EXHIBIT C WARRANT AGREEMENT INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
Exhibit
4.03
EXHIBIT
C
INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
Warrant
No. Issuance
Date: June 17, 2009
THE
SECURITES 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 DIATECT INTERNATIONAL CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS
WARRANT AGREEMENT (“this
Agreement”) is dated this 17th day of
June 2009, by and between Innovative Software Technologies, Inc., a Florida
corporation (the “Company”),
and The WEB Channel Network LLC., (the “Warrant
Holder”).
W I T N E S S E T H
WHEREAS,
as part of the Agreement, the Company agreed to issue to the Warrant Holder a
warrant (the “Warrant”)
to purchase an aggregate of 5,000,000 shares of the Company’s Common Stock, par
value $0.001 per share (the “Common
Stock”).
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Incorporation
of Recitals. The
Recitals portion of this Agreement is hereby incorporated by this reference as
though it were fully set forth and rewritten herein, and the affirmative
statements therein contained shall be deemed to be representations of the
Company and the Warrant Holder, which are hereby confirmed.
2. Grant of
Warrant.
(a) The
Company hereby agrees that the Warrant 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., EST, on the Expiration
Date (as defined below), June 17, 2012 fully paid and non-assessable shares of
Common Stock (as defined below). The “Exercise
Price” for such shares shall be equal to $0.03 per share, subject to
adjustment as set forth in Section 4 below.
(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
“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.
3. Exercise of
Warrant.
3.1 Process and Consequences of
Exercise.
(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. Florida time, on June 17, 2012 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
as Exhibit A
hereto (the “Notice of
Exercise”), duly executed by the Warrant Holder 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 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.
(d) 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 to be issued upon such exercise, not withstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Shares shall not then be actually delivered to
the Holder.
3.2 Issuance
of Certificates. As soon as practicable
after the exercise of the Warrant (in whole or in part) in accordance with
Section 3.1 hereof, the Company, at its expense, shall cause to be issued in the
name of and delivered to the Warrant Holder (i) a certificate or
certificates for the number of fully-paid and non-assessable Shares to which the
Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement
of like tenor to purchase all of the Shares that may be purchased pursuant to
the portion, if any, of the Warrant not exercised by the Warrant
Holder. The Warrant Holder shall for all purposes be deemed to have
become the holder of record of such Shares on the date on which the Notice of
Exercise and payment of the Purchase Price in accordance with Section 3.1 hereof
were delivered and made, respectively, irrespective of the date of delivery of
such certificate or certificates, except that if the date of such delivery,
notice and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of record of such
Shares at the close of business on the next succeeding date on which the stock
transfer books are open.
3.3 Market
Price. The
“Market
Price” of a share of Common Stock means: the average of the
daily volume weighted average price of shares of Common Stock on the principal
market on which shares of the Common Stock are traded for the five (5) trading
days immediately preceding the date of the determination of the Market
Price. If shares of Common Stock are not traded on any public market
(e.g. NYSE, AMEX, NASDAQ, OTCBB or Pink Sheets), the Market Price of the Common
Stock shall be determined, in good faith, by the Board of Directors of the
Company.
4. Adjustments.
4.1 Stock
Splits, Stock Dividends and Combinations. If the Company at any
time subdivides the outstanding shares of the Common Stock or issues a stock
dividend (in Common Stock) on the outstanding shares of the Common Stock, the
Exercise Price in effect immediately prior to such subdivision or the issuance
of such stock dividend shall be proportionately decreased, and the number of
Shares subject hereto shall be proportionately increased, and if the Company at
any time combines (by reverse stock split or otherwise) the outstanding shares
of Common Stock, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased, and the number of Shares subject
hereto shall be proportionately decreased, effective at the close of business on
the date of such subdivision, stock dividend or combination, as the case may
be.
4.2 Merger or
Consolidation. In
the case of any consolidation of the Company with, or merger of the Company with
or into another entity (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding capital stock of the
Company), the entity formed by such consolidation or merger shall execute and
deliver to the Warrant Holder a supplemental warrant agreement providing that
the Warrant Holder of the Warrant then outstanding or to be outstanding shall
have the right thereafter (until the expiration of such Warrant) to receive,
upon exercise of such Warrant, the kind and amount of shares of capital stock
and other securities and property receivable upon such consolidation or merger
by a holder of the number of Shares for which such Warrant might have been
exercised immediately prior to such consolidation or merger. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 4.1 hereof and to the
provisions of Section 11 hereof. This Section 4.2 shall similarly
apply to successive consolidations or mergers.
5. Transfers.
5.1 Unregistered
Securities. The Warrant Holder
hereby acknowledges and agrees that the Warrant and the Shares have not been
registered under the Securities Act of 1933, as amended (the “Securities
Act”), and are “restricted
securities” under the Securities Act inasmuch as they are being acquired
in a transaction not involving a public offering, and the Warrant Holder agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of the Warrant or any Shares issued upon exercise of the Warrant in the absence
of (a) an effective registration
statement under the Securities Act as to the Warrant or such Shares and
registration and/or qualification of the Warrant or such Shares under any
applicable Federal or state securities law then in effect or (b) an opinion of counsel,
reasonably satisfactory to the Company, that such registration and qualification
are not required.
5.2 Transferability. Subject to the
provisions of Section 5.1 hereof, the rights under this Agreement are freely
transferable, in whole or in part, by the Warrant Holder, and such transferee
shall have the same rights hereunder as the Warrant Holder.
5.3 Warrant
Register.
The Company will maintain a register containing the names and addresses
of the Warrant Holders of the Warrant. Until any transfer of Warrant
in accordance with this Agreement is reflected in the warrant register, the
Company may treat the Warrant Holder as the absolute owner hereof for all
purposes. Any Warrant Holder may change such Warrant Holder’s address
as shown on the warrant register by written notice to the Company requesting
such change.
6. No
Fractional Shares.
Any adjustment in the number of Shares purchasable hereunder shall be
rounded to the nearest whole share.
7. Investment
Representations.
The Warrant Holder agrees and acknowledges that it is acquiring the
Warrant and will be acquiring the Shares for its own account and not with a view
to any resale or distribution other than in accordance with federal and state
securities laws. The Warrant Holder confirms that its only member is
an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act.
8. Covenants
as to the Shares.
The Company covenants and agrees that the Shares to be issued upon
exercise of the Warrant, will, upon issuance in accordance with the terms
hereof, be duly and validly issued and outstanding, fully-paid and
non-assessable, with no personal liability attaching to the ownership thereof,
and free from all taxes, liens and charges with respect to the issuance thereof
imposed by or through the Company; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificates in
respect of such Shares in a name other than that of the Warrant Holder and the
Company shall not be required to issue or deliver such certificates unless or
until the person(s) requesting the issuance thereof shall have paid to the
Company the amount of such tax or it shall be established to the satisfaction of
the Company that such tax has been paid. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved a sufficient number of Shares to provide for the exercise of the rights
represented under this Agreement.
9. Legend. Any certificate
evidencing the Shares issuable upon exercise hereof will bear a legend
indicating that such securities have not been registered under the Securities
Act or under any state securities laws and may not be sold or offered for sale
in the absence of an effective registration statement as to the securities under
the Securities Act and any applicable state securities law or an opinion of
counsel reasonably satisfactory to the Company that such registration is not
required.
10. Rights
Applicable to the Warrant Shares. The parties hereby
acknowledge and agree that the Shares, when issued in accordance with the terms
hereof, shall be entitled to all of the same rights and privileges provided to
the Company’s Common Stock.
11. Dividends
and Other Distributions. In the event that the
Company shall, at any time prior to the exercise of all Warrants, declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, properties, rights,
evidence of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value, the
Warrant Holder shall thereafter be entitled, in addition to the shares of Common
Stock or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of such Warrant, the same assets, property, rights,
evidences of indebtedness, securities or any other thing of value that the
Warrant Holder would have been entitled to receive at the time of such dividend
or distribution as if the Warrant had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or
distribution, the Company shall make (and maintain) appropriate reserves to
ensure the timely performance of the provisions of this Section 11.
12. Vesting. The right to exercise
the Warrant to purchase one million (1,000,000) Shares is vested immediately and
the right to exercise the balance of the Warrant shall vest based on the
financial performance of the Company’s wholly owned subsidiary, The WEB Channel
Network, Inc., a Florida corporation (the “Subsidiary”),
as follows:
The right
to exercise the Warrant to purchase a second one million (1,000,000) Shares
shall vest when the Subsidiary generates its first $1 million in aggregate
revenue;
The right
to exercise the Warrant to purchase a third one million (1,000,000) Shares shall
vest when the Subsidiary generates $2 million in aggregate (cumulative)
revenue;
The right
to exercise the Warrant to purchase a fourth one million (1,000,000) Shares
shall vest when the Subsidiary generates $3 million in aggregate (cumulative)
revenue; and
The right
to exercise the Warrant to purchase a fifth one million (1,000,000) Shares shall
vest when the Subsidiary generates $4 million in aggregate (cumulative)
revenue;
13. Miscellaneous.
13.1 Waivers
and Amendments. This Agreement or
any provisions hereof may be changed, waived, discharged or terminated only by a
statement in writing signed by the Company and by the Warrant
Holder.
13.2 Governing
Law. This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Florida.
13.3 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
given when delivered by hand or by facsimile transmission, when telexed, or upon
receipt when mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i)
If to the Company:
Innovative
Software Technologies, Inc.
▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇,
▇▇, ▇▇▇▇▇
Phone: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇, President
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
(ii) If
to the Warrant Holder:
The WEB
Channel Network, LLC
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇.
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Phone: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Operating Manager
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
13.4 Headings. The headings in this
Agreement are for convenience of reference only, and shall not limit or
otherwise affect the terms hereof.
13.5 Closing
of Books. The
Company will at no time close its transfer books against the transfer of any
Shares issued or issuable upon the exercise of the Warrant in a manner that
interferes with the timely exercise of the Warrant.
13.6 No Rights
or Liabilities as a Stockholder. This Agreement shall not
entitle the Warrant Holder hereof to any voting rights or other rights as a
stockholder of the Company with respect to the Shares prior to the exercise of
the Warrant. No provision of this Agreement, in the absence of
affirmative action by the Warrant Holder to purchase the Shares, and no mere
enumeration herein of the rights or privileges of the Warrant Holder, shall give
rise to any liability of such Holder for the Exercise Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
13.7 Successors. All the covenants and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns and
transferees.
13.8 Severability. If any provision of
this Agreement shall be held to be invalid and unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
IN WITNESS WHEREOF, the undersigned
have caused this Agreement to be executed as of the date first written
above.
|
“Company”
Innovative
Software Technologies, Inc.
By: /s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, President
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"Warrant
Holder"
The
WEB Channel Network, LLC
By: /s/ ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Operating Manager
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EXHIBIT
A
NOTICE OF
EXERCISE
(To be
signed only on exercise of Warrant)
Dated:________________________
To: Innovative Software Technologies,
Inc.
The
undersigned, pursuant to the provisions set forth in the attached Warrant
Agreement, hereby irrevocably elects to:
r purchase
_____ shares of Common Stock covered by such Warrant Agreement and herewith
makes a cash payment of $_____________, representing the full purchase price for
such shares at the price per share provided for in such Warrant
Agreement.
r purchase
_____ shares of Common Stock covered by such Warrant Agreement and herewith
delivers _____ shares of Common Stock having a Market Price as of the last
trading day preceding the date hereof of $______, representing the full purchase
price for such shares at the price per shares provided for in such Warrant
Agreement.
Please
issue a certificate or certificates representing such shares of Common Stock in
the name of the undersigned or in such other name as is specified
below.
Signature:
_________________________________________________
Name
(print):_______________________________________________
Title (if
applicable):__________________________________________
Company
(if applicable):______________________________________
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 Delaware corporation, and hereby makes payment of $____________
in payment therefore.
| _______________________________________ | |
| Signature | |
| Type or print name of above signatory below: | |
| _______________________________________ |
| ___________________________________ | |
| Signature, if jointly held | |
| Type or print name of above signatory below: | |
| ___________________________________ |
Date:
INSTRUCTIONS FOR ISSUANCE OF
STOCK
(if other
than to the registered holder of the within Warrant)
Name
(Please typewrite or print in block
letters)
Address
Social
Security or Other Taxpayer Identification Number
ASSIGNMENT
FORM
FOR VALUE RECEIVED,
______________________________ hereby sells, assigns and transfers
unto
(Please typewrite or print above
name in block letters.) the right to purchase common stock, par value
$0.001 per share, of Innovative Software Technologies, Inc., a Delaware
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:
| _______________________________________ | |
| Signature | |
| Type or print name of above signatory below: | |
| _______________________________________ |
| _______________________________________ | |
| Signature, if jointly held | |
| Type or print name of above signatory below: | |
| _______________________________________ |