ASSET PURCHASE AGREEMENT
AMONG
INNOVATIVE SOFTWARE TECHNOLOGIES,
INC.
AND
THE WEB CHANNEL NETWORK,
INC.
AND
THE WEB CHANNEL NETWORK,
LLC.
AND
ROBERT W.
SINGERMAN
JUNE 17, 2009
TABLE OF CONTENTS
ASSET
PURCHASE AGREEMENT
EXHIBIT
A : PROMISSORY
NOTE
EXHIBIT
B : SECURITY
AGREEMENT
EXHIBIT
C : WARRANT AGREEMENT
EXHIBIT
D : EMPLOYMENT AGREEMENT
EXHIBIT
E : NON-DISCLOSURE, NON-COMPETITION,
NON-SOLICITATION AND INVENTION AGREEMENT
EXHIBIT
F : SCHEDULE OF PURCHASED
ASSETS
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (
“this Agreement” ) is made as of June 17,
2009, by and among Innovative Software Technologies, Inc., a
Delaware corporation (the “ Company” ),
the Company’s wholly owned subsidiary The WEB Channel
Network, Inc., a Florida corporation ( “ Buyer
” ), The WEB Channel Network, LLC., a Florida limited
liability company ( “Seller” ),and Robert
W. Singerman, a Florida resident and the principal manager of
Seller ( “ Manager ” ). (The
Company, Buyer, Seller, and Manager also are referred to herein
separately as a “Party” and collectively
as the “Parties.” )
Recitals:
WHEREAS, Seller has agreed to sell to Buyer substantially
all of its assets on the terms and conditions provided
herein;
WHEREAS, Manager has agreed to sell to Buyer the
Manager’s assets related to Seller’s business (which
together with Seller’s assets being sold to Buyer are
referred to herein as the “Purchased Purchased
Assets” ) on the terms and conditions provided
herein;
WHEREAS, Manager has agreed to enter into an Employment
Agreement with Buyer and a Non-Disclosure, Non-Competition,
Non-Solicitation and Invention Agreement with the Company and
Buyer, all on the terms and conditions provided herein;
WHEREAS, Buyer has agreed to buy the Purchased Assets
from Seller and Manager on the terms and conditions provided
herein;
WHEREAS, Buyer has agreed to enter into an Employment
Agreement with Manager and the Company and Buyer have agreed to
enter into a Non-Disclosure, Non-Competition, Non-Solicitation and
Invention Agreement with Manager all on the terms and conditions
provided herein;
Agreement:
NOW, THEREFORE,
in consideration of the above
recitals which are incorporated in this Agreement and made a part
hereof, and the mutual representations, warranties, covenants, and
promises herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Parties agree as follows.
1.
Definitions .
“Adverse
Consequences” means all payments, costs, expenses, damages and
losses resulting from any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens,
fees, and court costs, and reasonable attorneys’ fees and
expenses.
“Affiliate”
has the meaning set forth in Rule
12b-2 of the regulations promulgated under the Securities Exchange
Act of 1934
“Affiliated
Entities” means
any or all of the limited liability companies in which Manager has
an equity interest which relate to the business of Seller, which
are included in Exhibit F hereto.
“Buyer” has the meaning set forth in the preamble
above.
“Closing”
has the meaning set forth in §2(c)
below.
“Closing
Date” has the meaning set forth in §2(c)
below.
“Code” means the Internal Revenue Code of 1986, as
amended.
“Common
Stock” means
the common stock, no par value, of the Company.
“Confidential
Information” means any information concerning Buyer, Seller,
the Purchased Assets and Manager that is not already generally
available to the public.
“Intellectual
Property” means
(a) all inventions (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, and all
patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations- in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all
copies and tangible embodiments thereof (in whatever form or
medium).
“Liability”
or “Liabilities” mean
any liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any liabilities for Taxes.
“Party”
has the meaning set forth in the preface
above.
“Person” means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental
entity (or any department, agency, or political subdivision
thereof).
“Purchase
Price” has the
meaning set forth in §2(b) below.
“Purchased
Assets” means
substantially all of the assets of Seller, including (without
limitation) its Intellectual Property as defined
below, its signed and pending production agreements, and
Manager’s equity positions in several limited liability
companies, including various web channels, all as set forth in
Exhibit F hereto.
“Securities
Act” means the
Securities Act of 1933, as amended.
“Security
Interest” means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a)
mechanic’s, materialmen’s, and similar liens, (b) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the
ordinary course of business and not incurred in connection with the
borrowing of money.
“Seller” has the meaning set forth in the preface
above.
“Tax”
and “Taxes”
mean any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under
Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, other ad valorem,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether
disputed or not.
“Tax
Return” means
any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2.
Purchase and Sale of the Purchased Assets
.
(a)
Assets to be Purchased by Buyer .
Subject to the terms and conditions of this Agreement, Seller and
Manager agree to sell to Buyer, all of the Purchased
Assets. On the Closing Date, Seller and Manager shall
grant, sell, convey, transfer, deliver and assign to
Buyer, by bill of sale or other appropriate instruments of
assignment and transfer ( “Transfer
Document” ), free and clear of all liens,
encumbrances, options, pledges, charges, security interests,
equitable interests, easements or rights of third parties
(collectively, “Encumbrances” ) the
Purchased Assets, and Buyer shall purchase, all right, title and
interest in and to the Purchased Assets, free and clear of all
Encumbrances.
(b)
Purchase Price . The purchase price to
be paid by Buyer for the Purchased Assets (the "Purchase
Price" ) shall be an amount equal to six hundred thousand
dollars ($600,000) and stock purchase warrants of the Company, to
be paid (i) by a first cash installment of $25,000 to be
paid to Seller and Manager jointly within fifteen
(15) days of Closing, (ii) by a second cash installment of $75,000
to be paid to Seller and Manager jointly prior to
September 30, 2009, (iii) by the delivery to Seller at the Closing
of a promissory note in substantially the form of Exhibit A hereto
in the principal amount of $500,000, which shall be secured by all
of the Purchased Assets pursuant to a Security Agreement in
substantially the form of Exhibit B hereto, and (iv) by the
grant to Seller of five million (5,000,000) share purchase warrants
of the Company in substantially the form of Exhibit C hereto (the
“Warrant Agreement” ) to be delivered at
the Closing.
(c)
The Closing . The closing of the
transactions contemplated by this Agreement (the
“Closing” ) shall take place at the
offices of the Company in Tampa, Florida, on June 17, 2009 or such
other date as the Buyer and Seller may mutually determine (the
“Closing Date” ).
(d)
Deliveries at the Closing . At the Closing,
(i) Seller will deliver to Buyer the various certificates,
instruments, and documents referred to in this Agreement, (ii)
Buyer will deliver to Seller the various certificates, instruments,
and documents referred to in this Agreement, (iii) Buyer will
deliver to Seller the consideration specified in §2(b)
above.
3.
Representations and Warranties Concerning
the Transaction .
(a)
Representations and Warranties of Seller and Manager
. Seller and Manager jointly and severally represent and
warrant to Buyer that the statements contained in this §3(a)
are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date.
(i)
Organization and Standing of Seller
. Seller and the Affiliated Entities are duly organized,
validly existing, and in good standing under the laws of the
Florida.
(ii)
Authorization of Transaction and Change of Seller’s
Name . Seller and Manager have full power and authority
to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of Seller and Manager,
enforceable in accordance with its terms and
conditions. Within three business days following the
Closing Date, Seller and Manager shall cause an amendment to
Seller’s Articles of Organization to be filed with the State
of Florida to change its name to a name distinguishable from that
of Buyer. Other than such filing of a name change
amendment to Seller’s Articles of Organization within three
business days following the Closing Date, neither Seller nor
Manager is required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency or any other third party in order to consummate
the transactions contemplated by this Agreement.
(iii)
Noncontravention . Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller or
Manager is subject or the articles of organization or operating
agreement of Seller or any of the Affiliated Entities (B) conflict
with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under, any
agreement, contract, lease, license, instrument, or other
arrangement to which Seller is a party or by which he or it is
bound or to which any of his or its assets is subject.
(iv)
Complete, Valid and Authentic Documents
. The Amended and Restated Operating Agreement of
Seller and the other operating agreements of entities in which
Seller or Manager may have an interest which constitute a part of
the Purchased Assets and all other agreements, instruments, written
evidence of action or authority which Seller or Manager have
delivered to the Company and Buyer with respect to the Purchased
Assets and the transactions contemplated hereby are complete, valid
and authentic, and have not been amended beyond any amending
documents provided, and have not been rescinded, terminated,
nullified or annulled. No membership certificates have
ever been issued to Manager or any other Person by Seller or any of
the Affiliated Entities to evidence ownership of a member interest
in Seller or any of the Affiliated Entities.
(v)
Compliance with Laws . Seller, Manager
and the Affiliated Entities each have conducted their business and
operated the Purchased Assets in compliance with all laws,
statutes, ordinances, rules, regulations or orders of any
governmental authority (collectively,
“Laws” ), including without limitation
all Laws pertaining to environmental protection, occupational
health and safety, employee benefits and employment
practices. Seller and the Affiliated Entities have all
permits, licenses, orders, approvals, authorizations, concessions
and franchises (collectively, “Permits” )
of any governmental authority that are necessary in the conduct of
their business or that are required under any Law. All
such Permits are in full force and effect, and may be assigned or
transferred, as applicable, to Buyer for use with the Purchased
Assets, and no proceeding is pending or, to the knowledge of Seller
or Manager, threatened, to revoke or limit any of
them. In addition, to the knowledge of Seller or
Manager, there is no state of facts or events that could reasonably
be expected to form the basis for the revocation or limitation of
any Permit or other imposition of conditions or obligations on the
possession of transfer of any Permit. To the knowledge
of Seller or Manager, Seller and the Affiliated Entities are not
required to make, and Seller and Manager does not have any
reasonable expectation that Buyer will be required to make after
the Closing, any expenditures to achieve or maintain compliance
with any Law, except in amounts similar to those reflected in
Seller’s financial statements.
(vi)
No Infringement of Intellectual Property Rights
. Seller and Manager each have conducted their
business and operated the Purchased Assets without infringing upon
or otherwise violating any other person’s Intellectual
Property; and none of the Purchased Assets include or are
constituted of any element that would be an infringement of or
otherwise violate any other person’s Intellectual
Property.
(vii)
Financial Statements . Each of the
financial statements of Seller and the Affiliated
Entities: (A) is true, accurate and complete in
all material respects, (B) fairly presents the financial
condition and the results of operations of Seller or
the applicable entity as of the date or for the period specified,
and (C) has been prepared from the books and records of
Seller or the applicable entity in accordance with Seller’s
or the applicable entity’s past practices. The
books of account of Seller and the applicable entities
as delivered to the Company and Buyer accurately reflect all items
of income and expense (including, without limitation, accruals) and
all assets and Liabilities of Seller.
(viii)
Undisclosed Liabilities . Seller,
Manager and the Affiliated Entities do not have any Liabilities of
any kind whatsoever (whether secured or unsecured, accrued or
un-accrued, fixed or contingent, matured or un-matured, and whether
due or to become due), including without limitation any Liabilities
which may become known or which may arise only after the Closing
resulting from acts, omissions or occurrences prior to the Closing,
other than: (A) Liabilities which have arisen in the
ordinary course of business consistent with past practice and are
fully reflected or reserved for in the books and records of Seller
and the applicable entities as delivered to the Company and Buyer,
and (B) express contractual obligations (other than any
obligations that might arise due to any default or other failure of
performance by Seller or the applicable entities prior to the
Closing Date) under contracts to which Seller or any of the
applicable entities is a party.
(ix)
Title to and Status of the Purchased Assets
. Seller and Manager hold of record and owns
beneficially the Purchased Assets free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, demands, and Encumbrances, including
(without limitation) any Encumbrance affecting Seller’s or
Manager’s ability to use or transfer any of the Purchased
Assets. Neither Seller, Manager nor any of the
Affiliated Entities is a party to any option, warrant, purchase
right, or other contract or commitment that could require Seller,
Manager or any of the Affiliated Entities to sell, transfer, or
otherwise dispose of any Purchased Assets (other than this
Agreement). Neither Seller, Manager nor any of the
Affiliated Entities is a party to any voting trust, proxy, or other
agreement.
(x)
No Litigation . There has not been (and there
is not now) any action, suit or proceeding pending or threatened
against or affecting Seller, the Affiliated Entities, or Manager,
at law, in equity, by way of arbitration or before any Governmental
Authority. There has not been (and there is not now) any
default by Seller, the Affiliated Entities, or Manager with respect
to any order, injunction or decree of any governmental authority,
and neither Seller, nor any of the Affiliated Entities, nor
Manager, nor any Purchased Assets are bound by or subject to any
such order, injunction or decree. There are no existing
facts or conditions which might give rise to any charge, claim,
litigation, proceeding or investigation by any third party, nor to
the knowledge of Seller, any of the Affiliated Entities, or Manager
are there any facts or conditions which might give rise to any such
charge, claim, litigation, proceeding or investigation.
(xi)
Taxes . All Tax Returns required by any
governmental authority to be filed in connection with the
properties, business, income, expenses, net wor
