EXHIBIT 4.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 26, 2004, by
and between CDEX, Inc., a Nevada corporation, with offices located at 0000
Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 (the "COMPANY"), and
_____________ (the "BUYER").
WHEREAS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT"); and
B. The Company desires to issue and sell, and Buyer wishes to purchase,
upon the terms and conditions set forth in this Agreement: (i) 10% convertible
debentures of the Company, in the form attached hereto as EXHIBIT "A," in the
aggregate principal amount of _______________ ($ ) (together with any
debenture(s) issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the "DEBENTURES"),
convertible into Class A Common Stock of the Company, par value $.005 (the
"Common Stock") within six (6) months of the Closing Date at a price of $0.75
per share, upon the terms and subject to the limitations and conditions set
forth in the Debentures and (ii) Common Stock Purchase Warrants, in the form
attached hereto as EXHIBIT "B," to purchase up to ____________shares of Common
Stock (the "WARRANTS") within twelve (12) months of the Closing Date at a price
of $0.75 per share (and together with the Debentures, the "Securities"); and
C. This Agreement, the Debentures and the Warrants are collectively
termed the "Transaction Documents"; and
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS
a. PURCHASE OF DEBENTURES AND WARRANTS. On the
Closing Date (as defined below), the Company shall (a) issue and sell to the
Buyer and the Buyer agrees to purchase from the Company _______________ dollars
($ ) of Debentures (at a purchase price equal to the original principal amount
thereof) and (b) issue to Buyer Warrants to purchase _________ shares of Common
Stock.
b. FORM OF PAYMENT. On the Closing Date, (i) the
Buyer shall pay the purchase price for the Securities to be issued and sold to
him at the Closing (as defined below) (the "PURCHASE PRICE") by wire transfer of
immediately available funds (or as otherwise mutually agreed) to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Securities, and (ii) the Company shall deliver such Securities
duly executed on behalf of the Company, to such Buyer, against delivery of such
Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 5 and 6 below, the parties shall
use their best efforts to cause the issuance and sale of the Securities pursuant
to this Agreement on or before 5:00 p.m. Eastern Standard Time on April 26, 2004
(the "CLOSING DATE"). The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall occur on the Closing Date at the offices of
Xxxxx & Xxxxxxx LLP, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
or at such other location as may be agreed to by the parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents and
warrants to the Company solely as to such Buyer that:
a. INVESTMENT PURPOSE. As of the date hereof, the
Buyer is purchasing the Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures (including, without
limitation, such additional shares of Common Stock, if any, as are issuable as a
result of the events described in the Debenture (including without limitation
Section 1.6 of the Debenture), such shares of Common Stock being referred to
herein as the "CONVERSION SHARES"), and the Warrants and the shares of Common
Stock issuable upon exercise thereof (the "WARRANT SHARES") for Buyer's own
account and not with a present view toward the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D (an
"ACCREDITED INVESTOR") for the reasons checked on Schedule 1 hereto.
c. RELIANCE ON EXEMPTIONS. The Buyer understands
that the Securities are being offered and sold to the Buyer in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. INFORMATION. The Buyer and the Buyer's advisors,
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or such advisors.
The Buyer and any such advisors have been afforded the opportunity to ask
questions of the Company. The Buyer agrees and acknowledges, however, that it
has not been furnished any offering literature or prospectus concerning the
Company other than this Agreement and, in making its decision to acquire the
Securities hereunder, the Buyer has relied solely upon
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this Agreement and independent investigations made by the Buyer. The Buyer
acknowledges that no representations or warranties have been made to the Buyer
by the Company, or any officer, employee, agent or affiliate of the Company,
except as contained in this Agreement. The Buyer understands that his investment
in the Securities involves a significant degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that
no United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that
(i) the sale or re-sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are sold pursuant to
an effective registration statement under the 1933 Act, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of the Buyer
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, or (d) the Securities are
sold pursuant to Rule 144; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any re-sale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. LEGENDS. The Buyer understands that the
Debentures and the Warrants and, unless the Conversion Shares and Warrant Shares
have been registered under the Securities Act of 1933 (as amended) or otherwise
may be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended. The securities may not be
sold, transferred or assigned in the absence of an
effective registration statement for the securities
under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of
counsel in comparable transactions, that
registration is
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not required under said Act or unless sold pursuant
to Rule 144 under said Act."
h. AUTHORIZATION; ENFORCEMENT. The Agreement has
been duly and validly authorized. It has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes a valid and binding
agreement of the Buyer enforceable in accordance with its terms.
i. RESIDENCY. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership or use of property or the nature of the business conducted
by it makes such qualification necessary except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company, taken as a
whole, or on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has
all requisite corporate power and authority to enter into and perform the
Transaction Documents and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Company's Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Transaction Documents, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. CAPITALIZATION. The Company has reserved a
sufficient number of shares of Common Stock as required for issuance upon
conversion of the Debentures and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in SECTION 4(f) below).
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d. ISSUANCE OF SHARES OF COMMON STOCK. The
Conversion Shares and Warrant Shares are (or shall be) duly authorized and
reserved for issuance and, upon conversion of the Debentures and exercise of the
Warrants in accordance with their respective terms, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of shareholders of the Company.
e. ABSENCE OF LITIGATION. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company, or
its officers or directors in their capacity as such, that could have a Material
Adverse Effect.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best
efforts to satisfy timely each of the conditions described in Sections 5 and 6
of this Agreement.
b. FORM D; BLUE SKY LAWS. The Company shall take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Buyer at the applicable closing pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification).
c. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Debentures and the Warrants for the development of
its technologies to include compensation for engineering companies providing
product development support and payment of component parts for the prototype
products being developed and for such other general corporate purposes in
connection therewith as it deems appropriate but shall not, however, directly or
indirectly, use such proceeds for any repayment of debt, loan to or investment
in any other corporation, partnership, enterprise or other person.
d. CORPORATE EXISTENCE. Until such date on which
there are no longer any amounts outstanding on the Debentures, the Company shall
maintain its corporate existence and shall not sell all or substantially all of
the Company's assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction assumes the Company's obligations hereunder
and under the agreements and instruments entered into in connection herewith.
e. NO INTEGRATION. The Company shall not make any
offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the Securities to be
integrated with any other offering of securities by the Company.
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f. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If,
at any time when the Debentures are issued and outstanding and prior to
conversion of all of the Debentures, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Company shall be changed into
the same or a different number of shares of another class or classes of shares
or securities of the Company or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Company other than
in connection with a plan of complete liquidation of the Company, then the Buyer
shall thereafter have the right to receive upon conversion of the Debentures,
upon the basis and upon the terms and conditions specified therein and in lieu
of the Conversion Shares immediately theretofore issuable upon conversion, such
shares, securities or assets which the Buyer would have been entitled to receive
in such transaction had the Debentures been converted in full immediately prior
to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Buyer of the Debenture to the end that the
provisions set forth in the Debenture (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of Conversion Shares
issuable upon conversion of the Debentures) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion hereof.
g. REGISTRATION RIGHTS. If at any time after the
date hereof the Company proposes to register any of its securities with the
Securities and Exchange Commission, the Company shall give notice to Buyer of
such proposed registration, and, upon the written request of Buyer delivered to
the Company within 20 days of such notice, the Company shall use its best
efforts to effect the registration of Buyer's Warrant Shares or Conversion
Shares, as requested by Buyer.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Debentures and Warrants to Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The Buyer shall have executed, as applicable, the
Agreement, and delivered the same to the Company.
b. The Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
c. The representations and warranties of Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and
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conditions required by this Agreement to be performed, satisfied or complied
with by Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
6. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE. The obligation of
Buyer to purchase the Debentures and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for the Buyer's sole benefit and may be
waived by the Buyer at any time in his sole discretion:
a. The Company shall have executed the Agreement and
delivered the same to Buyer, and shall within a reasonable time after the
Closing Date provide to Buyer executed Debentures and Warrants, as reflected in
this Agreement.
b. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
7. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN MARYLAND WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE
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THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE
ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,
INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH
SUCH DISPUTE.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. In the event that any provision of
this Agreement is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be the then most current
address of the party. Each party shall provide notice to the other party of any
change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the
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Buyer shall assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other.
h. THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. SURVIVAL. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 2, 3, 4 and 7
shall survive the Closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all of Buyer's agents for loss or
damage arising as a result of or related to any breach or alleged breach by the
Company of any of his representations, warranties and covenants set forth in
Sections 3 and 4 hereof or any of his covenants and obligations under the
Transaction Documents, including advancement of expenses as they are incurred.
The Buyer agrees to indemnify and hold harmless the Company and its officers,
directors, employees and agents for loss or damage arising as a result of or
related to any material breach by the Buyer of any of his representations,
warranties and covenants set forth in Sections 2 and 4 hereof or any of his
covenants and obligations under the Transaction Documents, including advancement
of expenses as they are incurred.
j. FURTHER ASSURANCES. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.
INVESTOR: CDEX, INC.
--------------------------------------- ---------------------------------
Name: Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: CEO
RESIDENCE:
--------------------------
ADDRESS:
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SCHEDULE 1
ACCREDITED INVESTOR STATUS
Please initial below the items which apply to your status as an
Accredited Investor.
_____________ An individual having a net worth with spouse
(excluding automobiles, principal residence and
furnishings) at the time of purchase, individually
or jointly, in excess of $1,000,000.
_____________ An individual whose individual net income was in
excess of $200,000 in each of the two most recent
years, or whose joint net income with his or her
spouse was in excess of $300,000 in each of those
years, and who reasonably expects his individual
or joint net income with such investor's spouse to
reach such level(s) in the current year.
_____________ A corporation or partnership, not formed for the
specific purpose of acquiring the Purchased
Shares, having total assets in excess of
$5,000,000.
_____________ A small Business Investment Company licensed by
the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business
Investment Act of 1958.
_____________ A self-directed employee benefit plan within the
meaning of ERISA, with investment decisions made
solely by persons who are accredited investors as
defined in Rule 501(a) of Regulation D.
_____________ A trust with total assets in excess of $5,000,000
not formed for the specific purpose of acquiring
the Purchased Shares, whose purchase is directed
by a sophisticated person (i.e., a person who has
such knowledge and experience in financial and
business matters that he, she or it is capable of
evaluating the merits and risks of an investment
in the Purchased Shares).
_____________ An entity in which all of the equity owners are
accredited investors.
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Exhibit A to Securities Purchase Agreement
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
CONVERTIBLE DEBENTURE
Rockville, Maryland Debenture No.__
_______________, 2004 $_______.00
FOR VALUE RECEIVED, CDEX, INC., a Nevada corporation
(hereinafter called the "BORROWER"), hereby promises to pay to the order of
______________________________, having a principal residence at
______________________________________________ (the "HOLDER") the sum of
____________________ Dollars ($_______.00), on ________, 2007, (the "MATURITY
DATE"), and to pay interest on the unpaid principal balance hereof at the rate
of ten percent (10%) per annum (the "Initial Interest Rate") from the date
hereof (the "ISSUE DATE") until the same becomes due and payable, whether at
maturity or upon acceleration or by prepayment or otherwise. Any amount of
principal or interest on this Debenture which is not paid when due shall bear
interest at the rate of fifteen percent (15%) per annum from the due date
thereof until the same is paid ("DEFAULT INTEREST"). Interest shall commence
accruing on the Issue Date, shall be computed on the basis of a 365-day year and
the actual number of days elapsed and shall be payable, at the Maturity Date, or
at the time of conversion of the principal to which such interest relates in
accordance with Article I below. All payments due hereunder (to the extent not
converted into common stock, par value $0.005 per share, of the Borrower (the
"COMMON STOCK") in accordance with the terms hereof) shall be made in lawful
money of the United States of America or, at the option of the Holder, in whole
or in part, in shares of Common Stock of the Borrower valued at the then
applicable Conversion Price (as defined herein). All payments shall be made at
such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Debenture. Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a business day, the same shall instead be due on the next
succeeding day which is a business day. As used in this Debenture, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are authorized or
required by law or executive order to remain closed. This Debenture may be
issued in conjunction with other debentures with the same terms to the Holder or
to other holders thereof (such other debentures being referred to collectively
herewith as the "Debentures" and such holders, collectively with the Holder, as
the "Holders"). Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in that certain
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Securities Purchase Agreement, dated March ___, 2004, pursuant to which this
Debenture was originally issued (the "PURCHASE AGREEMENT").
The following terms shall apply to this Debenture:
ARTICLE I. CONVERSION RIGHTS
1.1 CONVERSION RIGHT.
(a) CONVERSION. Subject to Section 1.1(b), the Holder shall have
the right at any time, and from time to time, on or prior to the six month
anniversary hereof (the "Conversion Deadline") in respect of the remaining
outstanding principal amount and accrued and unpaid interest thereon of this
Debenture, to convert all or any part of the outstanding and unpaid principal
amount of this Debenture into fully paid and non-assessable shares of Common
Stock (the "Conversion Shares"), as such Common Stock exists on the Issue Date,
or any shares of capital stock or other securities of the Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the Conversion
Price (as defined below) determined as provided herein (a "CONVERSION"). The
number of Conversion Shares to be issued upon each conversion of this Debenture
shall be determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price in effect on the date that the notice of conversion,
in the form attached hereto as Exhibit A (the "NOTICE OF CONVERSION"), is
delivered to the Borrower by the Holder in accordance with Section 1.4 below.
(the "CONVERSION DATE"). The term "CONVERSION AMOUNT" means, with respect to any
conversion of this Debenture, the sum of (1) the principal amount of this
Debenture to be converted in such conversion PLUS (2) accrued and unpaid
interest, if any, on such principal amount at the interest rates provided in
this Debenture to the Conversion Date PLUS (3) Default Interest, if any, on the
amounts referred to in the immediately preceding clauses (1) and/or (2) PLUS (4)
at the Holder's option, any amounts owed to the Holder pursuant to this
Debenture (including, without limitation Section 1.6 hereof).
(b) PREPAYMENT IN LIEU OF CONVERSION. Notwithstanding anything to
the contrary contained in Section 1.1(a), at Borrower's option at any time, upon
ten days prior written notice, the Borrower shall have the right to prepay the
entire principal amount of the Debenture (the "Prepayment Option"). Unless the
Holder shall have previously converted the entire principal amount of this
Debenture, then on the 11th day following such notice, the Borrower shall make
payment to the Holder, of an amount in cash equal to the sum of (w) the
principal amount of the Debenture outstanding on such day plus (x) accrued and
unpaid interest on such unpaid principal amount plus (y) Default Interest, if
any, on the amounts referred to in clauses (w) and (x) plus (z) any other
amounts owed to the Holder pursuant to this Debenture.
1.2 CONVERSION PRICE.
(a) CALCULATION OF CONVERSION PRICE. The initial Conversion Price
shall be $0.75 per share (THE "CONVERSION PRICE"). The Conversion Price shall be
subject, in each
12
case, to equitable adjustments for stock splits, reverse stock splits, stock
dividends or rights offerings by the Borrower relating to the Borrower's
securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events.
(b) DEFICIENCY UPON CONVERSION. Upon Conversion, in the event of
any deficiency of any amounts due Holder hereunder, Borrower agrees to pay
Holder, at Holder's option any such deficiency in either cash or additional
shares of Common Stock. If the Holder elects to be paid such deficiency in
Common Stock, such Common Stock shall be valued at the Conversion Price, then in
effect.
1.3 AUTHORIZED SHARES. The Borrower covenants that during the period
the conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Debenture and the other Debentures issued pursuant to the Purchase
Agreement. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. In addition, if the Borrower
shall issue any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the Debentures
shall be convertible at the then current Conversion Price, the Borrower shall at
the same time make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Debentures. The Borrower
agrees that its issuance of this Debenture shall constitute full authority to
its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Debenture.
If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article I (a "CONVERSION DEFAULT"), subject to Section
4.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this
Debenture which the Holder included in his Conversion Notice and which exceeds
the amount which is then convertible into available shares of Common Stock (the
"EXCESS AMOUNT") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional shares
of Common Stock are authorized by the Borrower to permit such conversion. The
Borrower shall use its best efforts to authorize a sufficient number of shares
of Common Stock as soon as practicable following the earlier of (i) such time
that the Holder notifies the Borrower or that the Borrower otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof and (ii) a Conversion Default. The
Borrower shall send notice to the Holder of the authorization of additional
shares of Common Stock, and the Authorization Date.
13
1.4 METHOD OF CONVERSION.
(a) MECHANICS OF CONVERSION. Subject to Section 1.1, this Debenture
may be converted by the Holder in whole or in part at any time from time to time
after the Issue Date and prior to the Conversion Deadline, by (A) submitting to
the Borrower a Notice of Conversion (by facsimile or other reasonable means of
communication dispatched on the Conversion Date prior to 5:00 p.m., New York,
New York time) and (B) subject to Section 1.4(b), surrendering this Debenture at
the principal office of the Borrower.
(b) SURRENDER OF DEBENTURE UPON CONVERSION. Notwithstanding
anything to the contrary set forth herein, upon conversion of this Debenture in
accordance with the terms hereof, the Holder shall not be required to physically
surrender this Debenture to the Borrower unless the entire unpaid principal
amount of this Debenture is so converted. The Borrower shall maintain records
showing the principal amount so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Debenture upon each
such conversion. In the event of any dispute or discrepancy, such records of the
Borrower shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of this Debenture is
converted as aforesaid, the Holder may not transfer this Debenture unless the
Holder first physically surrenders this Debenture to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Holder a new
Debenture of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Debenture.
THE HOLDER AND ANY ASSIGNEE, BY ACCEPTANCE OF THIS DEBENTURE, ACKNOWLEDGE AND
AGREE THAT, BY REASON OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING CONVERSION
OF A PORTION OF THIS DEBENTURE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF
THE DEBT REPRESENTED BY THIS DEBENTURE MAY BE LESS THAN THE AMOUNT STATED ON THE
FACE HEREOF.
(c) PAYMENT OF TAXES.The Borrower shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on conversion
of this Debenture in a name other than that of the Holder (or in street name),
and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than
the Holder or the custodian in whose street name such shares are to be held for
the Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.
(d) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon receipt by the
Borrower from the Holder of a facsimile transmission (or other reasonable means
of
14
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this Section 1.4, the Borrower shall issue and deliver or cause
to be issued and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion as soon as practicable after such
receipt (and, solely in the case of conversion of the entire unpaid principal
amount hereof, surrender of this Debenture) in accordance with the terms hereof
and the Purchase.
(e) OBLIGATION OF BORROWER TO DELIVER COMMON STOCK. Upon receipt by
the Borrower of a Notice of Conversion, the Holder shall be deemed to be the
Holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Debenture shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Debenture being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets, as herein provided, on such conversion. The Conversion Date
with respect to a Notice of Conversion shall be the date on which the Notice of
Conversion is given so long as the Notice of Conversion is received by the
Borrower before 5:00 p.m., New York, New York time, on such date; or if received
after 5:00 p.m. New York, New York time the Conversion Date shall be the
following date.
1.5 CONCERNING THE SHARES. The shares of Common Stock issuable upon
conversion of this Debenture may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("RULE 144") or (iv)
such shares are transferred to an "affiliate" (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Debenture have been
registered under the Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Debenture that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE CUSTOMARY FOR
15
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT."
The legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefor free of any transfer legend if
(i) the Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Common Stock may be made without registration under the Act, including the
provisions of Rule 144 and the shares are so sold or transferred, or (ii) in the
case of the Common Stock issuable upon conversion of this Debenture, such
security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold.
1.6 EFFECT OF CERTAIN EVENTS.
(a) EFFECT OF MERGER, CONSOLIDATION, ETC. Except as otherwise
previously publicly disclosed, at the option of the Holder, the sale, conveyance
or disposition of all or substantially all of the assets of the Borrower, the
effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or
the consolidation, merger or other business combination of the Borrower with or
into any other Person (as defined below) or Persons when the Borrower is not the
survivor shall either: (i) be deemed to be an Event of Default (as defined in
Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "PERSON"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
(b) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time
when this Debenture is issued and outstanding and prior to conversion of all of
the Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be
16
applicable, as nearly as may be practicable in relation to any securities or
assets thereafter deliverable upon the conversion hereof. The Borrower shall not
effect any transaction described in this Section 1.6(b) unless (a) it first
gives, to the extent practicable, thirty (30) days prior written notice (but in
any event at least fifteen (15) days prior written notice) of the record date of
the special meeting of stockholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the Holder shall be entitled to convert this Debenture) and
(b) the resulting successor or acquiring entity (if not the Borrower) assumes by
written instrument the obligations of this Section 1.6(b). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.
1.7 STATUS AS STOCKHOLDER. Upon submission of a Notice of Conversion by
a Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder's allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder's rights as a Holder
of such converted portion of this Debenture shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Borrower to comply with the terms of this
Debenture.
ARTICLE II. SALE OF ASSETS BY BORROWER
So long as the Borrower shall have any obligation under this Debenture,
the Borrower shall not, without the prior written consent of the Holders of a
majority of the then outstanding balance of principal and interest on the
Debentures, sell, lease or otherwise dispose of any portion of its assets, in
any transaction or series of transactions, having a value in excess of 50% of
the fair market value of its consolidated assets outside the ordinary course of
business. Any consent to the disposition of any assets may be conditioned on a
specified use of the proceeds of disposition.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an "EVENT OF DEFAULT")
shall occur:
3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails to pay the
principal hereof or interest thereon when due on this Debenture, whether at
maturity upon acceleration or otherwise.
3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the
17
terms of this Debenture (unless such failure is solely as a result of the
circumstances governed by Section 1.3 and the Borrower is using its best efforts
to authorize a sufficient number of shares of Common Stock as soon as
practicable), fails to transfer or cause its transfer agent to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Debenture as and when required by this Debenture,
and any such failure shall continue uncured for fifteen (15) business days after
the Borrower shall have been notified thereof in writing by the Holder.
3.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in the Purchase Agreement shall
be false or misleading in any material respect when made and the breach of which
has (or with the passage of time will have) a material adverse effect on the
rights of the Holder with respect to this Debenture, the Purchase Agreement or
any of the other Transaction Documents.
ARTICLE IV. MISCELLANEOUS
4.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges.
4.2 NOTICES. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 0000 Xxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000. Both the Holder and the Borrower may
change the address for service by service of written notice to the other as
herein provided.
4.3 AMENDMENTS. This Debenture and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the Holder. The
term "Debenture" and all references thereto, as used throughout this instrument,
shall mean this instrument (and the other Debentures issued pursuant to the
Purchase Agreement) as originally executed, or if later amended or supplemented,
then as so amended or supplemented.
4.4 ASSIGNABILITY. This Debenture shall be binding upon the Borrower
and its successors and assigns, and shall inure to be the benefit of the Holder
and his successors and assigns. Each transferee of this Debenture must be an
"accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Debenture to the contrary, this
18
Debenture may be pledged as collateral in connection with a BONA FIDE margin
account or other lending arrangement.
4.5 COST OF COLLECTION. If default is made in the payment of this
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.
4.6 GOVERNING LAW. THIS DEBENTURE SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN MARYLAND,
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS DEBENTURE, THE AGREEMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS DEBENTURE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
4.7 CERTAIN AMOUNTS. Whenever pursuant to this Debenture the Borrower
is required to pay an amount in excess of the outstanding principal amount (or
the portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Debenture may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Debenture at a price in excess of the price paid for
such shares pursuant to this Debenture. The Borrower and the Holder hereby agree
that such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Debenture into shares of Common Stock.
19
4.8 ALLOCATIONS OF MAXIMUM SHARE AMOUNT AND RESERVED AMOUNT. The
Maximum Share Amount and Reserved Amount shall be allocated pro rata among the
Holders of Debentures based on the principal amount of such Debentures issued to
each Holder. Each increase to the Maximum Share Amount and Reserved Amount shall
be allocated pro rata among the Holders of Debentures based on the principal
amount of such Debentures held by each Holder at the time of the increase in the
Maximum Share Amount or Reserved Amount. In the event a Holder shall sell or
otherwise transfer any of such Holder's Debentures, each transferee shall be
allocated a pro rata portion of such transferor's Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining Holders of Debentures, pro rata
based on the principal amount of such Debentures then held by such Holders.
4.9 DAMAGES SHARES. The shares of Common Stock that may be issuable to
the Holder pursuant to any penalty or adjustment provisions contained in this
Debenture (including, without limitation Section 1.6 hereof) ("DAMAGES SHARES")
shall be treated as Common Stock issuable upon conversion of this Debenture for
all purposes hereof and shall be subject to all of the limitations and afforded
all of the rights of the other shares of Common Stock issuable hereunder.
4.10 DENOMINATIONS. At the request of the Holder, upon surrender of
this Debenture, the Borrower shall promptly issue new Debentures in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations as the Holder shall request.
4.11 PURCHASE AGREEMENT. By its acceptance of this Debenture, each
Holder agrees to be bound by the applicable terms of the Purchase Agreement.
4.12 NOTICE OF CORPORATE EVENTS. Except as otherwise provided below,
the Holder of this Debenture shall have no rights as a Holder of Common Stock
unless and only to the extent that it converts this Debenture into Common Stock.
Notwithstanding the foregoing sentence, the Borrower shall provide the Holder
with notice of any meeting of Borrower's shareholders or directors at which any
matter is to be voted upon which requires the consent of the Holders of the
Debentures.
4.13 REMEDIES. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Borrower acknowledges that the remedy at law for a breach of its obligations
under this Debenture will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Debenture, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Debenture
and to enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other security being
required.
20
4.14 TERMINATION OF CERTAIN PROVISIONS. Upon the Maturity Date
(assuming repayment on such date of 100% of the Debentures) or conversion of
100% of the Debentures, which ever is earlier, the provisions of Sections 2.1
and 2.2 shall thereafter be of no further force and effect.
IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this ___ day of ________________, 2004.
CDEX, INC.
By: ______________________________
Xxxxxxx X. Xxxxxxx, Xx.
Chief Executive Officer
21
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debentures)
The undersigned hereby irrevocably elects to convert $________principal
amount of the Debenture (defined below) into shares of common stock, par value
$0.005 per share ("COMMON STOCK"), of CDEX, Inc., a Nevada corporation (the
"CORPORATION") according to the conditions of the convertible debentures of the
Corporation dated as of _______________, 2004 (the "Debentures"), as of the date
written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any. A
copy of each Debenture is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned hereby requests that the Corporation issue a
certificate or certificates for the number of shares of Common Stock set forth
below (which numbers are based on the Holder's calculation attached hereto) in
the name(s) specified immediately below or, if additional space is necessary, on
an attachment hereto:
Name:
-----------------------------------------------------
Address:
--------------------------------------------------
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Debentures shall be made pursuant to registration of the securities under
the Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption
from registration under the Act.
Date of Conversion:_______________________________
Applicable Conversion Price:______________________
Number of Shares of Common Stock to be Issued:____
Pursuant to Conversion of the Debentures:_________
Signature:________________________________________
Name:_______________________________________
Address:_____________________________________
22
EXHIBIT B TO SECURITIES PURCHASE AGREEMENT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE
SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT OR ANY APPLICABLE STATE LAWS.
COMMON STOCK PURCHASE WARRANT
To Purchase ______________ Shares of Common Stock of
CDEX, INC.
THIS CERTIFIES that, for value received,
_____________________________ 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 date hereof (the "Initial Exercise Date") and on or
prior to the close of business twelve (12) months from the Initial Exercise Date
(the "Termination Date") but not thereafter, to subscribe for and purchase from
CDEX, Inc., a Nevada corporation (the "Company"), ______________ shares of
Common Stock, par value $0.005, of the Company (the "Common Stock" or "Warrant
Shares"). The purchase price of each share of Common Stock upon the exercise of
this Warrant shall be $0.75 (the "Exercise Price"). The Exercise Price and the
number of shares of Common Stock for which this Warrant is exercisable shall be
subject to adjustment as provided herein.
1. TITLE TO WARRANT. Prior to the Termination Date and subject
to compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with a properly endorsed and/or duly executed Assignment Form,
a copy of which is annexed hereto.
2. AUTHORIZATION OF SHARES OF COMMON STOCK. The Company
covenants that all securities which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully paid and non-assessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
3. EXERCISE OF WARRANT. Except as provided in Section 4
herein, exercise of the purchase rights represented by this Warrant may be made
at any time or times on or after the Initial
23
Exercise Date, and before the close of business on the Termination Date by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company) and upon
payment of the Exercise Price for the shares of Common Stock thereby purchased
by wire transfer or cashier's check drawn on a United States bank, the Holder of
this Warrant shall be entitled to receive a certificate for the number of shares
of Common Stock so purchased. Certificates for the securities representing the
shares of Common Stock purchased hereunder shall be delivered to the Holder
hereof as soon as practicable after the date on which this Warrant shall have
been duly exercised. This Warrant shall be deemed to have been exercised and
such certificate or certificates 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 securities for all purposes, as of the date
this Warrant has been exercised by payment to the Company of the Exercise Price
and all taxes required to be paid by Holder, if any, pursuant to Section 4
hereof, prior to the issuance of such securities.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for
shares of Common Stock and/or the securities representing the shares of Common
Stock upon the exercise of this Warrant 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
of this Warrant or in such name or names as may be directed by the Holder of
this Warrant; provided, however, that in the event certificates for shares of
Common Stock are to be issued in a name other than the name of the Holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the Holder hereof, and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
5. CLOSING OF BOOKS. The Company will not close its books or
records in any manner which prevents the timely exercise of this Warrant.
6. TRANSFER, DIVISION AND COMBINATION.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by 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 shares
of Common Stock without having
24
a new Warrant issued.
(b) 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 Holder or his agent or attorney.
Subject to compliance with Section 6(a) hereof, 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.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 6.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does
not entitle the Holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender of
this Warrant and the payment of the Exercise Price, the shares of Common Stock
so purchased shall be deemed to be issued to such Holder as the record owner of
such securities as of the close of business on the later of the date of such
surrender or payment.
8. 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
certificate or any certificate relating to the shares of Common Stock and in
case of loss, theft or destruction, of indemnity or security satisfactory to it,
and upon surrender and cancellation of such Warrant or certificate, if
mutilated, the Company will make and deliver a new Warrant or certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant or
certificate.
9. 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 be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised until 5:00 P.M. New York Time on the
next succeeding day not a Saturday, Sunday or legal holiday.
10. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES, SHARE SPLITS, ETC. The number and kind of securities purchasable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time as set forth in this Section 10. In the event that
the Company shall (i) pay a dividend in its capital securities or make a
distribution of its capital securities to holders of its outstanding capital
securities; (ii) subdivide its outstanding capital securities into a greater
number of its capital securities; (iii) combine its outstanding capital
securities into a smaller number of its capital securities; or (iv) issue any
capital securities in a reclassification of its capital securities, then the
number of securities purchasable upon exercise of
25
this Warrant immediately prior thereto shall be adjusted so that the Holder of
this Warrant shall be entitled to receive the kind and number of capital
securities or other securities of the Company which it would have owned or have
been entitled to receive had such Warrant been exercised in advance thereof.
Upon each such adjustment of the kind and number of capital securities or other
securities of the Company which are purchasable hereunder, the Holder of this
Warrant shall thereafter be entitled to purchase the number of capital
securities or other securities resulting from such adjustment at an Exercise
Price per share of Common Stock or other security obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment
and dividing by the number of capital securities or other securities of the
Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
11. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital
securities, reclassify its securities, consolidate or merge with or into another
company (where the Company is not the surviving company or where there is a
change in or distribution with respect to the shares of Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all of
its property, assets or business to another company and, pursuant to the terms
of such reorganization, reclassification, merger, consolidation or disposition
of assets, capital securities of the successor or acquiring company, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring company ("Other
Property"), are to be received by or distributed to the holders of securities of
the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock or other
securities of the successor or acquiring company or of the Company, if it is the
surviving company, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
for which this Warrant is exercisable immediately prior to such event. In case
of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring company (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined in
good faith by resolution of the Board of Directors of the Company) in order to
provide for adjustments of the shares of Common Stock and/or other securities
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes of
this Section 11, "securities of the successor or acquiring company" shall
include securities of such company of any class which is not preferred as to
dividends or assets over any other class of securities of such company and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such securities.
26
12. VOLUNTARY ADJUSTMENT BY THE 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.
13. NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock or number or kind of securities or other property purchasable upon
the exercise of this Warrant or the Exercise Price is adjusted, as herein
provided, the Company shall promptly mail by registered or certified mail,
return receipt requested, to the Holder of this Warrant notice of such
adjustment or adjustments setting forth the number of shares of Common Stock
(and other securities or property) purchasable upon the exercise of this Warrant
and the Exercise Price of such shares of Common Stock (and other securities or
property) after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
14. AUTHORIZED SECURITIES. The Company covenants that during
the period this Warrant is outstanding, it will use its best efforts to reserve
from its authorized and unissued shares of Common Stock a sufficient number of
shares of Common Stock to provide for the issuance of the shares of Common Stock
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 certificates to execute
and issue the necessary certificates for the shares of Common Stock upon the
exercise of the purchase rights under this Warrant.
15. MISCELLANEOUS.
(a) JURISDICTION. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of Maryland, without regard to its conflict of law, principles or
rules, and be subject to arbitration in the State of Maryland pursuant to the
rules of the American Arbitration Association.
(b) RESTRICTIONS. The Holder hereof acknowledges that the
securities acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws.
(c) NON-WAIVER 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 all rights hereunder terminate on the Termination
Date. If the Company willfully fails to comply with any provision of this
Warrant, 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.
27
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof by the Company shall be
delivered to the last address of the Holder appearing on the books of the
Company.
(e) LIMITATION OF LIABILITY. No provision hereof, in the
absence of affirmative action by Holder to purchase securities, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any securities or as a
holder of securities or shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(f) 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.
(g) 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 any such Holder or any other holder of the
securities underlying the Warrant.
(h) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(i) 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.
(j) 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.
Dated: March ____, 2004
CDEX, INC.
By:
------------------------------------
Name:
Title:
28
NOTICE OF EXERCISE
To: CDEX, INC.
k. The undersigned hereby elects to purchase ________ shares of Common
Stock of CDEX, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
l. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
------------------------------
Signature
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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, 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 the Company and those acting in an fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
30
