STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into as of the
effective closing date of December 31, 2001, by and between the individuals
listed in Schedule A attached hereto ("Sellers"), and Innovative Software
Technologies, Inc., A California corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Sellers own an aggregate of 1,000 shares of the
outstanding common stock of Energy Professional Marketing Group, Inc. a Utah
Corporation (the "Company") also known as Professional Marketing Group, Inc.,
which constitute all of the issued and outstanding shares of the Company; and
WHEREAS, the Sellers wish to sell to the Purchaser all of such common
stock (the "Shares") of the Company pursuant to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereafter set forth, the Purchaser and the Sellers
hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF STOCK
--------------------------
Section 1.01 Purchase and Sale of Stock. Subject to the terms and
conditions hereof, on the Closing Date (as defined below) the Sellers agree to
sell to the Purchaser, and the Purchaser agrees to purchase from the Sellers,
the Shares, in exchange for shares of Purchaser's common stock and 1,500,000
shares of Purchaser's series A Preferred Stock, stated value of $1.00 per share
(the "Stock"). The Stock shall be delivered to the Sellers pro rata in
proportion to the Seller's current ownership of Company common stock.
(a) The provisions of the Preferred Stock shall include the following:
(i) have full voting rights with the INIV common stock,
(ii) provide for the payment of an annual dividend of 4% payable
in INIV restricted common stock priced @ 95% of the market
bid price based the first five trading days of the new year,
1
(iii) Be-callable-by Purchaser at the option of the Purchaser at a
purchase price of $1.00 per share. Upon receipt of the call
notice, the holders of the Preferred Stock shall have 30
days after the call notice to convert the Preferred Stock
into the Purchaser's common stock @ 95% of the market bid
price based on a 5 day average proceeding the conversion
date, if the preferred shareholders or INIV so desire.
(b) The number of common shares issued shall be determined by dividing
the closing bid price of the Purchaser shares as traded on the
otc.bb symbol INIV one day prior to the Closing Date by
$12,000,000. The common shares that are issued at closing will be
delivered as follows:
(i) 50% of the stock issued will be delivered at closing to the
Sellers.
(ii) The remaining 50% will be held in a mutually agreeable
escrow and will be subject to 3 performance milestones that
relate to the profitable sales of the Company.
(iii) Escrow will remain in effect for a period of 1 year from the
date of closing and the shares will be released in equal
traunches upon the Company's successful achievement of
profitable auditable sales of 6 million, 8 million and 10
million.
(iv) Any shares remaining in escrow at the end of the year period
shall be returned to Purchaser and delivered into treasury.
(c) For the fiscal years ending December 31, 2002 and 2003. Sellers
shall be entitled to receive 2 shares of INIV common stock for each
$1.00 of net profits before taxes of PMG in excess of $1,500,000
for each such year.
(d) One representative of the Company shall be elected to the INIV
Board of Directors.
(e) If and when establishes an Executive Committee, the Company shall
elect two representatives thereto.
(f) The Company principals will be given employment agreements in the
form of Exhibits A attached hereto.
(g) Within 30 days of closing, INIV will create an officer/director
personal guarantee indemnification agreement collateralized by INIV
restricted common stock.
Closing Date. The consummation of the purchase and sale of the Shares hereunder
(the "Closing") shall be held at the offices of Innovative Software
Technologies, Inc. located at 112 N.W. Parkway, Riverside, Missouri 64150 at
5:00 P.M. (Local Time) on the effective closing date of December 31, 2001, or at
such other time and place as the Sellers and the Purchaser may mutually agree
(the "Closing Date").
2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Section 2.01 Representations of Each of the Sellers. Each of the
Sellers represents and warrants to the Purchaser that the following is true and
correct as of the date hereof and shall be true and correct as of the Closing
Date. The representations and warranties of the Sellers set forth in this
Section 2.01 are several obligations, meaning that the particular Seller making
the representation and warranty will be solely responsible therefore to the
extent provided in Section 6.02 hereof for loss, etc. the Purchaser may suffer
as a result of any breach thereof:
(a) Existence. The Company is a corporation duly organized and validly
existing under the laws of Utah.
(b) Authorization; No Violation. The execution, delivery and
performance by each Seller of this Agreement are within such
Sellers powers, have been duly authorized by all necessary action,
and do not contravene in any material respect any Requirement of
Law or Contractual Obligation of Sellers. As used herein,
"Requirement of Law" shall mean, as to any Person, the certificate
of incorporation and bylaws or other organizational or governing
documents of such Person, if applicable, and any law, treaty, rule
or regulation, or determination of an arbitrator or any court or
other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or
any of its property is subject. As used herein, "Contractual
Obligation" shall mean, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any
of its property is bound. As used herein, "Person" shall mean an
individual or any corporation, association, partnership, joint
venture, estate, trust or other legal entity, including any
Governmental Authority. As used herein, "Governmental Authority"
shall mean any nation or government, any state or other political
subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
(c) Government and Other Consents. No authorization or approval or
other action by, and no notice to or filing with, any Governmental
Authority is required to be obtained or made, and no consent of any
third party is required to be obtained by, each Seller for the due
execution, delivery and performance by each Seller of this
Agreement.
(d) Enforceable Obligations. This Agreement has been duly executed and
delivered on behalf of each Seller and constitutes the legal, valid
and binding obligation of each of the Sellers enforceable against
each Seller in accordance with its terms and conditions, except as
3
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity.
(e) No Litigation. No claim, action, suit, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of each Seller, threatened by or against each
Seller with respect to the Company, this Agreement or any of the
transactions contemplated hereby. To the best of Sellers'
knowledge, no judgment, order, writ, injunction, decree or award
issued by any Governmental Authority is applicable to any Seller,
which affects any of the Shares, the Company, this Agreement or any
of the transactions contemplated hereby.
(f) Ownership of the Shares. Each Seller is the owner of record and
beneficially of the number of issued and outstanding shares listed
in Schedule C. All of the Shares are free and clear of any liens,
claims and encumbrances (collectively, "Encumbrances"). Each Seller
has the right to transfer title to the Shares to the Purchaser.
There are no commitments, agreements or rights relating to the
purchase, sale or other disposition of the Shares or any interest
therein (including, without limitation, any subscription agreement,
preemptive right or right of first refusal). None of the Shares are
subject to any voting trust, voting agreement, or other similar
agreement or understanding with respect to the voting or control
thereof, nor is any proxy in existence with respect to any of the
Shares. Upon the sale of the Shares to the Purchaser pursuant to
this Agreement, the Purchaser will own the Shares free and clear of
all Encumbrances.
(g) Disclosure. No representation or warranty made by Sellers in this
Agreement and in any schedule or exhibit hereto, to the best
knowledge of Sellers, contains any untrue statement of material
fact or omits any material fact in order to make the statements
made and information contained therein as of the date hereof not
misleading.
(h) Brokers, Finders. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for
which Purchaser could become liable or obligated.
Section 2.02 Representations of the Sellers as to the Company. Each
Seller represents and warrants to the Purchaser that the following is true and
correct with respect to the Company as of the date hereof and shall be true and
correct as of the Closing Date. The representations and warranties set forth in
this Section 2.02 are several obligations, meaning that the particular Seller
making the representation and warranty will be solely therefore to the extent
provided in Section 6.02 hereof for loss, etc. the Purchaser may suffer as a
result of any breach thereof:
4
(a) Organization, Standing and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of Utah and the Company has all
necessary corporate power and authority to engage in the business
in which it is presently engaged. The Company has not qualified to
do business as a foreign corporation in any state other than Utah.
Sellers have delivered to the Purchaser true, correct and complete
copies of the certificate of incorporation and bylaws of the
Company, and all amendments thereto.
(b) Capital Structure of the Company. The authorized capital stock of
the Company consists of 1000 shares of common stock of which 1000
shares are issued and outstanding. No other class or series of
capital stock of the Company is or has been authorized, nor has the
Company authorized or issued, nor does it have outstanding, any
other securities (including, without limitation, options, warrants,
conversion privileges or other rights, contingent or otherwise, to
purchase any capital stock or other securities of the Company). All
of the Shares are duly authorized, validly issued, fully paid and
non-assessable. All of the Shares were issued in compliance with
all applicable Requirements of Law (including securities laws) and
in compliance with the certificate of incorporation and bylaws of
the Company. There are no outstanding subscriptions for any
securities to be issued by the Company.
(c) No Violation of Statute or Breach of Contract. To the best
knowledge of the Sellers, the Company is not in default under, or
in violation of, (a) any material applicable Requirement of Law, or
(b) any material Contractual Obligation. The Company has not
received notice that any Person claims that the Company has
committed such a default or violation.
(d) Government and Other Consents. No consent, authorization, license,
permit, registration or approval of, or exemption or other action
by, any Governmental Authority is required to be obtained or made,
and no consent of any third party is required to be obtained by the
Company in connection with the execution and delivery of this
Agreement or with the consummation of the transactions contemplated
hereby.
(e) Effect of Agreement. The execution and delivery of this Agreement
by the Sellers, performance of the obligations of the Sellers
hereunder and consummation of the transactions contemplated hereby
will not (i) result in a breach or violation of any Requirement of
Law applicable to the Company; (ii) result in the breach of, or be
in conflict with, any term, covenant, condition or provision of,
any Contractual Obligation of the Company; or (iii) result in the
creation or imposition of any Encumbrance upon any assets of the
Company.
5
(f) Financial Statements. The audited balance sheet and income
statement of the Company as of December 31, 2001, to be procured
and paid for by the Purchaser and approved by the Sellers (the
"Financial Statements") shall be complete and accurate and fairly
present the assets and liabilities of the Company as of the dates
and for the periods therein specified.
(h) Assets and Business. The Company owns the tangible and intangible
assets listed in Schedule C (plus tangible assets acquired after
the date hereof and minus tangible assets disposed of in the
ordinary course of business after the date hereof) free and clear
of all Encumbrances except as set forth in Schedule C, as such
Schedule may be amended to include Encumbrances attaching after the
date hereof to tangible assets acquired after the date hereof.
(i) Absence of Undisclosed Liabilities. Except as included in the
Financial Statements and except for liabilities which arise after
the date of the Financial Statements in the ordinary course of
business, to the best of Sellers' knowledge, the Company does not
have any material debt, liability, or obligation as of the Closing
Date of any nature, accrued, absolute or contingent, due or to
become due, liquidated or unliquidated (each, "Undisclosed
Liability"). For purposes of this subsection 2.01(h), a liability
shall be deemed to be material if it exceeds 5% of the Company's
assets as shown on the Financial Statements.
(j) Tax Returns and Payments. All income tax returns, federal, state,
local, foreign and other, including, without limitation, all
federal income tax returns and reports for each fiscal year of the
Company through the fiscal year ended December 31, 2001 required to
be filed by and/or on behalf of the Company in respect of any
income taxes (including without limitation all foreign, federal,
state, county and local income taxes) have been filed, and the
Company has paid all income taxes shown thereon as owing except
where the failure to file or to pay income taxes would not have a
material adverse affect on the financial condition of the Company.
There are no deficiency assessments against the Company with
respect to any foreign, federal, state, local or other taxes. There
are no outstanding agreements or waivers extending the period of
limitation applicable for assessment or collection for any federal,
state, local or foreign tax, or for the filing of any tax return,
in respect of the Company for any period. Neither the federal tax
returns nor any state, county, local or foreign tax returns of the
Company have in the past been audited by the Internal Revenue
Service or any other taxing authority. The Sellers have heretofore
made available to the Purchaser copies of all federal, state, local
and foreign tax returns or reports of the Company filed prior to
the Closing Date. To Sellers' best knowledge, all tax returns filed
6
by or on behalf of the Company are materially true, correct and
complete. To the best knowledge of the Sellers, all taxes that the
Company is or was required to withhold or collect (including,
without limitation, payroll taxes) have been duly withheld or
collected and paid to the proper Governmental Authority.
(k) Contracts. Attached hereto as Schedule D is a list of all written
agreements and contracts to which the Company is a party or by
which it is bound (the "Contracts"). Sellers have no reason to
believe the Contracts are not valid, legally binding and
enforceable in accordance with their terms and are in full force
and effect. Copies of the Contracts have been delivered to the
Purchaser.
(l) Litigation. Except as set forth on Schedule E, no claim, action,
suit, or other proceeding against the Company is pending or, to the
knowledge of Sellers, is threatened before or by any court,
administrative or regulatory body, or other Governmental Authority.
The Sellers know of no investigation of the Company by any
administrative agency of any federal, state or local government. No
judgment, order, writ, injunction, decree or award issued by any
Governmental Authority is applicable to the Company.
(m) Accounts, Powers of Attorney. There are no persons holding a power
of attorney on behalf of the Company or otherwise holding the right
to act as an agent on behalf of the Company. Schedule F lists the
names and addresses of each bank or other financial institution in
which on the date hereof the Company has an account, deposit or
safe-deposit box, including the number of each such account,
deposit and safe-deposit box.
(n) Insurance. Except as set forth in Schedule G, there are no
insurance policies maintained by or on behalf of the Company in
effect on the Closing Date.
(o) No Subsidiaries or Joint Ventures. The Company does not own,
directly or indirectly, beneficially or of record, or have any
obligation to acquire, any stock of, or other equity or ownership
interest in, any Person. The Company is not a party to or involved
in any joint venture.
(p) Accounts Receivable. Schedule H shall be completed by the Company
on the Closing date to include a complete and accurate list of all
accounts receivable of the Company as of the Closing Date.
(q) Minute Books. All stock books, stock ledgers and minute books of
the Company have been made available to Purchaser for review.
(r) Employees. The Company has approximately 70 employees and except as
set forth on Schedule I, no employee benefit plans or pension plans
(as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") or any incentive, bonus, stock
option, stock appreciation or parachute program or any other type
of employee compensation arrangement or program. Neither the
7
Company nor any employee benefit or pension plan previously
maintained by the Company has any unsatisfied liability or
obligation to any former employee of the Company or in connection
with any employee benefit or pension plan or any incentive, bonus,
stock option, stock appreciation or parachute program.
(s) Toxic Wastes; Employee Safety, etc.
(i) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
a. "Hazardous Substances" shall mean any chemical, compound,
material, mixture, living organism or substance that is
now or hereafter defined or listed in, or otherwise
classified or regulated in any way pursuant to, any
Environmental Laws as a "hazardous waste," "hazardous
substance," "hazardous material," "extremely hazardous
waste," "infectious waste," "toxic substance," "toxic
pollutant" or any other formulation intended to define,
list, or classify substances by reason of deleterious
properties, including without limitation, ignitability,
corrosivity, reactivity, carcinogenicity or toxicity,
such materials to include without limitation, oil, waste
oil, petroleum waste petroleum, polychlorinated biphenyls
(PCBs), asbestos, radon, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable
for fuel (or mixtures of natural gas and such synthetic
gas).
b. "Environmental Laws" shall mean applicable federal,
state, or local laws, including without limitation,
common law, statutes, rules, regulations, codes or
ordinances, requirements under licenses, permits,
franchises, approvals or contracts, orders, demands,
decrees, judgments, directives, injunctions and
requirements of any other governmental authority,
relating to the protection of health, safety or the
environment.
(ii) Neither the Sellers nor the Company are in actual or alleged
violation of any Environmental Laws, arising from the
Sellers or the Company's ownership, operation or use of any
property prior to the Closing Date, or arising from their
ownership, operation or use of any of their other current or
former assets or businesses.
(iii) To the Sellers' knowledge, no property currently or formerly
owned, operated or used by the Company or any property to
which the Company may have transported, treated or disposed
8
or arranged for the transport, treatment or disposal of
Hazardous Substances is listed as a site on the National
Priorities List (as defined in the Comprehensive
Environmental Response Compensation and Liability Act of
1980, as amended) or comparable federal, state or local list
of sites of environmental concern. In addition, to the
Sellers' knowledge, none of such sites are or have been the
subject of any remediation, removal, cleanup, investigation,
response action, claim, judgment or enforcement action
regarding any actual or alleged presence of Hazardous
Substances.
(iv) To the Sellers' knowledge, the Company has not received any
written notice or report of any releases of Hazardous
Substances on, under, from or into any property formerly
owned, operated or used by the Company during the time of
its ownership, operation or use or, to the knowledge of the
Sellers, prior to the Company's ownership, operation or use.
(v) To the best of Sellers' knowledge, there are no civil,
criminal or administrative actions, suits, demands, claims,
hearings, proceedings or notices pending or, threatened
against the Company under any Environmental Laws, including
without limitation, those related to any allegations of
economic loss, personal injury, illness or damage to real or
personal property or the environment. To the Sellers'
knowledge, there are no facts or circumstances which are
reasonably likely to give rise to such a claim.
(vi) The Company is not a party or a successor in interest to any
contract or agreement, including without limitation, any
purchase agreements, leases, indemnities or guaranties,
pursuant to which the Company has assumed or agreed to be
responsible for any current or contingent liabilities with
respect to any Hazardous Substances or any matters under
Environmental Laws.
(t) Permits, Licenses, Etc. No franchise, license, permit, certificate,
authorization, right or other approval issued or granted by any
Governmental Authority to or for the benefit of the Company is in
existence or effect, except for the Company's incorporation in
Utah, the Company's authorization to transact business in Utah as a
corporation, and the Company's certificate of occupancy to occupy
its offices.
(u) Officers; Directors. Schedule J contains a complete and correct
list of all of the officers and directors of the Company.
9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
Section 3.01 Representations of the Purchaser. The Purchaser hereby
represents and warrants to the Sellers as follows:
(a) Existence. The Purchaser is a corporation duly organized and
validly existing under the laws of the State of Nevada.
(b) Authorization; No Violation. The execution, delivery and
performance by the Purchaser of this Agreement are within the
Purchaser's corporate powers and have been duly authorized by all
necessary action, and do not contravene in any material respect any
Requirement of Law or Contractual Obligation of the Purchaser.
(c) Government Authorization. No authorization or approval or other
action by, and no notice to or filing with, any Governmental
Authority is required to be obtained or made by the Purchaser for
the due execution, delivery and performance by the Purchaser of
this Agreement.
(d) Enforceable Obligations. This Agreement and the Voting Agreement
and employment agreements (provided for as exhibits to this
agreement) have been duly executed and delivered on behalf of the
Purchaser and constitute the legal, valid and binding obligations
of the Purchaser enforceable against the Purchaser in accordance
with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(e) No Litigation. No claim, action, suit, investigation or other
proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Purchaser, threatened by or
against the Purchaser with respect to this Agreement or any of the
transactions contemplated hereby.
(f) Brokers, Finders. The Purchaser has not retained any person to act
on its behalf as a broker or finder in connection with the purchase
of the Shares.
(g) Investment Intent. The Shares are being acquired by the Purchaser
for its own account and not with a view to distribution within the
meaning of the Securities Act of 1933, as amended (the "Securities
Act"). The Purchaser acknowledges that there is no existing public
10
market for the Shares and that no registration statement relating
to the Shares has been filed under the Securities Act or any
applicable state securities laws, and that the Shares must be held
by it for an indefinite period of time unless the Shares are
subsequently registered under the Securities Act and state
securities laws or unless an exemption from any such applicable
registration requirement is available, and the Purchaser
acknowledges that there is no assurance or obligation as to any
such registration or exemption.
ARTICLE IV
CONDITIONS TO CLOSING
---------------------
Section 4.01 Conditions to Purchaser's Obligations. The obligation of
the Purchaser to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct; Performance of Obligations.
The representations and warranties made by the Sellers in Article
II hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the
Closing Date with the same force and effect as if they had been
made on and as of the Closing Date. The Sellers shall have
performed in all material respects all obligations and conditions
herein required to be performed or observed by them on or prior to
the Closing Date.
(b) Qualifications. All actions and steps necessary to assure
compliance with applicable federal and state securities laws shall
have been duly obtained and shall be effective on and as of the
Closing, except for such filings as are required or permitted by
state or federal securities laws subsequent to the Closing.
(c) Dividends. The Company shall not have declared or paid any dividend
or otherwise changed its capitalization between the date hereof and
the Closing Date.
(d) Audited Financial Statements. Purchaser shall have received and
approved the Financial Statements. The Purchaser agrees that it is
the Purchaser's sole obligation to pay for such audit and that
neither the Sellers nor the Company shall have any liability for
such expense.
11
Section 4.02 Conditions to Obligations of the Sellers. The Sellers'
obligation to sell the Shares at the Closing is subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct; Performance of Obligations.
The representations and warranties of the Purchaser in Article III
hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the
Closing Date with the same force and effect as if they had been
made on and as of the Closing Date, and the Purchaser shall have
performed in all material respects all obligations and conditions
herein required to be performed by it on or prior to the Closing
Date.
(b) Incumbency Certificate of the Purchaser. The Sellers shall have
received a certificate of the Purchaser in its capacity as
Secretary of the Purchaser, certifying the names and signatures of
officers of the Purchaser authorized to sign this Agreement and the
other documents to be delivered hereunder on behalf of the
Purchaser.
(c) Audited Financial Statements. Sellers shall have received and
approved the Financial Statements.
ARTICLE V
CLOSING DELIVERIES
------------------
Section 5.01 Sellers' Deliveries. At the Closing, in addition to any
other documents or agreements required under this Agreement, the Sellers shall
deliver or cause to be delivered to the Purchaser the following:
(a) Stock certificates evidencing the Shares duly endorsed in blank, or
accompanied by stock powers duly executed in blank, in a form
reasonably satisfactory to the Purchaser.
(b) Copies of all consents and approvals obtained, and all
registrations, qualifications, declarations, filings and notices
made, by the Sellers pursuant to Section 4.01(b) hereof.
(c) All records, documents and files of the Company including, without
limitation, all minute books, stock records and internal accounting
records.
(d) Such other documents, assignments, instruments of conveyance and
certificates as reasonably may be required by the Purchaser to
consummate this Agreement and the transactions contemplated hereby.
12
Section 5.02 Purchaser's Deliveries. At the Closing, in addition to any
other documents or agreements required under this Agreement, the Purchaser shall
deliver to the Sellers the Stock (including appropriate stock certificates) in
accordance with the instructions of Sellers, together with. such other documents
as reasonably may be required by the Sellers to consummate this Agreement.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
Section 6.01 Survival of Representations. The parties agree that,
notwithstanding any right or ability of the Purchaser fully to investigate the
affairs of the Company, any knowledge of facts determinable by the Purchaser
pursuant to such investigations or right of or ability to investigate, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Sellers contained in this Agreement and on the
accuracy of any schedule, exhibit, document or certificate annexed hereto. All
representations and warranties of the parties contained herein shall survive the
Closing until the expiration of the time periods set forth in Section 6.04.
Section 6.02 Indemnification by the Sellers.
(a) Subject to the provisions of this Article VI, each Seller shall
indemnify and hold harmless the Company, the Purchaser and their
affiliates and the officers, partners, directors, employees,
agents, owners, successors and assigns thereof from such Seller's
Allocable Portion of any loss, damage, liability or expense,
including, without limitation, reasonable expenses of investigation
and reasonable attorneys' fees and expenses incurred in connection
with any action, suit or proceeding against any thereof ("Adverse
Consequence") incurred or suffered by such party and arising out of
or resulting from (i) any material breach of any representation or
warranty contained in Article II of this Agreement (provided,
however, that the Sellers shall not be deemed to have breached the
provisions of Section 2.01(g) unless the Sellers are also liable to
the Purchaser under Section 10b-5 of the Securities Exchange Act of
1934 or Section 12(2) of the Securities Act of 1933), (ii) any
material breach of any covenant made by Sellers hereunder, or (iii)
any lawsuit or other proceeding or claim brought by any third party
after the Closing against the Company, the Purchaser, or any of
their respective officers, partners, directors, employees, agents,
owners, successors and assigns with respect to any acts or
13
omissions of the Company prior to the Closing For purposes of this
Section 6.02(a), the term "material" means a breach which would
have a material adverse effect on the Company's business, taken as
a whole. The term "Allocable Portion" with respect to a Seller
means the number of Shares owned by such Seller divided by the
number of Shares owned by all Sellers.
(b) Anything to the contrary contained herein notwithstanding, in the
event of liability of any or all the Sellers to the Purchaser under
this Article VI, the Sellers may discharge such liability by
transferring to the Purchaser shares of Stock which shall be deemed
to have a value per share equal to the average public trading price
of the Purchaser's common stock during the 20 trading days prior to
such transfer, but not less than $1 per share.
Section 6.03 Indemnification by the Purchaser. The Purchaser shall
indemnify and hold Sellers harmless from any loss, damage, liability or expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses) in connection with any action, suit or
proceeding brought against Sellers, either jointly or severally, incurred or
suffered by Sellers and arising out of or resulting from (i) any breach of any
representation, warranty, or covenant made by the Purchaser hereunder, or (ii)
any lawsuit or other proceeding or claim brought by a third party after the
Closing against one or more of the Sellers with respect to any acts or omissions
of the Purchaser or the Company after the Closing.
Section 6.04 Time Periods. The indemnification obligations under this
Article VI shall continue for the periods specified below and shall terminate
with the expiration of such respective periods:
(a) as to representations and warranties set forth in Section 2.01(f),
such representations and warranties shall survive the Closing
indefinitely;
(b) as to representations and warranties set forth in Section 2.02(i),
until the lapse of the statute of limitations applicable to the
matters described therein;
(c) as to all other representations and warranties and breaches of any
other covenant or undertaking, for two (2) years after the Closing
Date.
Any claim or demand against any Sellers or the Purchaser of which notice has
been given pursuant to Section 6.06 at or prior to the expiration of the related
period shall continue to be subject to indemnification hereunder notwithstanding
the expiration of such period.
Section 6.05 Notice Claim. Purchaser, on the one hand, and each of the
Sellers, on the other hand, shall promptly notify the other of any claim, suit
or demand of which the notifying party has actual knowledge which entitles it to
indemnification under this Article VI, provided, however, that the delay or
14
failure of any party required to provide such notification shall not affect the
liability of the indemnifying party hereunder except to the extent the
indemnifying party is harmed by such delay or failure.
Section 6.06 Defense. If the liability or claim for which
indemnification under this Article VI is sought is asserted by a third party,
the indemnifying party shall have, at its election, the right to defend any such
matter at its sole cost and expense through counsel chosen by it and reasonably
acceptable to the indemnified party (provided that the indemnifying party shall
have no such right if it is contesting its liability under this Article VI). If
the indemnifying party so undertakes to defend, the indemnifying party shall
promptly notify the indemnified party hereto of its intention to do so. The
indemnifying party shall not, without the indemnified party's written consent,
settle or compromise any claim or consent to an entry of judgment which does not
include as an unconditional term thereof a release of the indemnified party.
Section 6.07 Cooperation and Conflicts. Each party agrees in all cases
to cooperate with the indemnifying party and its counsel in the defense of any
such liabilities or claims. The indemnifying party and the indemnified party or
parties may be represented by the same counsel unless such representation would
be inappropriate due to conflicts of interest between them. In addition, the
indemnified party or parties shall at all times be entitled to monitor and
participate in such defense through the appointment of counsel of its or their
own choosing, at its or their own cost and expense.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Waiver. Any extension or waiver with respect to any
agreement or condition contained herein or the breach thereof shall be valid
only if set forth in a separate instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.
Section 7.02 Further Assurances. The Sellers jointly and severally
agree, without further consideration, to execute and deliver following the
Closing such other instruments of transfer and take such other action as the
Purchaser may reasonably request in order to put the Purchaser in possession of,
and to vest in the Purchaser, good and valid title to the Shares free and clear
of any Encumbrances in accordance with this Agreement and to otherwise
consummate the transactions contemplated by this Agreement.
15
Section 7.03 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties hereto with regard to the subject matter hereof
and thereof and supersede all prior and contemporaneous agreements and
understandings, oral or written, among the parties hereto with respect to such
subject matter. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived only with the written consent of the
parties hereto.
Section 7.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law, rule or
regulation or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
Section 7.05 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, mailed by first-class mail, postage prepaid, or sent by reputable
overnight courier service addressed (a) if to the Purchaser, at the Purchaser's
address set forth on Section 1.02 hereto or at such other address as such
Purchaser shall have furnished to the Sellers by 10 days' notice in writing,
with a copy to (b) if to any Sellers, at the addresses set forth on Exhibit B
hereto, or such other address as such Sellers shall have furnished to the
Purchaser by 10 days' notice in writing.
Section 7.06 Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement and consummation of the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses; however,
the Company shall pay, at the Closing, the legal fees and disbursements of legal
counsel to the Sellers and the Purchaser shall pay for the audit of the Company.
16
Section 7.07 Governing Law; Jurisdiction. This Agreement shall be
governed in all respects by the laws of the State of California without
application of principles of conflicts of laws. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in any state or federal
court located in the State of California, County of Los Angeles, and each of the
parties consents to the jurisdiction of such courts in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
Section 7.08 Benefit of Agreement; Assignment. This Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. This Agreement may not be
assigned by operation of law or otherwise by the Purchaser without the express
written consent of the Sellers (which consent may be granted or withheld in the
sole discretion of the Sellers). Notwithstanding the foregoing, this Agreement
and the rights hereunder may be (i) assigned as collateral security to any
lender of funds to the Company, and (ii) assigned by the Purchaser after the
Closing to the beneficial owners of the Purchaser or to any subsequent purchaser
or other holder of all or a portion of the Shares, provided that in no event
shall the Purchaser be relieved from its obligations hereunder in connection
with any such assignment.
Section 7.09 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR
AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS AGREEMENT.
Section 7.10 Titles and Subtitles. The titles of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
Section 7.12 Representation Disclaimer. Sellers shall not be deemed to
have made to Purchaser any representation or warranty other than as expressly
made by Sellers in Article II hereof. Without limiting the generality of the
foregoing, and notwithstanding any otherwise express representations and
warranties made by Sellers in Article II hereof, Seller makes no representation
or warranty to Purchaser with respect to:
17
(a) any projections, estimates or budgets heretofore delivered to or
made available to Purchaser of future revenues, expenses or
expenditures or future results of operations; or
(b) except as expressly covered by a representation and warranty
contained in Article II hereof, any other information or documents
(financial or otherwise) made available to Purchaser or its
counsel, accountants or advisers with respect to the Company.
Section 7.13 Purchaser's Due Diligence Investigation. Purchaser has
had over 60 days (such period, "Purchaser's Due Diligence Period") in which to
conduct its confirmatory due diligence. During such Purchaser's Due Diligence
Period, Purchaser and its accountants, consultants, and advisers have been
permitted to review the premises, facilities, books and records and contracts of
the Company, and to conduct interviews with the Company's senior management
regarding the business, operations, financial condition and results of
operations of the Company, for the purpose of confirming the accuracy of the
representations and warranties of Sellers contained herein. Purchaser had the
right, at any time during the Purchaser's Due Diligence Period, at Purchaser's
sole discretion and without any liability or obligation, to terminate all
negotiations with the Sellers, except for the Purchaser's obligation to pay for
an audit of the Company.
Section 7.14 Sellers' Due Diligence Investigation. Sellers have had
over 60 days (such period, "Sellers' Due Diligence Period") in which to conduct
its confirmatory due diligence. During such Sellers' due diligence period,
Sellers and their accountants, consultants, and advisers were permitted to
review the premises, facilities, books and records and contracts of the
Purchaser, and to conduct interviews with the Purchaser's senior management
regarding the business, operations, financial condition and results of
operations of the Company, for the purpose of confirming the accuracy of the
representations and warranties of Purchaser contained herein. Sellers had the
right, at any time during the Sellers' Due Diligence Period, at Sellers' sole
discretion and without any liability or obligation, to terminate all
negotiations with the Purchaser.
Section 7.15 Press Releases and Public Announcements. No party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Purchaser and the Sellers; provided, however, that any party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing party will use its efforts to advise the other parties prior
to making the disclosure).
18
Section 7.16 Holding Period. The Purchaser agrees that, for purposes
of Securities and Exchange Commission Rule 144, the holding period with respect
to all shares of Purchaser common stock delivered to the Sellers under this
Agreement, whether pursuant to conversion of shares of Preferred Stock or
otherwise, commences on the date of the Closing and that upon the expiration of
one year thereafter (or any shorter period included in any amendment to Section
(d) of Rule 144), upon compliance with the other requirements of Rule 144, as
amended, such shares may be publicly sold. Upon the expiration of two years
after the Closing (or any shorter period included in any amendment to Section
(k) of Rule 144), the Purchaser shall remove all restrictive legends from
certificates evidencing shares of Preferred Stock and common stock issued upon
the conversion thereof.
Section 7.17 Capital for the Company. The Sellers have disclosed to
the Purchaser that the Company is in need of up to $200,000 in capital for
relocation, expansion and recruiting purposes. As a material inducement to the
Sellers to enter into this Agreement, the Purchaser has represented to the
Sellers that the Purchaser will provide the Company with a line of credit from
Innovative Software Technologies within 10 days of the Closing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth in the heading hereof.
Innovative Software Technologies, Inc.
By: ___________________________
Energy Professional Marketing Group, Inc
By: ___________________________
Sellers:
------------------------------
------------------------------
------------------------------
19