SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1)
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Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
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|_| Definitive Additional Materials
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CDEX INC.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
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___________________________________________________________________________
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___________________________________________________________________________
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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid: _______________________________________________
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4) Date Filed: __________________________________________________________
CDEX, INC.
4555 South Palo Verde Road
Suite 125
Tucson, Arizona 85714
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear CDEX Inc. Shareholders:
You are cordially invited to attend the fiscal year 2007 Annual Meeting of
Shareholders to be held at the Holiday Inn at 4550 South Palo Verde Road,
Tucson, Arizona on April 9 2008, at 9:00 AM, for the following purposes:
(i) To elect Directors whose terms are scheduled to expire on or
before the meeting date; and
(ii) To ratify the appointment of S.E. Clark and Co. as the Company's
independent registered public accounting firm for the Fiscal
year ending October 31, 2008; and
(iii) To approve a proposed amendment to the Company's 2003 Stock
Incentive Plan limiting the amount of stock that can be granted
under the Stock Incentive Plans to no more than 25% of the
authorized shares of the Company; and
(iv) To transact such other business as may properly come before the
meeting or any adjournments thereof.
During the meeting we will review the results of the fiscal year
ended October 31, 2007, and report on significant aspects of our
operations during the first quarter of fiscal year 2008.
Only holders of record of the Common Stock of CDEX Inc. at the close of business
on February 25, 2008, the record date fixed by the Board of Directors, will be
entitled to vote on each matter submitted to a vote of shareholders at the
meeting. To assure your representation at the annual meeting, you are urged to
cast your vote, as instructed in the Notice of Internet Availability of Proxy
Materials, over the internet as promptly as possible. You may also request a
paper proxy card to submit your vote by mail, if you prefer.
IMPORTANT NOTICE
----------------
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR VOTE AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE. PLEASE VOTE OVER THE
INTERNET AT WWW.PROXYVOTE.COM. ALTERNATIVELY, YOU MAY REQUEST A PAPER PROXY
CARD, WHICH YOU MAY COMPLETE, SIGN, AND RETURN BY MAIL.
By Order of the Board of Directors,
/s/ Malcolm H. Philips, Jr.
---------------------------
Malcolm H. Philips, Jr.,
Chairman
February 28, 2008
Tucson, Arizona
CDEX, INC.
4555 South Palo Verde Road
Suite 125
Tucson, Arizona 85714
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of Directors
(the "Board") of CDEX Inc. (the "Company") in connection with the solicitation
of proxies for use at the fiscal year 2007 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at 9:00 AM, local time, April 9, 2008,
the Holiday Inn at 4550 South Palo Verde Road, Tucson, Arizona, and at any
adjournments thereof. The Notice of Annual Meeting of Shareholders and the
Notice of Internet Availability of Proxy Materials will be first mailed on or
about February 28, 2008, to the shareholders of the Company (the "Shareholders")
of record on the Record Date (as defined below).
THE BOARD OF DIRECTORS URGES YOU TO FOLLOW THE VOTING INSTRUCTIONS GIVEN IN THE
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
SHARES ENTITLED TO VOTE
Each valid proxy given pursuant to this solicitation that is received in time
for the Annual Meeting and not revoked will be voted with respect to all shares
represented by it and will be voted in accordance with the instructions, if any,
given in the proxy. If instructions are not given in the proxy, it will be voted
(i) for the election as Directors of the nominees listed in this Proxy
Statement; (ii) for ratification of the appointment of S.E. Clark and Co. as the
Company's independent registered public accounting firm for the fiscal year
ending October 31, 2008; (iii) to approve a proposed amendment to the Company's
2003 Stock Incentive Plan limiting the granting or issuing of stock under the
Stock Incentive Plans to no more than 25% of the authorized shares of the
Company; and (iv) in accordance with the best judgment of the proxy holders on
any other matter that may properly come before the meeting. The submission of a
signed proxy will not affect a Shareholder's right to attend and to vote in
person at the Annual Meeting. Shareholders who execute a proxy may revoke it at
any time before it is voted by filing a written revocation with the Secretary of
the Company at the following address: CDEX Inc., 4555 South Palo Verde Road,
Suite 125, Tucson, Arizona 85714, Attn: Board of Directors; executing a proxy
bearing a later date; or attending and voting in person at the Annual Meeting.
Only Shareholders of record as of the close of business on February 25, 2008
(the "Record Date"), will be entitled to vote at the Annual Meeting. As of the
close of business on the Record Date there were 54,002,555 shares of Class A
Common Stock outstanding. Each share of Class A Common Stock is entitled to one
vote on all matters presented for Shareholder vote.
According to the Bylaws of the Company (the "Bylaws"), the holders of a majority
of the shares of Class A Common Stock outstanding and entitled to be voted at
the Annual Meeting must be present in person or be represented by proxy to
constitute a quorum and to act upon proposed business. If a quorum is not
present or represented by proxy at the Annual Meeting, the meeting will be
adjourned and the Company will be subjected to additional expense. If a quorum
is present or represented by proxy at the Annual Meeting, the Bylaws provide
that the affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting will decide the corporate action taken unless a different vote is
required by Nevada law, the Articles of Incorporation or the Bylaws. Nevada law
and the Bylaws specify that directors shall be elected by the holders of eighty
percent (80%) of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting. Because abstentions with respect to any matter are treated as shares
present or represented and entitled to vote for the purposes of determining
whether the matter has been approved by the Shareholders, abstentions have the
same effect as negative votes for each proposal other than the election of
directors. Broker non-votes are not deemed to be present or represented for
purposes of determining whether Shareholder approval of that matter has been
obtained, but they are counted as present for purposes of determining the
existence of a quorum at the Annual Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board currently consists of five members, each of whom serves three year
terms, or until their successor is elected. The current board consists of
Malcolm H. Philips, Jr. (Chairman), Timothy Shriver, George Dials, Donald W.
Strickland and Carmen J. Conicelli, and these individuals are seeking approval
to serve as Directors until the Annual Meeting of Shareholders in the year each
term expires, as set forth below, and until their successors have been duly
elected and qualified or until their earlier death, resignation or removal. The
Company's Bylaws were recently amended to provide for three-year terms for the
directors. Accordingly, each of the positions are up for election at this
meeting, for terms of various lengths as specified below.
Each nominee has consented to serve as a director of the Company if elected. If,
at the time of the Annual Meeting, any of the nominees are unable or declines to
serve as a director, the discretionary authority provided in the enclosed proxy
card will be exercised to vote for a substitute candidate designated by the
Board. The Board has no reason to believe that any of the nominees will be
unable or will decline to serve as a director.
The Board recommends that the Shareholders vote FOR the election of the nominees
named above as directors of the Company.
Name Age Position(s) Term
- ------------------------ ---------- -------------------------- -----------------
Malcolm H. Philips, Jr. 62 Chairman, President, 2008-2011
C.E.O., Director Three years
Timothy Shriver 57 C.O.O., Director 2008-2010
Two years
George Dials 62 Director 2008-2009
One year
Donald W. Strickland 58 Director 2008-2009
One year
Carmen J. Conicelli 55 Director 2008-2011
Three years
NOMINEES FOR DIRECTOR
Mr. Malcolm H. Philips Jr. was appointed President, Chief Executive Officer and
a Member of the Board of Directors of the Company on June 11, 2007. On October
9, 2007, Mr. Philips was appointed Chairman of the Board of Directors. He has
overall responsibility for directing the Company's activities. Mr. Philips was
the founding President, CEO and Chairman of the Board of the Company and served
in those positions from July 2001 until he left the Company in early 2006.
During his earlier tenure with the Company, Mr. Philips guided the Company
during its formation, technology acquisitions and development, transition to a
public company, and initial commercialization of its existing product lines.
Prior to his work with CDEX, Mr. Philips served as an attorney for 23 years
(ultimately as a senior partner with Winston and Strawn, one of the largest law
firms in the United States), an energy consultant for four (4) years, and an
army officer for eight (8) years (serving in various stations including Viet Nam
and various positions including OIC of the SM-1 Nuclear Power Plant). Mr.
Philips has a BS in engineering from the United States Military Academy (1967),
a Master of Engineering in Nuclear Engineering from Iowa State University (1971)
and a Juris Doctor from Georgetown University Law Center (1978). Mr. Philips was
a Professional Engineer (Texas) and has received various awards in the military
including the Bronze Star, Nuclear Plant Engineer Certification, Nuclear Plant
OIC Certification and Airborne/Ranger Certifications.
Timothy Shriver was appointed Chief Operating Officer of the Company on February
18, 2008. Prior to that appointment, he had served as the Company's Senior Vice
President of Technical Operations since July 2001. From 1999 until 2001 Mr.
Shriver provided outside consulting services to Ontario Hydro-Generation and
CAMOCO, a large uranium mining and processing company. Mr. Shriver's consulting
focused on overall business practices with particular emphasis on the
implementation of quality assurance programs and evaluation of management
capabilities and practices. From 1997 to 1999, Mr. Shriver served as Director of
Performance Assurance for Ontario Hydro-Generation (OPG), where he developed and
managed the implementation of the overall Quality Program at OPG's three CANDU
sites and OPG auxiliary sites supporting the Nuclear Program (at that time, the
largest in North America). His activities also included responsibility for the
development and implementation of an integrated Corrective Action Program, a
performance based Audit and Assessment program and the development of a process
oriented Quality Assurance Manual including the establishment and maintenance of
the required interface with the federal regulator to obtain approval. Between
OPG and CDEX, Mr. Shriver consulted for other utilities' quality assurance
programs.
Mr. George Dials has been a director of the Company since July 2001. Currently
Mr. Dials is President and Chief Executive Officer of Y-12 National Security
Complex in Oak Ridge, TN. From April 2003 until February 2006, Mr. Dials was the
Chief Operating Officer of Waste Control Specialists, a chemical waste
repository. From July 2002 until May 2003, Mr. Dials was President and CEO of
LES, LLC a company seeking a license to build a nuclear fuel enrichment
facility. From February 2001 to June 2002, Mr. Dials served as Senior Vice
President of Consulting Services for Science and Engineering Associates
responsible for its Consulting Services line of business, where he provided
executive level direction in corporate mergers and acquisitions in the
consulting area. Mr. Dials managed the engineering, and scientific studies of
Yucca Mountain as a potential geologic repository for spent nuclear fuel and
high-level radioactive waste. Responsibilities include scheduling and cost
performance, technical and administrative performance, strategic operations plan
development, and resource allocation for a $250 million project. Mr. Dials
received a B.S. in Engineering in 1967 from West Point and Masters Degrees in
Political Science and Nuclear Engineering from the Massachusetts Institute of
Technology. He served in the U.S. Army for 10 years, and was awarded the Silver
Star and Bronze Star for Valor.
Mr. Donald W. Strickland was appointed to serve as a Director on February 3,
2006. He comes to the Company from a 30-year career in successfully developing
businesses internationally for both large public companies and technology
startups. He has held executive positions at Eastman Kodak Company and Apple
Computer, including heading product development, manufacturing, and sales. In
1996 he became CEO of PictureWorks Technology, a technology start up, which he
sold for $200M in 2000 to IPIX Corporation, a public company traded on the
NASDAQ exchange. Thereafter, he served as President and CEO of IPIX through
2004, during which time he led the company through a major restructuring,
focusing on the security markets and taking the company to profitability. Mr.
Strickland holds a bachelor's degree in physics from Virginia Tech, a master's
degree in physics from the University of Notre Dame, a master's degree in optics
from the University of Rochester, a master's degree in management from the
Stanford University and a law degree from George Washington University.
Mr. Carmen J. Conicelli, Jr., was appointed to serve as a Director on October 9,
2007. He has served in senior management positions in a number of companies over
the past 32 years, with a primary focus in national and international (Europe,
Japan, Latin America and Asia) financial planning and management. He has
directed financial operations involving SEC compliance and reporting, internal
control and audit, strategic planning, financial systems control, and
mergers/acquisitions/consolidations in a number of industries including
precision optical manufacturing and distribution, cable and telecommunications,
manufacturing, and software development. Mr. Conicelli has served in public
company accounting and since 2004 has served as Chief Financial Officer of
Edmund Optics, Inc. From 2003 to 2004, Mr. Conicelli served as a Senior
Financial Consultant to VWR International. He has a Bachelor of Science Degree
in Business Administration (Accounting Major) from Drexel University (1974) with
extensive postgraduate training and is a Certified Public Accountant.
CORPORATE GOVERNANCE
Committees of the Board of Directors
On November 27, 2007, The Company's Board of Directors formed and approved
Charters for its Audit Committee, Executive Compensation Committee, and
Corporate Governance and Nomination Committee. While the Audit Committee was not
in place in fiscal year 2007, it did review the 10-KSB for fiscal year 2007. Mr.
Carmen J. Conicelli acts as the Company's audit committee financial expert.
Director Independence
As the Company is quoted on the OTCBB and not one of the national securities
exchanges, it is not subject to any director independence requirements. With the
exception of Malcolm H. Philips and Timothy Shriver, all of the Company's Board
of Directors consists of "independent" directors as independence is defined by
the applicable rules of the SEC and the National Association of Securities
Dealers' ("NASD").
Code of Business Conduct and Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is
reasonably designed to deter wrongdoing and promote honest and ethical conduct,
provide full fair, accurate, timely and understandable disclosure in public
reports; comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code. A copy of our
corporate code of ethics may be obtained, without charge, upon written request
to: 4555 South Palo Verde Road, Suite 125, Tucson, Arizona, 85714. A copy of our
code of ethics was included under Item 9 of our Form 10-KSB filed with the SEC
on February 13, 2008. These filings may be viewed online at www.sec.gov.
Policy on Board of Directors Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Board of Directors pre-approves all audit and non-audit services provided by
the independent auditors prior to the engagement of the independent auditors
with respect to such services. The Company's independent auditors may be engaged
to provide non-audit services only after the appointed auditor has first
considered the proposed engagement and has determined in each instance that the
proposed services are not prohibited by applicable regulations and the auditors'
independence will not be materially impaired as a result of having provided
these services. In making this determination, the Board of Directors takes into
consideration whether a reasonable investor, knowing all relevant facts and
circumstances, would conclude that the Directors' exercise of objective and
impartial judgment on all issues encompassed within the auditors' engagement
would be materially impaired.
OWNERSHIP OF SHARES
Security Ownership of Certain Beneficial Owners
The following table sets forth the stock ownership as of January 22, 2008 of:
(i) each person known by us, as of the date of this report, to be the beneficial
owner of five percent (5%) or more of our common stock, (ii) each executive
officer and director, individually, and (iii) our executive officers and
directors as a group. Each person has sole voting and investment power with
respect to the shares shown, unless otherwise indicated.
Name and Address of each Position Amount of Beneficial Percentage of
Beneficial Owner (1) Ownership Class
- ----------------------------- ------------------ ------------------------ ------------------
Jeffrey Brumfield Investor 6,970,042 13.0%
Malcolm H. Philips, Jr. Chairman, 2,377,853 (2),(3) 4.4%
President,
C.E.O., Director
Timothy Shriver C.O.O., Director 1,259,322(2) 2.4%
George Dials Director 180,000(2) 0.3%
Donald W. Strickland Director 0(2) 0.0%
Carmen J. Conicelli Director 0(4) 0.0%
All Officers and Directors 3,817,175 7.1%
as a Group (5 persons)
- --------------------------------------------------------------------------------------------
(1) The address for each of the listed persons is c/o CDEX Inc., 4555 South Palo
Verde Road, Suite 125, Tucson, AZ 85714.
(2) The stock granted to each of the above-named directors and executive
officers may be subject to a vesting schedule and risk of forfeiture. CDEX has
the option to require that any unvested shares at termination be forfeited. Upon
termination of employment/provision of service, CDEX has the option to purchase
any vested shares of the employee/service provider at fair market value.
(3) Includes stock held by entities in which Mr. Philips has a controlling
interest.
(4) Mr. Carmen J. Conicelli was appointed a Director on October 9, 2007.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL FISCAL SALARY(1) OPTION ALL OTHER TOTAL
POSITION YEAR AWARDS (2) COMPENSATION (1)
- ------------------------------------------------------------------------------------------------------------
Malcolm Philips 2007 $ 62,999 $280,595 $343,594
President, CEO and Chairman 2006 $ 16,000 $ - $349,000 $365,000
of the Board of Directors
Timothy D. Shriver 2007 $201,560 $142,235 $343,795
Sr. VP Technical Operations 2006 $163,690 $ - $ 30,290 $193,980
Director
Dr. Wade Poteet 2007 $138,000 $ 88,115 $226,115
Principal Scientist 2006 $131,000 $ - $ 19,000 $150,000
(1) During 2007, Mr. Philips and Mr. Shriver deferred a portion of their cash
salary. During 2006, pursuant to the terms of their respective Employment
Agreement Agreements and based upon CDEX's financial condition, the executive
officers have each foregone a portion of his stated salary, and have been paid
instead in the form of cash and shares of common stock. All share amounts are
subject to a vesting schedule with a risk of forfeiture in the event the
employee does not remain with CDEX for the required amount of time. Dr. Poteet
resigned from his employment position with the company effective January 1, 2006
and now serves on a full-time consultancy basis, continuing as the company's
Principal Scientist. See discussion under Employment Agreements below for
greater detail on the terms of employment including compensation.
(2) Stock option awards are exercisable within one or two years of the date of
grant. The fair value of each option is estimated using the Black-Scholes option
model with the following assumptions: volatility of 75%; dividend yield of 0%;
risk free interest rate of 4.2% and expected terms of 3 to 5 years.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Philips and Shriver
effective January 1, 2002. The agreements each continue for an indefinite period
unless terminated by CDEX for "cause," or by the employee for "good reason" (as
such terms are defined in the agreements), or upon two weeks prior written
notice by either party to the other. The agreements provide for salaries based
on annual amounts of $300,000 for Mr. Philips and $250,000 for Mr. Shriver,
which are subject to review on an annual basis. The salary shall be payable in
equal monthly installments, unless otherwise required by applicable state law
and, based on CDEX's economic posture, may be paid in cash and/or stock, at
CDEX's option. Each agreement provides for a minimum monthly cash payment to the
employee of $7,500 for Mr. Shriver and $3,000 for Mr. Philips. CDEX has availed
itself of this option for the past three fiscal years as reflected under
"Compensation of Executive Officers." Each of these agreements provides for the
forfeiture of restricted stock granted to the employee in the event of the
employee's termination before the stock is fully vested. Under the agreements,
each employee is entitled to a severance package in the event of termination by
CDEX other than for "cause" or by the employee for "good reason." In each case,
"good reason" includes a change in management of CDEX.
The agreements with Messrs. Philips and Shriver were amended on January 1, 2003
to increase the intended minimum monthly cash payment to the employee to $8,000,
and permit CDEX to pay the entire salary in common stock if paying cash is not
in the best interest of the Company.
Mr. Philips resigned from the positions of Chief Executive Officer and President
effective January 1, 2006, and the company entered into a Settlement and
Consulting Agreement, as of said date, with an entity controlled by Mr. Philips,
for Mr. Philips's continued services as the Company's Chairman of the Board and
additional services as a consultant in order to assure a smooth and settled
transition for the Company's new Chief Executive Officer. The agreement has a
term of one year, unless extended by mutual agreement of the parties, and may be
terminated by either party on two weeks' notice. Pursuant to the agreement, the
Company paid Mr. Philips 350,000 free-trading shares of Class A Common Stock.
Mr. Philips' agreement was terminated in April 2006.
Effective June 11, 2007, the Company entered into an employment agreement with
Mr. Philips whereby Mr. Philips became the CEO and President. The agreement
provides for an annual salary of $180,000. The agreement provides for an award
of 350,000 stock options with a strike price as the fair market value of the
shares on June 11, 2007. These options vest on June 11, 2008 and terminate five
years after the grant date. Furthermore, if the Company elects to terminate Mr.
Philips' employment for any reason prior to June 11, 2009, the Company shall pay
to Mr. Philips a severance fee of $200,000. In addition, on July 17, 2007, the
Company granted to Mr. Philips 100,000 options with a strike price as of the
fair market value at the time of granting.
Effective January 11, 2006, the Company entered into an amendment to the
employment agreement of Mr. Shriver. The amendment to Mr. Shriver's employment
agreement provides for an annual cash salary of $180,000 as well as options
which will vest 1/3 on January 1, 2007, and 1/24th of the remainder on the first
day of each month thereafter for the following two years, as long as he is
providing to the Company substantial services pursuant to a contract with the
Company at the time of vesting. The Company canceled all options granted to Mr.
Shriver in 2006. On July 17, 2007, the Company granted to Mr. Shriver 200,000
options with a strike price the fair market value at the time of granting with
50% vesting immediately and 25% vesting in both 12 and 24 months.
The following table sets forth information regarding stock option awards to our
Executive Officers and significant officers:
Option Awards at October 31, 2007
Name Number of Number of Option Option
Securities Securities Exercise Exercise
Underlying Underlying Price Date
Unexercised Unexercised
Options (#) Options (#)
Exercisable Unexercisable
Malcolm H. Philips 100,000 - $ 0.15 7/17/2010
350,000 - $ 0.22 6/11/2012
Timothy D. Shriver 100,000 100,000 $ 0.15 7/17/2010
Dr.Wade Poteet 50,000 50,000 $ 0.15 7/17/2010
The following table sets forth information regarding stock based compensation
granted to our Directors:
Director Summary
Compensation
Name Option Awards
- --------------------------------------------------
George Dials $32,713
Dr. BD Liaw $32,713
Donald W. Strickland $49,070
CERTAIN TRANSACTIONS
During the fiscal year ended October 31, 2007, certain Directors and Officers
loaned the Company $158,000. These notes mature in one year from the loan date
and pay interest at the rate of 9% or 10% per year. The notes are convertible
into Class A common stock with warrants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Officers, Directors and 10% stockholders of CDEX, other then those listed
below, timely filed all reports subject to the reporting requirements of Section
16(a) during the fiscal year ended October 31, 2007.
The following table sets forth as of February 28, 2008, the name and position of
Officers, Directors and 10% stockholders of CDEX who failed to file on a timely
basis any reports required pursuant to Section 16(A) during fiscal year ended
October 31, 2007. As of February 13, 2008, Malcolm H. Philips has filed his Form
3 report and is now current with his required filings. The Company expects Dr.
BD Liaw and Jeffrey Brumfield to complete their filings by March 10, 2008.
Name Position Report to be Filed
- --------------------------------------------------------------------------------
Malcolm H. Philips President and Chief Executive Officer Form 3
and Chairman of the Board
Dr. BD Liaw Director Form 4
Jeffrey Brumfield Investor Form 3
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
For fiscal year 2007, S.E. Clark and Co. provided audit services to the Company
that included examination of the Company's annual consolidated financial
statements. The Company's Board of Directors has selected S.E. Clark and Co. to
perform an audit of the consolidated financial statements of the Company and its
subsidiaries for the fiscal year ending October 31, 2008 in accordance with the
standards of the Public Company Accounting Oversight Board (United States) and
for issuing a report thereon. The stockholders are being requested to ratify
such selection at the Annual Meeting. No representative of S.E. Clark and Co.
will attend the Annual Meeting to make a statement or to respond to stockholder
questions.
The Board of Directors recommends a vote to ratify the appointment of S.E. Clark
and Co. as the Company's Independent Auditors.
Fees to Independent Registered Public Account Firm for Fiscal Years 2006 and
2007
The following is a summary of the fees billed to us by S.E. Clark and Co., our
independent auditor, for professional services rendered for the year ended
October 31, 2007 and Aronson and Company, our prior independent auditors, for
audit and professional services rendered for the fiscal year ended October 31,
2006:
Description FY2006 FY2007
- ----------------------------------------------
Audit fees $58,000 $57,007
Other services 15,600 6,850
----------------------
Total $73,600 $63,857
----------------------
Policy on Board of Directors Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Board of Directors pre-approves all audit and non-audit services provided by
the independent auditors prior to the engagement of the independent auditors
with respect to such services. The Company's independent auditors may be engaged
to provide non-audit services only after the appointed auditor has first
considered the proposed engagement and has determined in each instance that the
proposed services are not prohibited by applicable regulations and the auditors'
independence will not be materially impaired as a result of having provided
these services. In making this determination, the Board of Directors take into
consideration whether a reasonable investor, knowing all relevant facts and
circumstances, would conclude that the Directors' exercise of objective and
impartial judgment on all issues encompassed within the auditors' engagement
would be materially impaired.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO 2003 STOCK INCENTIVE PLAN
The 2003 Stock Incentive Plan provides for a pro-rata increase in the number of
shares permitted to be granted or issued with increases in the authorized shares
approved by the shareholders. At a special shareholders' meeting held on January
9, 2007, the shareholders approved an increase in the number of authorized
shares from 50.2 million to 100 million. This shareholder action resulted in an
automatic increase in the number of shares permitted to be issued or granted
under the 2003 Stock Incentive Plan to approximately 26.9 million. The Board of
Directors believes that this number should be reduced and a ceiling placed on
the number of shares that can be issued under the Plan.
Accordingly, the Board of Directors proposes to amend the 2003 Stock Incentive
Plan limiting the granting or issuing of stock under the Stock Incentive Plans
to no more than 25% of the authorized shares of the Company. Currently, there
are 100 million shares authorized. A vote for this amendment would reduce the
number of shares that are currently allowed under all Stock Incentive Plans from
about 26.9 million to 25 million shares.
As of January 22, 2008, we have issued or granted 12,378,043 shares of common
stock under the plans to certain of our officers, directors, consultants and
employees, which are subject to forfeiture in accordance with the vesting
schedules set forth in the granting agreements. Shares issued pursuant to the
plans, whether underlying options or as restricted stock, generally may not be
sold or transferred without the grantee first offering CDEX a right of first
refusal to purchase the shares sought to be sold.
The Board of Directors recommends a vote to approve the amendment to the 2003
Stock Incentive Plan.
STOCK INCENTIVE PLANS
2002 Stock Incentive Plan
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On May 27, 2002, our board of directors adopted the 2002 Stock Incentive Plan,
under which stock options and restricted stock may be granted to such of our
officers, directors, employees or other persons providing services to CDEX as
our board of directors, or a committee designated by them for this purpose,
selects. The plan was approved by our stockholders on July 1, 2002.
Stock options granted under the plan may be nonqualified stock options or
incentive stock options, as provided in the plan. Incentive stock options are to
be issued in accordance with Section 422 of the Internal Revenue Code of 1986,
as amended. As such, incentive stock options may only be issued to employees of
CDEX or any subsidiary of CDEX, must have an exercise price of no less than the
fair market value of the common stock on the date of the grant; provided,
however, that in the event the grantee is a ten percent stockholder, the
exercise price shall not be less then 110% of fair market value of the common
stock on the date of the grant. The aggregate fair market value of the
underlying shares cannot exceed $100,000 for any individual option holder during
any calendar year. Incentive stock options granted to a ten percent stockholder
must expire no later than five years from the date of grant. Non-incentive
options are not subject to the restrictions contained in Section 422, except
that pursuant to the plan, such options cannot be exercisable at less than 85%
of fair market value and must expire no later than ten years from the date of
grant. The options are non-transferable and may not be assigned except that
non-incentive options may, in certain cases be assigned to family members of the
grantee.
Upon termination of the employment (other than for cause) of a grantee of
options under this plan, the grantee shall have 60 days following such
termination, or one year if such termination results from the grantee's death or
disability (as defined in the plan), to exercise the vested portion of any
option. Holders of options under the plan have no voting or other rights of
shareholders except and to the extent that they exercise their options and are
issued the underlying shares. Options under the plan may be exercised by the
issuance of a promissory note from the grantee, or on a cashless basis by the
grantee surrendering a portion of the shares issuable thereunder, as payment of
the exercise price in lieu of cash.
Restricted stock granted under this plan may be issued subject to any
restrictions set by our board of directors in its discretion except that the
vesting restrictions for restricted stock granted to individuals who are not
officers, directors or consultants of CDEX shall lapse no less rapidly than the
rate of 20% per year for each of the first five years from the grant date.
However, the board of directors in its discretion may shorten or eliminate the
restrictions. Generally, unless otherwise provided by the board of directors
with respect to a particular grant of restricted stock, holders of restricted
stock have the right to vote and receive dividends on their shares, including
shares not yet vested. Also, unless otherwise so provided, any unvested shares
are deemed forfeited by the grantee upon termination of such grantee's service
with CDEX.
2003 Stock Incentive Plan
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On July 1, 2003, our shareholders adopted the 2003 Stock Incentive Plan, which
has substantially the same terms as the 2002 Stock Incentive Plan. At the annual
meeting of stockholders held on June 30, 2004, the shareholders authorized
10,000,000 shares in the aggregate for issuance under both the 2002 and 2003
plans, including 3,000,000 available for the Board of Directors to allocate at
their discretion. At the annual meeting of the stockholders held on March 17,
2006, the shareholders approved an amendment to the 2003 Stock Incentive Plan
increasing the number of Class A common stock available for issuance by an
additional 3,500,000 shares. This amendment increased the aggregate number of
shares available for issuance under both the 2002 and 2003 Stock Incentive Plans
to 13,500,000. It should be noted that our 2005 Form 10-KSB correctly listed the
aggregate number of shares reserved for issuance under the 2002 and 2003 Stock
Incentive Plans as 10,000,000 shares and Form DEF 14A filed on February 14,
2006, as well as the second quarter 2006 10-QSB correctly noted an increase in
the reserved shares by 3.5 million as approved at the March 17, 2006 Shareholder
Meeting. However, the 2006 Form 10-KSB inadvertently listed the aggregate number
of shares reserved for issuance under both the 2002 and 2003 Stock Incentive
Plans as 10,000,000 shares. The 2003 Stock Incentive Plan provides for a
pro-rata increase in the number of shares permitted to be granted or issued for
an increase in the authorized shares approved by the shareholders. At a special
shareholders' meeting held on January 9, 2007, the shareholders approved an
increase in the number of authorized shares from 50.2 million to 100 million.
This shareholder action resulted in an automatic increase in the number of
shares permitted to be issued or granted under the 2003 Stock Incentive Plan to
approximately 26.9 million.
SHAREHOLDER PROPOSALS FOR 2008 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder of the Company wishing to submit a proposal for action at the
Company's 2008 Annual Meeting of Shareholders must provide a written copy of the
proposal to the management of the Company at its principal executive offices not
later than March 17, 2008 and must otherwise comply with the rules and
regulations of the Commission applicable to shareholder proposals.
ANNUAL REPORT
The Company's 2007 Annual Report to Shareholders, which includes financial
statements, is being made available to the Company's Shareholders with this
Proxy Statement. The Annual Report is not part of the proxy soliciting material.
Both the Annual report on Form 10-KSB and the Proxy Statement are available
online at www.proxyvote.com.
OTHER MATTERS
The Board does not know of any other matters to be presented at the Annual
Meeting for action by Shareholders. If any other matters requiring a vote of the
Shareholders arise at the Annual Meeting or any adjournment thereof, however, it
is intended that votes will be cast pursuant to the proxies with respect to such
matters in accordance with the best judgment of the persons acting under the
proxies.
The Company will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by mail, certain officers and regular employees of the
Company may solicit the return of proxies by telephone, telegram or personal
interview. The Company may request brokers and others to forward proxies and
soliciting materials to the beneficial owners of Common Stock, and will
reimburse them for their reasonable expenses in so doing.
A list of Shareholders entitled to be present and vote at the Annual Meeting
will be available during the Annual Meeting for inspection by shareholders who
are present.
If you cannot be present in person, you are requested to follow the voting
instructions in the Notice of Internet Availability of Proxy Materials.
By Order of the Board of Directors,
/s/ Malcolm H. Philips, Jr.
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Malcolm H. Philips, Jr.,
Chairman