Exhibit 10.3
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
CDEX INC.
Warrant Shares: 2,717,391 Issue Date: June 25, 2008
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for value received, Gemini Master Fund, Ltd. (the "Holder") is
entitled, upon the terms and subject to the limitations on exercise and
the conditions hereinafter set forth, at any time on or after the Issue
Date (as defined above) and on or prior to the close of business on the
fifth (5th) anniversary of the Issue Date (the "Termination Date") but
not thereafter, to subscribe for and purchase from CDEX Inc., a Nevada
corporation (the "Company"), up to 2,717,391 shares (the "Warrant
Shares") of Common Stock. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as
defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement pursuant to which this Warrant was issued (the "Purchase
Agreement"), dated on or about the date hereof, among the Company and the
purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at any
time and from time to time on or after the Issue Date and on or before
the Termination Date by delivery to the Company (or such other office
or agency of the Company as it may designate by notice in writing to
the registered Holder at the address of the Holder appearing on the
books of the Company) of a duly executed facsimile copy of the Notice
of Exercise Form annexed hereto (which delivery may be made in any
1
manner set forth in Section 5.4 of the Purchase Agreement, including
without limitation by email); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall
have received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier's check drawn on a United
States bank, unless payment is being made by cashless exercise as
provided in Section 2(c) below. Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised
in full, in which case the Holder shall surrender this Warrant to the
Company for cancellation within 3 Trading Days of the date the final
Notice of Exercise is delivered to the Company. Partial exercises of
this Warrant resulting in purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. In the event
of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following
the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time
may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of the Common
Stock under this Warrant shall be $0.375, subject to adjustment
hereunder (the "Exercise Price").
c) Cashless Exercise. This Warrant may also be exercised by
means of a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the daily VWAPs for the three (3)
Trading Days immediately preceding the date of such
election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
Notwithstanding anything herein to the contrary, on the
Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 2(c).
d) Holder's Restrictions. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, the
Holder (together with the Holder's Affiliates, and any other person or
entity acting as a group together with the Holder or any of the
Holder's Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with
respect to which such determination is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any
other Common Stock Equivalents) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by the Holder that the Company is not representing
to the Holder that such calculation is in compliance with Section 13(d)
of the Exchange Act and the Holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and
of which portion of this Warrant is exercisable shall be in the sole
discretion of the Holder, and the submission of a Notice of Exercise
shall be deemed to be the Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by the
Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company's most recent periodic or annual
report, as the case may be, (y) a more recent public announcement by
the Company or (z) any other notice by the Company or the Company's
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its
Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. The "Beneficial Ownership Limitation"
shall be 4.9% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. By written notice to the
Company, the Holder may at any time and from time to time increase or
decrease (but not below 4.9%) the Beneficial Ownership Limitation to
any other percentage specified in such notice (or specify that the
Beneficial Ownership Limitation shall no longer be applicable),
provided, however, that (A) any such increase (or inapplicability)
shall not be effective until the sixty-first (61st) day after such
notice is delivered to the Company, and (B) any such increase or
decrease shall apply only to the Holder and not to any other holder of
Warrants. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the
terms of this Section 2(d) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to
a successor holder of this Warrant.
e) Mechanics of Exercise.
i. Delivery of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be
transmitted by the transfer agent of the Company to the Holder
by crediting the account of the Holder's prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent
Commission ("DWAC") system if the Company is a participant in
such system and either (x) there is an effective Registration
Statement permitting the resale of the Warrant Shares by the
Holder, or (y) such shares may be sold pursuant to Rule 144,
and otherwise by physical delivery to the address specified by
the Holder in the Notice of Exercise, within 3 Trading Days
from the delivery to the Company of the Notice of Exercise
Form, surrender of this Warrant (if required) and payment of
the aggregate Exercise Price as set forth above ("Warrant
Share Delivery Date"), provided that if such Warrant Shares
are to be issued in the name of a Person other than the
Holder, the Warrant Share Delivery Date shall be extended by
one day for each day after the date of the Notice of Exercise
that the Holder fails to submit the additional documentation
required hereunder with respect to such issuance to such other
Person. This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company. The
Warrant Shares shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be
deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised by
payment to the Company of the Exercise Price (or by cashless
exercise) and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(e)(vi) prior to the issuance of
such shares, have been paid. If the Company fails for any
reason to deliver to the Holder the Warrant Shares or
certificates evidencing the Warrant Shares subject to a Notice
of Exercise by the Warrant Share Delivery Date (provided at
least three Trading Days have elapsed since the Company has
communicated with the Holder, either orally or by email or
otherwise, in a manner which indicates that it has received
the applicable Notice of Exercise), the Company shall pay to
the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of
the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day
after such liquidated damages begin to accrue) for each
Trading Day after such Warrant Share Delivery Date until such
shares or certificates are delivered.
ii. Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall,
at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this
Warrant.
iii. Rescission Rights. If the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares (or otherwise
transmit such shares via DWAC to the Holders DTC account)
pursuant to this Section 2(e) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such
exercise.
iv. Compensation for Buy-In on Failure to Timely
Deliver Certificates Upon Exercise. In addition to any other
rights available to the Holder, if the Company fails to cause
its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares (or otherwise
transmit such shares via DWAC to the Holders DTC account)
pursuant to an exercise on or before the Warrant Share
Delivery Date (provided at least three Trading Days have
elapsed since the Company has communicated with the Holder,
either orally or by email or otherwise, in a manner which
indicates that it has received the applicable Notice of
Exercise), and if after such date the Holder is required by
its broker to purchase (in an open market transaction or
otherwise) or the Holder's brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a "Buy-In"), then the Company
shall (1) pay in cash to the Holder the amount by which (x)
the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and (2) at the option
of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise
was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available
to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver
the Warrant Shares or certificates representing shares of
Common Stock upon exercise of the Warrant as required pursuant
to the terms hereof.
v. No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a
share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall at its election, either
pay a cash adjustment in respect of such final fraction in an
amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates
for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
vii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise
of this Warrant), (B) subdivides outstanding shares of Common Stock
into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issues by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then in each
case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall
remain unchanged. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase, or sell or grant any right
to reprice, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the "Base Share Price" and such
issuances collectively, a "Dilutive Issuance") (if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due
to warrants, options or rights per share which are issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise
Price on such date of the Dilutive Issuance), then the Exercise Price
shall be reduced and only reduced to equal the Base Share Price, and
the number of Warrant Shares issuable hereunder shall be increased such
that the aggregate Exercise Price payable hereunder, after taking into
account the decrease in the Exercise Price, shall be equal to the
aggregate Exercise Price prior to such adjustment. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 3(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later than
the Trading Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this Section 3(b), indicating therein the
applicable issuance price, or applicable reset price, exchange price,
conversion price and other pricing terms (such notice the "Dilutive
Issuance Notice"). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section
3(b), upon the occurrence of any Dilutive Issuance, after the date of
such Dilutive Issuance the Holder is entitled to receive a number of
Warrant Shares based upon the Base Share Price regardless of whether
the Holder accurately refers to the Base Share Price in the Notice of
Exercise.
c) Subsequent Rights Offerings. If the Company, at any time
while the Warrant is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders) entitling
them to subscribe for or purchase shares of Common Stock at a price per
share less than the VWAP at the record date mentioned below, then the
Exercise Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of
the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price
of the total number of shares issued (assuming receipt by the Company
in full of all consideration payable upon exercise of such rights,
options or warrants) would purchase at such VWAP. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
d) Pro Rata Distributions. If the Company, at any time while
this Warrant is outstanding, shall distribute to all holders of Common
Stock (and not to Holders of the Warrants) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security other than the
Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of
the record date mentioned above, and of which the numerator shall be
such VWAP on such record date less the then per share fair market value
at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
e) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property
(each "Fundamental Transaction"), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction,
the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the "Alternate Consideration") receivable
as a result of such merger, consolidation or disposition of assets by a
holder of the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such event. For purposes of any
such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing
provisions and evidencing the Holder's right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the
provisions of this Section 3(e) and insuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction that is (1) an all cash transaction, (2) a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Securities Exchange Act
of 1934, as amended, or (3) a Fundamental Transaction involving a
person or entity not traded on a national securities exchange, the
Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq
Capital Market, the Company or any successor entity shall pay at the
Holder's option, exercisable at any time concurrently with or within 30
days after the consummation of the Fundamental Transaction, an amount
of cash equal to the value of this Warrant as determined in accordance
with the Black Scholes Option Pricing Model obtained from the "OV"
function on Bloomberg L.P. using (i) a price per share of Common Stock
equal to the VWAP of the Common Stock for the Trading Day immediately
preceding the date of consummation of the applicable Fundamental
Transaction, (ii) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this Warrant
as of the date of consummation of the applicable Fundamental
Transaction and (iii) an expected volatility equal to the 100 day
volatility obtained from the "HVT" function on Bloomberg L.P.
determined as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction.
f) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Voluntary Adjustment By Company. The Company may at any
time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
h) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the
Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring
such adjustment. If the Company enters into a Variable Rate
Transaction (as defined in the Purchase Agreement), despite
the prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised.
ii. Notice to Allow Exercise by Holder. If (A) the
Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of
the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last address as it
shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the period commencing
on the date of such notice to the effective date of the event
triggering such notice.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof and
to the provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the original Issue Date and shall
be identical with this Warrant except as to the number of Warrant
Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time
to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws or eligible for resale
under Rule 144, the Company may require, as a condition of allowing
such transfer, that the Holder or transferee of this Warrant, as the
case may be, comply with the provisions of Section 5.7 of the Purchase
Agreement.
Section 5. Forced Exercise. Notwithstanding anything herein to the
contrary, if at any time following the date which is nine (9) months following
the Closing Date the VWAP for any 20 out of 30 consecutive Trading Days (such 30
Trading Day period being the "Threshold Period") exceeds $1.125 (subject to
appropriate and equitable adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the Original Issue Date), then the Company may, within 1
Trading Day after the end of any such Threshold Period, deliver a written notice
to the Holder (a "Forced Exercise Notice" and the date such notice is delivered
to the Holder, the "Forced Exercise Notice Date") to cause the Holder to
exercise this Warrant, in whole or in part, as specified in such Forced Exercise
Notice ("Forced Exercise") on or prior to the tenth Trading Day following the
Holder's receipt of such Forced Exercise Notice (such date, the "Forced Exercise
Date"). The Company may not deliver a Forced Exercise Notice, and any Forced
Exercise Notice delivered by the Company shall not be effective, unless all of
the Equity Conditions (as defined in the Notes) are met (unless waived in
writing by the Holder) on each Trading Day occurring during the applicable
Threshold Period through and including the later of the Forced Exercise Date and
the Trading Day after the date such Warrant Shares pursuant to such exercise are
delivered to the Holder (except clause (xii) of the Equity Conditions shall
apply only during the Threshold Period). Any Forced Exercise shall be applied
ratably to all holders of Warrants based on their original number of Warrant
Shares underlying the Warrants, provided that any voluntary exercises by a
Holder shall be applied against the Holder's pro rata allocation, thereby
decreasing the aggregate amount forcibly exercised hereunder if only a portion
of this Warrant is subject to Forced Exercise hereunder. For purposes of
clarification, a Forced Exercise shall be subject to all of the provisions of
Section 2, including, without limitation, the provision requiring payment of
liquidated damages and limitations on conversions. If any Forced Exercise cannot
be effected due to the Beneficial Ownership Limitation, then the Holder shall
furnish the Company with the calculation showing that such Beneficial Ownership
Limitation would otherwise be exceeded.
Section 6. Miscellaneous.
a) No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof as set forth in
Section 2(e)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such
action may be taken or such right may be exercised on the next
succeeding Business Day.
d) Authorized Shares.
The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable
law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other
than taxes in respect of any transfer occurring
contemporaneously with such issue).
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations
under this Warrant.
Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's
rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
i) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
j) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense
in any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
m) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above indicated.
CDEX INC.
By: M H Philips, Jr.
-----------------------
Name: M H Philips, Jr.
Title: CEO
15
NOTICE OF EXERCISE
TO: CDEX INC.
RE: Warrant originally issued on or about ____________ to ________________
for ____________ Warrant Shares.
(1) The undersigned hereby elects to purchase _______________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2)______Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3)______Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
-------------------------------
The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
-------------------------------
-------------------------------
-------------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Warrant Holder: ________________________________________________________
Signature of Authorized Signatory of Warrant Holder: ___________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to
whose address is
- -------------------------------------------------
- ---------------------------------------------------------------.
- ---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.