patents, Patents Pending,
Patentable Technology,
Copyrights,
Trade Names and Service Marks
1.1.7 - Computer Software Programs
1.1.8 - Actions by Permian Against Third
Parties
1.2 - Excluded Assets
2.1 - Liabilities of
Permian
ii
<page>
ASSET
PURCHASE AGREEMENT
THIS ASSET
PURCHASE AGREEMENT (the "Agreement") is made and entered
into and effective as of March 11, 2005, by
and among Permian Energy
Services, L.P., a Texas limited partnership
("Permian"), R. J. Clark,
Managing Partner of Permian ("Clark") and
Federal Security Protection
Services, Inc., a Delaware corporation
("Federal").
EXPLANATORY
STATEMENT
A.
Permian
markets various patented thermal pulse units ("TPU") to the oil
and gas industry through a licensing and distribution agreement
with Bi-Comp,
L.L.C. and markets the patented "Penney Pump" to the oil and gas
industry
through a licensing, use and distribution agreement with Penney
Resources,
LLC and has various other ventures also in the oil and gas
industry.
B.
Federal
desires to purchase and Permian desires to sell and transfer
to Federal, substantially all of the assets of Permian related to
the
marketing of the TPU and "Penney Pump" (collectively, the "TPU
Business") on
the terms and conditions stated herein.
NOW THEREFORE, for and in consideration of
the Explanatory Statement that
shall be deemed a substantive part of this
Agreement, and the mutual
covenants, promises, agreements,
representations and warranties contained
herein, and other good and valuable
consideration the receipt and sufficiency
of which is hereby acknowledged by the
parties, the parties hereto agree,
represent and warrant as follows:
1.
Purchase
and Sale of Assets.
1.1. Purchased Assets.
Except as and to the extent otherwise provided in
Section 1.2 below, Federal agrees to purchase from Permian, and
Permian agrees to sell, transfer and assign to Federal, all of
the
assets, wherever located, which are owned by Permian, or in
which
Permian has any rights, title or interest (to the extent of such
right,
title or interest), and used in connection with the TPU
Business
(collectively referred to herein as the "Purchased Assets"). The
Purchased
Assets shall include, but shall not be limited to, all of Permian's
right,
title and interest in the following:
1.1.1. All of the
rights, tangible and intangible, and leasehold interests
in personal or real property of Permian existing under any of
the
contracts, agreements, leases, licenses, instruments or
commitments
that are listed in Schedule 1.1.2 attached hereto, and under
any
contracts, agreements, leases, licenses, instruments and
commitments
which are entered into by Permian in connection with the TPU
Business
after the date hereof and prior to the "Closing" (as defined
below)
with the prior written consent of Federal (collectively, the
"Personal
Property Contracts" or collectively referred to as the "Assumed
Contracts");
1.1.2. All rights
in and to any governmental and private permits, licenses,
certificates of occupancy, franchises and authorizations, to the
extent
assignable, used in connection with the TPU Business;
1.1.3. All raw
materials, work-in progress and finished-goods inventories,
and all repair and replacement parts and materials, and all other
parts
and materials, used in the TPU Business (collectively, the
"Inventory");
Page 1
<page>
1.1.4. All rights
in and to any requirements, processes, formulations,
methods, technology, know-how, formulae, trade secrets,
designs,
inventions and other proprietary rights and all documentation
embodying,
representing or otherwise describing any of the foregoing, owned or
held
by Permian in connection with the TPU Business, which are more
fully
described in Schedule 1.1.4 (the assets described in Sections
1.1.4
through 1.1.7 are referred to as the "Intangible Property
Rights");
1.1.5. All
patents, patents pending, patentable technology, copyrights,
trade names and service marks of Permian used in or related to
the
TPU Business, all of which are set forth in Schedule 1.1.5, and
all
applications therefor, and all documentation embodying,
representing
or otherwise describing any of the foregoing;
1.1.6. All rights
in and to the customer lists, promotion lists, supplier
lists, marketing data and other complications of names and data
developed
in connection with the TPU Business, and which shall be delivered
by or
on behalf of Permian to Federal at or prior to the Closing;
1.1.7. All of
Permian's rights in and to the computer software programs
(including software licensed to Permian) used in connection with
the
TPU Business or developed or under development by, or on behalf
of,
Permian in connection with the TPU Business or developed or
under
development by, or on behalf of, Permian in connection with the
TPU
Business and identified on Schedule 1.1.7, including the source
code,
object code and documentation for such software, in each case to
the
extent that Permian possesses and has a right to possess and
transfer the
same (provided, however, that copies of all financial data and
information, and any software necessary to access or process it,
shall be
provided or made available to Permian following the Closing);
1.1.8. All causes
of action, claims, suits, proceedings, judgments or
demands, of or held by Permian against third parties which are
listed on
Schedule 1.1.8 attached hereto;
1.1.9. All
accounts and notes receivable pertaining exclusively to
Permian's conduct of the TPU Business existing as of the Closing
Date;
1.1.10. Copies of all
account lists, files, books and records, including
personnel records, publications, and other records and data used
in
connection with the TPU Business;
1.1.11. All goodwill
associated with the TPU Business and the Purchased
Assets, including the Intangible Property Rights;
1.1.12. All deposits and
all other funds held by or on behalf of Permian
for the delivery of TPU products; and
1.1.13. All assets of any
kind, nature or description owned by Permian not
otherwise described in this Section 1.1 which are used exclusively
in
connection with the TPU Business and which are not Excluded Assets
(as
hereinafter defined).
1.2. Excluded Assets.
Set forth in Schedule 1.2 is a list and description of
assets owned by Permian and used in connection with the TPU
Business which
shall not be sold, but shall be retained by Permian (the
"Excluded
Assets"). Notwithstanding anything to the contrary set forth in
Section 1.1, the Purchased Assets shall not include any of the
Excluded
Assets.
Page 2
<page>
1.3. Purchase Price for
Assets: Allocations. The purchase price for the
Purchased Assets shall be the transfer to Permian of 2,250,000
restricted
shares of $.001 par value common stock of Federal together with
a
promissory note in the principal amount of $250,000 with interest
at 6% per
annum and with accrued interest due one (1) year from the date of
the note
and all principal and accrued but unpaid interest due two (2) years
from
the date of the note (the "Purchase Price"). The Purchase Price
shall be
allocated to the Purchased Assets as determined by Federal in
Federal's
sole discretion.
1.4. Inventory. All
inventory of Permian relating to the TPU Business is
included in the Purchase Price and shall be conveyed to Federal at
Closing.
1.5. Payment of
Aggregate Price. On the terms and subject to the conditions
of this Agreement, at Closing Federal shall pay the Purchase Price
to
Permian by the issuance of the shares of Federal common stock
representing
the Purchase Price.
2.
Liabilities
of Permian. Federal assumes and shall be solely liable and
responsible for all debts, obligations, duties, and liabilities of
Permian
as listed on Schedule 2 incurred prior to Closing and shall
indemnify and
hold Permian harmless therefrom.
3.
Creditor
Matters. The transactions contemplated by this Agreement are
intended by the parties to be a contemporaneous exchange between
Permian and
Federal and will be accomplished at Closing. The transactions
contemplated
by this Agreement represent a regularly conducted, noncollusive
sale, and
have been negotiated by the parties in an arm's length manner with
due
regard for the respective obligations of the parties and value of
the assets
transferred.
4.
Assembly of
Purchased Assets. Permian shall assemble all of the Purchased
Assets at the Premises for delivery to Federal at Closing.
5.
Customer
and Supplier Lists and Records. Prior to or at the Closing
Permian shall furnish Federal with all of Permian's Customer and
Supplier
Lists, which shall include a complete and correct list of all of
Permian's
customers and suppliers and their addresses, telephone numbers and
such
other and further information as Federal may reasonably request in
respect
of the TPU Business.
6.
Adjustment
of Purchase Price. The Purchase Price set forth in Section 1.3
above will not be adjusted at Closing for any prorations.
7.
Approvals,
Permits, Licenses and Authorizations. Promptly after the
execution of this Agreement, Permian and Federal shall use their
best
efforts to obtain such approvals, consents, permits, licenses
and
authorizations, if any, of all Governments and Governmental
Agencies (as
hereinafter defined) as may be required to complete lawfully
the
transactions contemplated hereby and to enable Federal to acquire
the
Purchased Assets and operate the TPU Business as operated by
Permian and
in full compliance with any and all applicable laws, rules and
regulations.
Permian agrees to cooperate fully, execute, acknowledge, swear to
and
deliver such instruments and documents and take all such other and
further
actions as may be necessary or desirable in order to obtain such
approvals,
consents, permits, licenses and authorizations.
8.
Brokerage
Commissions. Each party hereto represents to the other party
that it has not incurred any obligation or liability, contingent
or
otherwise, for brokerage fees, finder's fees, agent's commissions,
or the
like in connection with this Agreement or the transactions
reflected hereby.
<page>
9.
Representations and Warranties.
9.1. Representations
and Warranties of Permian and Clark. Permian and Clark,
jointly and severally, represent and warrant to Federal as of the
date
hereof and as of the Closing on the Closing Date that:
9.1.1. Ownership
of Permian. Permian has the power and authority to sell,
assign, transfer and deliver the Purchased Assets to Federal in
accordance
with the terms of this Agreement, to consummate the
transactions
contemplated hereby and to enter into the Agreement.
9.1.2. Due
Organization; Name and Address; Good Standing, Authority of
Permian. Permian is a limited partnership duly organized,
validly
existing and in good standing under the laws of the State of
Texas.
Permian has full right, power and authority to own, lease and
operate
its properties and assets, and to carry on its TPU Business.
Permian
is duly licensed, qualified and authorized to do business in
each
jurisdiction in which the properties and assets owned by it or
the
nature of the business conducted by it make such licensing,
qualification
and authorization legally necessary. Permian is not in breach or
violation
of, and the execution, delivery and performance of this Agreement
will
not result in a breach or violation of, any of the provisions of
Permian's
Limited Partnership Agreement or any other partnership documents
or
agreements, amended to the date of this Agreement ("Permian"s
Corporate
Documents").
9.1.3.
Authorization and Validity of Agreements. Permian has the full
right, power and authority to execute, acknowledge and deliver
this
Agreement and to perform the transactions contemplated by this
Agreement.
The execution, acknowledgment and delivery of this Agreement by
Permian
and the performance by Permian of the transactions contemplated
hereby
have been duly and validly authorized by all necessary corporate
action.
This Agreement has been duly executed, acknowledged and delivered
by
Permian and is the legal, valid and binding obligation of
Permian,
enforceable against Permian in accordance with its terms, except in
each
case as such enforceability may be limited by general principles
of
equity, bankruptcy, insolvency, moratorium and similar laws
relating to
creditors rights generally.
9.1.4. Agreement
Not in Conflict with Other Instruments; Required Approvals
Obtained. The execution, acknowledgment, delivery, and performance
of this
Agreement, and the consummation of the transactions contemplated by
this
Agreement will not (a) violate or require any consent, approval, or
filing
under, (i) any common law, law, statute, ordinance, rule or
regulation
(collectively referred to throughout this Agreement as "Laws") of
any
federal, state or local government (collectively referred to
throughout
this Agreement as "Governments") or any agency, bureau,
commission,
instrumentality or judicial body of any Governments (collectively
referred
to throughout this Agreement as "Governmental Agencies"), or (ii)
any
judgment, injunction, order, writ or decree of any court,
arbitrator,
Government or Governmental Agency by which Permian (b) conflict
with,
require any consent, approval, or filing under, result in the
breach or
termination of any provision of, constitute a default under, or
result in
the creation of any claim, security interest, lien, charge, or
encumbrance
upon any of the Purchased Assets pursuant to, (i) Permian's
Corporate
Documents, (ii) any indenture, mortgage, deed of trust, license,
permit,
approval, consent, franchise, lease, contract, or other
instrument,
document or agreement to which Permian is a party or by which
Permian or
any of the Purchased Assets is bound, or (iii) any judgment,
injunction,
order, writ or decree of any court, arbitrator, Government or
Governmental
Agency by which Permian or any of the Purchased Assets is bound;
and all
permits, licenses and authorizations of any Government or
Governmental
Agency required to be obtained prior to the Closing, shall have
been
obtained and shall be in full force and effect as of the Closing
Date.
Page 3
<page>
9.1.5. Disclaimer
of Fraudulent Intent. The transactions described in this
Agreement have been undertaken by Permian in good faith,
considering
their obligations to any person or entity to whom Permian owes a
right
to payment, whether or not the right is reduced to judgment,
liquidated,
unliquidated, fixed, contingent, matured, unmatured, claims are
called "Creditors" under this paragraph), and have undertaken
these
transactions without any intent to hinder, delay or defraud any
such
Creditors, and either have disclosed in the ordinary course of
business
or will undertake to disclose to all such Creditors the existence
of this
transaction, and have not and will not conceal this transaction or
the
proceeds
