Warrant No. 15 Issuance Date: October 16, 2006
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Warrant
No. 15
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Issuance
Date: October 16, 2006
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THE
SECURITIES REPRESENTED BY THIS AGREEMENT HAVE BEEN SOLD IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
MAY
NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO
THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO INNOVATIVE
SOFTWARE TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.
1. Grant
of Warrant.
(a) Innovative
Software Technologies, Inc. a California corporation (the “Company”), hereby
agrees that Crescent
International Ltd.,
a
Bermuda corporation (the “Holder”), for value received, is entitled, subject to
the provisions of this Warrant, to purchase from the Company, in whole or in
part and at any time or from time to time, during the period commencing on
the
date hereof and expiring at 5:00 p.m., Eastern time, on the Expiration Date
(as
defined below), One
Million Two Hundred Thousand,
(1,200,000)
fully
paid and non-assessable shares of Common Stock (as defined below). The “Exercise
Price” for such shares shall be the lesser of five cents ($.05) or the price per
share paid by a third-party investor for a share of Common Stock in a Qualified
Financing. For purposes hereof, the term “Qualified Financing” shall mean the
first transaction after the date of this Note in which the Company issues to
any
person or entity any shares of Common Stock, or any rights, options, warrants
or
convertible or exchangeable securities containing the right to subscribe for
or
purchase shares of Common Stock (excluding (i) the issuance of any convertible
promissory note on or after the date hereof having substantially the same
conversion price as the Convertible Promissory Note of even date herewith in
the
principal amount of $300,000
issued
by the Company to Holder (the “Note”) and the issuance of any warrant having
substantially the same terms and conditions as this Warrant, as well as the
issuance of any shares of Common Stock upon the conversion or exercise of such
note or warrant pursuant to the terms thereof , (ii) any shares of Common Stock
issued or issuable upon conversion or exchange of any rights, options, warrants
or convertible or exchangeable securities, and any shares of Common Stock
issuable upon exercise thereof, which rights, options, warrants or convertible
or exchangeable securities were issued on or prior to the date of this Warrant,
(iii) any rights, options, warrants or convertible or exchangeable securities
and any shares of Common Stock issued upon conversion or exercise thereof or
any
shares of Common Stock otherwise issued or issuable pursuant to employees,
directors, officers, consultants, or independent contractors of the Company
in
consideration of past or future services rendered by such parties to the Company
or its affiliates, (iv) shares of Common Stock issued for consideration other
than cash, including without limitation shares issued in the settlement of
any
claim against the Company, (v) shares of Common Stock or other securities issued
in a financing transaction that, together with all prior related financing
transactions containing the same terms, results in gross proceeds to the Company
of less than $2,000,000, and (vi) shares of Common Stock issued as consideration
for a merger or acquisition of all or substantially all of the assets of a
third
party). In a Qualified Financing, if the Company issues any rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock, the per share Common Stock
purchase price in such transaction shall be determined by dividing (1) the
total
amount receivable by the Company in consideration for the sale and issuance
of
such rights, options, warrants or convertible or exchangeable securities, plus
the total consideration receivable by the Company upon exercise, conversion
or
exchange thereof, by (2) the total number of shares of Common Stock covered
by
such rights, options, warrants or convertible or exchangeable securities. For
purposes of the preceding sentence, the “total amount receivable by the Company”
will include the fair market value of all non-cash consideration received or
receivable by the Company in consideration for the issuance, including, in
the
case of warrants granted in conjunction with a debt facility, the value received
by the Company for such warrants in excess of the exercise price thereof. The
Exercise Price is subject to adjustment as set forth in Section 4 below. This
Warrant is being granted in connection with, and in consideration of, a loan
in
the amount of One Hundred Thousand Dollars ($300,000) as evidenced by that
certain Convertible Promissory Note of even date herewith granted to the
Holder.
(b) The
term
“Common Stock” means the common stock, par value $0.001 per share, of the
Company as constituted on the date hereof, together with any other equity
securities that may be issued by the Company in substitution therefor. The
number of shares of Common Stock to be received upon the exercise of this
Warrant, and the Exercise Price, shall be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter referred to as
“Warrant Stock” or “Warrant Shares.” The term “Company” means and includes the
Company as well as (i) any successor corporation resulting from the merger
or consolidation of the Company with another corporation, or (ii) any
corporation to which the Company has transferred its property or assets as
an
entirety or substantially as an entirety.
2. Exercise
of Warrant.
(a) Subject
to the limitations set forth in Section 5, this Warrant may be exercised in
whole or in part at any time or from time to time during the period commencing
on the date hereof and expiring at 5:00 p.m. Tampa (Florida) time, on the fifth
anniversary of the Issuance Date of this Warrant as stated above, or, if such
date is a day on which banking institutions in Florida are authorized by law
to
close, then on the next succeeding day that banking institutions in Florida
shall not be authorized to close.
(b) The
Holder may exercise this Warrant by presentation and surrender of this Warrant
to the Company at its principal office with the Warrant Exercise Form attached
hereto duly executed and accompanied by payment (either in cash, wire transfer,
or by certified or official bank check, payable to the order of the Company)
of
an amount equal to the Exercise Price multiplied by the number of shares of
Warrant Stock purchased (the “Purchase Price”). The Purchase Price shall be
payable in cash.
(c) If
this
Warrant is exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the shares purchasable
hereunder.
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(f) Upon
receipt by the Company of this Warrant, together with the Purchase Price, at
its
office in proper form for exercise, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall
not
then be actually delivered to the Holder.
3. Reservation
of Shares.
The
Company will, on the date of issuance of this Warrant, reserve, and use
reasonable best efforts to maintain such reservation, for issuance and delivery
of all shares of Warrant Stock. All such shares shall be duly authorized and,
when issued upon exercise in compliance with the terms of this Agreement, shall
be validly issued, fully paid and non-assessable. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but the Company shall pay the Holder an amount equal to the applicable
Exercise Price multiplied by such fraction in lieu of each fraction of a share
otherwise called for upon any exercise of this Warrant.
4. Adjustments.
(a) Capital
Adjustments.
In case
the Company shall: (i) pay a dividend with respect to its capital stock in
shares of Stock, (ii) subdivide its outstanding shares of Stock, (iii) combine
its outstanding shares of Stock into a smaller number of shares, or (iv) issue
any shares of its capital stock in a reclassification of the Stock (including
any such reclassification in connection with a merger, consolidation or other
business combination in which the Company is the continuing corporation) (each
of the actions in (i)-(iv) is hereinafter referred to as an “Adjustment Event”),
the number of shares of Warrant Stock purchasable upon exercise of this Warrant
immediately prior to the record date for such Adjustment Event shall be adjusted
so that the Holder shall thereafter be entitled to receive the number of shares
of Warrant Stock or other securities of the Company that such Holder would
have
owned or have been entitled to receive after the happening of such Adjustment
Event, had such Warrant been exercised in whole immediately prior to the
happening of such Adjustment Event or any record date with respect thereto.
An
adjustment made pursuant to this Section 4(a) shall become effective immediately
after the effective date of such Adjustment Event, retroactive to the record
date, if any, for such Adjustment Event. Whenever the number of shares of
Warrant Stock purchasable upon the exercise of this Warrant is adjusted pursuant
to this Section 4(a), the Exercise Price payable upon exercise of this Warrant
shall be adjusted by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Warrant Stock purchasable upon the exercise of this Warrant immediately
prior
to such adjustment, and the denominator of which shall be the number of shares
of Warrant Stock so purchasable immediately thereafter.
(b) Business
Combinations.
If the
Company is a party to a merger, sale of all or substantially all of its assets,
share exchange or other similar business combination transaction, this Warrant
shall pertain and apply to the securities and/or other property to which the
Holder would have otherwise been entitled had this Warrant then been exercised
in whole prior to such business combination.
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(c) Notice
to Warrant Holder of Adjustment.
Whenever the number of shares of Warrant Stock or the Exercise Price is adjusted
as herein provided, the Company shall cause to be mailed to the Holder in
accordance with the provisions of this Section 4 a notice (i) stating
that an event giving rise to an adjustment hereunder has occurred,
(ii) setting forth the adjusted number of shares of Warrant Stock and the
adjusted Exercise Price and (iii) showing in reasonable detail the
computations and the facts upon which such adjustments are based.
5. Restrictions
on Transfer.
The
Holder hereby acknowledges that neither this Warrant nor any of the securities
that may be acquired upon exercise of this Warrant have been registered or
qualified under the Securities Act of 1933, as amended (the “Securities Act”),
or under the securities laws of any state. The Holder acknowledges that, upon
exercise of this Warrant, the securities to be issued upon such exercise will
be
subject to applicable federal and state securities (or other) laws requiring
registration, qualification or approval of governmental authorities before
such
securities may be validly issued or delivered upon notice of such exercise.
The
Holder agrees that the issuance of such securities may be deferred until the
issuance or sale of such securities shall be compliant with federal and state
securities laws. The restrictions imposed by this Section 5 upon the
exercise of this Warrant shall cease and terminate as to any particular shares
of Warrant Stock (i) when such securities shall have been effectively
registered and qualified under the Securities Act and all applicable state
securities laws and disposed of in accordance with the registration statement
covering such securities, or (ii) when, in the reasonable opinion of
counsel reasonably acceptable to the Company, such restrictions are no longer
required in order to insure compliance with the Securities Act and all
applicable state securities laws.
6. Legends.
Unless
(i) the shares of Warrant Stock have been registered under the Securities Act,
or (ii) in the reasonable opinion of counsel for the Company such legend is
no
longer required in order to ensure compliance with the Securities Act and all
applicable state securities laws, upon exercise of any of the Warrants and
the
issuance of any of the shares of Warrant Stock, all certificates representing
such shares shall bear on the face thereof substantially the following legend
and any additional legends as may be required under state securities
laws:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN SOLD IN RELIANCE UPON
AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF
A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL OR UPON EVIDENCE REASONABLY SATISFACTORY
TO INNOVATIVE SOFTWARE TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
7. Notices
of Record Date, Etc.
In
case:
(a) the
Company shall establish a record date for the holders of its Stock for the
purpose of entitling them to receive any dividend or other distribution, or
any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any
class or any other securities or to receive any other right;
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(b) of
any
capital reorganization of the Company, any reclassification of the capital
stock
of the Company, any consolidation or merger of the Company with or into another
entity, any share exchange for shares of capital stock of another corporation
or
any conveyance of all or substantially all of the assets of the Company to
another entity;
(c) of
any
voluntary or involuntary dissolution, liquidation or winding up of the Company;
or
(d) the
Company shall enter into a letter of intent or agreement with respect to a
transaction by which all or substantially all of the outstanding shares of
Stock
of the Company are to be acquired by a third party;
then
the
Company shall mail or cause to be mailed to each Holder at the time outstanding
a notice specifying, as the case may be, (i) the date on which a record is
to be taken for the purpose of such dividend, distribution or rights, and
stating the amount and character of such dividend, distribution or rights,
(ii) the date on which such reorganization, reclassification, offering,
consolidation, merger, conveyance, dissolution, liquidation or winding up is
to
take place, and the time, if any is to be fixed, as to which the holders of
record of Stock shall be entitled to exchange their shares for securities or
other property deliverable upon the completion of such transaction, or
(iii) the date on which the closing of the acquisition by a third party of
all or substantially all of the outstanding shares of Stock is to occur. Such
notice shall be mailed as soon as practicable after the occurrence or likelihood
of such event is publicly disclosed, but in no event later than 15 days prior
to
the consummation of such event.
8. Transfer
and Assignment.
(a) Neither
this Warrant nor any rights hereunder may be assigned, transferred, pledged
or
hypothecated (a “Disposition”) in any way (whether by operation of law or
otherwise), unless such securities are registered under the Securities Act,
or
unless and until Holder shall have obtained the Company’s prior written consent
to such Disposition. Any attempted assignment, transfer, pledge, hypothecation
or other disposition of this Warrant contrary to the provisions of this
Agreement shall be null and void and without legal effect.
(b) Each
permitted Disposition of this Warrant shall be effected by the surrender of
this
Warrant certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered holder hereof, at the principal
executive office of the Company in the United States of America.
9. Representations
and Warranties. The
Holder represents and warrants to the Company that:
(a) Investment
Purpose.
The
Holder is acquiring the Warrant for the Holder’s own account and not with a
present view to the distribution thereof, and ▇▇▇▇▇▇ does not have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer, distribute or grant participation to any third person or entity with
respect to the Warrant or Warrant Stock. The Holder understands that the Holder
may be required to bear the economic risk of this investment indefinitely,
unless the Warrant Stock is registered pursuant to the Securities Act and any
applicable state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present intention of
registering the Warrant Stock.
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(b) Holder
Status.
The
Holder is either: (i) a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act; or (ii) an “accredited investor” as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D. The Holder is not registered as
a
broker or dealer under Section 15(a) of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”) or a member of the National Association of
Securities Dealers, Inc.
(c) Reliance
on Exemptions.
The
Holder understands that the Warrant and Warrant Stock are being offered and
sold
to Holder in reliance upon specific exemptions from the registration
requirements of the United States federal and state securities laws and that
the
Company is relying upon the truth and accuracy of, and the Holder’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Holder set forth herein to determine the availability
of
such exemptions and the eligibility of the Holder to acquire the Warrant and
Warrant Stock.
(d) Information.
The
Holder and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company, and materials relating
to the offer and sale of the Warrant, that have been requested by the Holder
or
its advisors, if any. The Holder and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received what the
Holder and its advisors, if any, believe to be satisfactory answers to any
such
inquiries. The Holder acknowledges and understands that its investment in the
Warrant or Warrant Stock involves a significant degree of risk.
(e) Experience.
The
Holder is experienced in evaluating companies such as the Company, is able
to
fend for itself in transactions such as the one contemplated by this Agreement,
has such knowledge and experience in financial and business matters that such
Holder is capable of evaluating the merits and risks of such ▇▇▇▇▇▇’s
prospective investment in the Company, and has the ability to bear the economic
risks of an investment in the Warrant and the Warrant Stock.
(f) Governmental
Review.
The
Holder understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Warrant or the Warrant Stock or an investment
therein.
(g) Transfer
or Resale.
The
Holder understands that:
i. neither
the delivery of the Warrant nor the Warrant Stock has been registered under
the
Securities Act or any applicable state securities laws, and consequently, the
Holder may have to bear the risk of owning the Warrant or the Warrant Stock
for
an indefinite period of time because the Warrant and Warrant Stock may not
be
transferred except as set forth in Section 8 of this Agreement and unless;
(i)
the resale of the Warrant or the Warrant Stock, as the case may be, is
registered pursuant to an effective registration statement under the Securities
Act or (ii) if requested by the Company, the Holder has delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and which counsel
shall be reasonably satisfactory to the Company) to the effect that the
securities to be sold or transferred may be sold or transferred pursuant to
one
or more exemptions from such registration (whether pursuant to statute,
regulation or otherwise);
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ii. any
sale
of the Warrant or Warrant Stock made in reliance on Rule 144 may be made only
in
accordance with the terms of Rule 144 (including the holding period requirement,
the volume limitations and the manner of sale restrictions, if applicable);
and
iii. neither
the Company nor any other person is under any obligation to register the Warrant
or Warrant Stock under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
(h) No
Public Offering.
The
Holder has not received any information relating to the Warrant, the Warrant
Stock or the Company, and is not purchasing the Warrant as a result of, any
form
of general solicitation or general advertising, including, but not limited
to,
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio
or
pursuant to any seminar or meeting whose attendees were invited by any general
solicitation or general advertising.
(i) Representation.
The
Holder has had an opportunity to consult with an attorney in connection with
the
Holder’s investment in the Company.
10. Notices.
All
notices required hereunder must be in writing and shall be deemed given when
telefaxed, delivered personally or within three days after mailing when mailed
by certified or registered mail, return receipt requested, if to the Company,
at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder, at the
address for the Holder set forth below ▇▇▇▇▇▇’s signature hereto, or at such
other address of which the Company or Holder has been advised by notice
hereunder.
11. Rights
as a Shareholder.
The
Holder shall have no rights as a shareholder with respect to any shares of
Warrant Stock until the date of issuance of such shares.
12. Lost
or Destroyed Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Warrant, and upon surrender
and
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date. The Holder agrees with the Company
that this Warrant is issued, and all the rights hereunder shall be held subject
to, all of the conditions, limitations and provisions set forth
herein.
13. Applicable
Law.
The
Warrant is issued under and shall for all purposes be governed by and construed
in accordance with the internal laws of the State of Florida, without regard
to
conflicts of laws principles.
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IN
WITNESS WHEREOF, the
parties have caused this Warrant to be signed on its behalf, in its corporate
name, by its duly authorized officer, as of the day and year first above
written.
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INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.
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By:
_______________________________________
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▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
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Chief
Financial Officer
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HOLDER
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By:
_______________________________________
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[insert
name of Holder]
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___________________________________________
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___________________________________________
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___________________________________________
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WARRANT
EXERCISE FORM
The
undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing __________ shares of common stock, par value $0.001 per
share, of Innovative Software Technologies, Inc., a Californica corporation,
and
hereby makes payment of $____________ in payment therefore.
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Signature
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Signature,
if jointly held
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| Date:_____________________ |
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INSTRUCTIONS
FOR ISSUANCE OF STOCK
(if
other
than to the registered holder of the within Warrant)
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Name
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(Please
typewrite or print in block letters)
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Address
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Social
Security or Taxpayer Identification Number
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********************************************************************************************
ASSIGNMENT
FORM
FOR
VALUE
RECEIVED, ______________________________ hereby sells, assigns and transfers
unto
Name
(please typewrite or print in block letters)
the
right
to purchase common stock, par value $0.001 per share, of Innovative Software
Technologies, Inc., a California corporation (the “Company”), represented by
this Warrant to the extent of shares as to which such right is exercisable
and
does hereby irrevocably constitute and appoint ______________________________,
as its attorney in fact, to transfer the same on the books of the Company with
full power of substitution in the premises.
| Dated:_____________________ | |
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Signature
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Signature,
if jointly held
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