UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 3, 2015

 

CARDAX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   333-181719   45-4484428
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

2800 Woodlawn Drive, Suite 129, Honolulu, Hawaii
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (808) 457-1400

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

 

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

 

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

 

 

 

 
 

 

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

 

The information set forth in Item 3.02 of this Current Report on Form 8-K is incorporated into this Item 1.01 by reference.

 

ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION.

 

The information set forth in Item 3.02 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.

 

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.

 

Cardax, Inc. (the “Company”) entered into separate subscription agreements, registration rights agreements and warrant purchase agreements (each, a ” Purchase Agreement”), by and between the Company and an investor (each a “Purchaser” and collectively, the “Purchasers”) pursuant to which the Company issued and sold to the Purchasers shares of common stock (each a “Share” and collectively, the “Shares”) and Class E Warrants and D Warrants (each, a “Warrant” and, collectively, the “Warrants”) to purchase shares of the Company’s common stock (the “Common Stock”). The sale of equity securities by the Company prior to March 3, 2015 were, in the aggregate, less than the 5% number of shares outstanding of the class of equity securities sold that require the filing of a Current Report on Form 8-K.

 

Under the Purchase Agreements, each of the Purchasers purchased units (the “Unit”) that consisted of: (A) shares of common stock a price per share of $0.30, (B) two (2) Class D warrants, each to purchase one (1) share of Common Stock at a price per share of $0.10, and (C) one (1) Class E warrants to purchase three-quarters (3/4) of one (1) share of Common Stock at a price per share of 0.1667. The Class D warrants and the Class E warrants will expire March 31, 2020. The Company has sold an aggregate of 966,665 Units for an aggregate purchase price of $290,000. No placement agent or broker dealer was used or participated in any offering or sale of the Units.

 

The offering of the Units was made in a transaction that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and the provisions of Regulation D or Regulation S that is promulgated under the Securities Act. The Company may continue to offer securities and may use a placement agent or broker dealer in any such offering.

 

This Current Report on Form 8-K does not constitute an offer to sell, or a solicitation to purchase, any securities of the Company.

 

Under the terms of the Registration Rights Agreement, the Company has agreed to registered the common stock that is issued in the Unit and the shares underlying the Warrants shortly after March 31, 2016 or, if earlier, in connection with any registration rights that may be granted by the Company in an offering of securities of $250,000 or more on or prior to March 31, 2016 (a “Qualified Financing”). The Subscription Agreement also includes “most favored nation” rights to the purchasers of the Units in the event the Company issues stock on terms more favorable to the purchaser in a Qualified Financing.

 

The foregoing summary of the Subscription Agreement, Registration Rights Agreement, and Warrants does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement. A copy of the Subscription Agreement, Registration Rights Agreement, and Form of each of the Warrants is attached as Exhibit 10.1, 10.2, 10.3, and 10.4, respectively, to this Current Report on Form 8-K and is incorporated herein by reference.

 

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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

Exhibit No.   Description
     
10.1   Form of Registration Rights Agreement
     
10.2   Form of Subscription Agreement
     
10.3   Form of Class D Warrant
     
10.4   Form of Class E Warrant

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: March 9, 2015

 

  Cardax, Inc.
     
  By: /s/ David G. Watumull
  Name: David G. Watumull
  Title: President and CEO

 

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REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of __________ ___, 2015 by and among Cardax, Inc., a Delaware corporation (the “ Company ” or “ CDXI ”), and the parties listed on Schedule I hereto (collectively, the “ Investors ”) as amended or supplemented by the Company to reflect Persons that purchase securities in the Offering. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Subscription Agreement (as defined below).

 

WHEREAS, the Investors are purchasing securities in the Company and have requested registration rights for such securities as a condition to purchasing such securities;

 

WHEREAS, the Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Investors to facilitate their investment in the Company; and

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the parties hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01 Definitions .

 

The terms set forth below are used herein as so defined:

 

Business Day ” means a day other than a Saturday, Sunday or other day on which banks located in New York, New York are authorized or required by law to close.

 

Change of Control ” shall mean either (i) the acquisition of the Company by another person or entity by means of any transaction or series of related transactions to which the Company is a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any such transaction if the primary purpose of such transaction is to change the Company’s domicile, and excluding any equity financing the primary purpose of which is to raise operating capital for the Company) that results in a transfer of at least fifty percent (50%) of the total voting power represented by the Company’s voting securities before such acquisition; or (ii) a sale, lease, or other conveyance of all or substantially all of the Company’s assets.

 

Commission ” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

Holder ” means the record holder of any Registrable Securities.

 

 
 

 

Included Registrable Securities ” has the meaning specified therefore in Section 2.02(a) of this Agreement.

 

Losses ” has the meaning specified therefore in Section 2.06(a) of this Agreement.

 

Majority-in-Interest ” means Investors holding a majority of the Registrable Securities.

 

Managing Underwriter ” means, with respect to any Underwritten Offering, the book-running lead manager of such Underwritten Offering.

 

Offering ” means the private investment in public equity, or PIPE, financing of the Company that occurs in accordance with the Subscription Agreement or any similar agreement for the private placement of securities described in the Subscription Agreement or any subsequent offering on substantially similar terms, including any offering that may include the Company retaining a Placement Agent.

 

Qualified Financing ” means an offering that is consummated on or prior to March 31, 2016 by the Company of securities that (x) has aggregate gross proceeds to the Company of $250,000 or more that (y) is received by the Company on or prior to March 31, 2016.

 

Piggyback Registration ” means a registration involving the sale of Common Stock by the Company as described further in Section 2.02(a) of this Agreement.

 

Placement Agent ” means any broker dealer that the Company may retain in connection with the Offering.

 

Priority Holders ” has the meaning specified therefore in Section 2.01 (c) of this Agreement.

 

Subscription Agreement ” means any Subscription Agreement dated as of _________ ___, 2015 or any date prior to such date between the Company and the investors named therein.

 

Registrable Securities ” means, with respect to any Holder (i) any and all shares of Company Common Stock which are owned by such Holder as of the Consummation Date (as hereinafter defined), (ii) any shares of Company Common Stock issuable upon exercise or exchange of any securities of the Company, including, but not limited to, the Common Stock issued upon exercise of the warrants purchased under the Subscription Agreement, which are owned by such Holder as of the Consummation Date, (iii) any shares of Company Common Stock issuable to the Placement Agent or its assigns upon exercise of warrants issued to the Placement Agent in connection with the private placement of shares of Common Stock and warrants or the Offering; and (iv) any securities of the Company issued in respect of the shares of Company Common Stock issued or issuable to any of the Holders by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Company Capital Stock issuable upon exercise or exchange thereof, in each case to the extent relating to any securities of the Company which were owned by such Holder as of the Consummation Date, each of which Registrable Securities described under (i) through (iii) above are subject to the rights provided herein until such rights terminate pursuant to the provisions hereof.

 

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Registration Expenses ” has the meaning specified therefore in Section 2.05(a) of this Agreement.

 

Registration Statement ” means a registration statement under the Securities Act to permit the resale of the Registrable Securities.

 

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as may be amended from time to time.

 

Rule 145 ” means Rule 145 promulgated by the Commission pursuant to the Securities Act, as may be amended from time to time.

 

Securities Act ” means the Securities Act of 1933, as amended.

 

Selling Expenses ” has the meaning specified therefore in Section 2.05(a) of this Agreement.

 

Selling Holder ” means a Holder who is selling Registrable Securities pursuant to a Registration Statement by the Company in accordance with the provisions of this Agreement.

 

Underwritten Offering ” means an offering (including an offering pursuant to a Registration Statement) in which Common Stock is sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.

 

Section 1.02 Registrable Securities . Any Registrable Security will cease to be a Registrable Security (a) when a Registration Statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective Registration Statement, (b) when such Registrable Security is held by the Company or one of its subsidiaries, (c) when such Registrable Security has been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities.

 

ARTICLE II
REGISTRATION RIGHTS

 

Section 2.01 (a) Timing of Registration . As soon as practicable following March 31, 2016 or the final closing date of a Qualified Financing (the “ Consummation Date ”), but in any event within thirty (30) days thereof, the Company shall use its commercially reasonable efforts prepare and file a Registration Statement under the Securities Act with respect to all of the Registrable Securities. The Company shall use its commercially reasonable efforts to cause such Registration Statement to become effective no later than sixty (60) days after the date of the initial filing of the Registration Statement. If a prospectus supplement will be used in connection with the marketing of an Underwritten Offering from the Registration Statement and the Managing Underwriter at any time shall notify the Company in writing that, in the reasonable judgment of such Managing Underwriter, inclusion of detailed information to be used in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Company shall use its commercially reasonable efforts to include such information in the prospectus, it being acknowledged and agreed that the Company will not be required to provide any confidential information under any material agreement or disclose information for that has not been disclosed in its filings due to confidential treatment with the SEC. The Company will cause the Registration Statement filed pursuant to this Section 2.01 to be continuously effective under the Securities Act, until there are no longer any Registrable Securities outstanding, but in any event no longer than such time as counsel for the Company is willing to issue a legal opinion, in a form acceptable to the transfer agent for the Company, that the Registrable Securities held by the Investors (assuming that no Investor is an Affiliate of the Company or has transferred or assigned their Registrable Securities) may be sold pursuant to Section 4(1) of the Securities Act, and the safe harbor provided under Rule 144. The number of Registrable Securities that will be included will be the fullest amount that is permitted and if the Company is required to not include Registrable Securities because of applicable law, then the number not included in the Registration Statement will be determined on a pro rata basis.

 

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(b) Delay Rights . Notwithstanding anything to the contrary contained herein, the Company may, upon written notice to any Selling Holder whose Registrable Securities are included in the Registration Statement, suspend such Selling Holder’s use of any prospectus which is a part of the Registration Statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Registration Statement) if (i) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Company’s independent directors determine in good faith that the Company’s ability to pursue or consummate such a transaction would be materially and adversely affected by any required disclosure of such transaction in the Registration Statement or (ii) the Company has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company’s directors, would materially adversely affect the Company; provided , however , in no event shall the Registration Statement be suspended for a period exceeding an aggregate of ninety (90) days in any three hundred sixty five (365)-day period. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions to permit registered sales of Registrable Securities as contemplated in this Agreement.

 

(c) Priority to Purchasers in a Qualified Financing . The parties to this Agreement acknowledge that the Company may consummate a Qualified Financing or any offering of securities to be part of a Qualified Financing (the “ Proposed Subsequent Offering ”) and that under the terms of the Subscription Agreement, a Holder may elect to participate in the Proposed Subsequent Offering on substantially similar terms. The Company expects to provide the purchasers of securities in a Proposed Subsequent Offering rights to register securities purchased in the Proposed Subsequent Offering under the Securities Act and grant a priority to such purchasers (“ Priority Holders ”). Notwithstanding any provision of this Agreement to the contrary: (i) the rights of the Holders to require that the Company register Registrable Shares shall be subject to the rights and priorities of the Priority Holders; (ii) the Company will request that the Holders have the right to register their Registrable Securities on pari passu basis with the Priority Holders; and (iii) any Holder that duly exercises its Anti-Dilution Right under its Subscription Agreement will terminate its rights under this Agreement and have the same rights to register its securities as the purchasers in the Proposed Subsequent Offering.

 

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Section 2.02 Piggyback Rights .

 

(a) Participation . If at any time after the Consummation Date, the Company proposes to file a registration statement for the sale of Common Stock in an Underwritten Offering for its own account and/or a Priority Holder, then as soon as practicable but not less than ten Business Days prior to the filing of such registration statement, the Company shall give notice of such proposed Underwritten Offering to the Holders and such notice shall offer the Holders the opportunity to include in such Underwritten Offering such number of Registrable Securities (the “ Included Registrable Securities ”) as each such Holder may request in writing (but only to the extent that such Registrable Securities are not then subject to lock-up provisions under any lock-up or similar agreement); provided , however , that if the Company has been advised by the Managing Underwriter that the inclusion of Registrable Securities for sale for the benefit of the Holders will have an adverse effect on the price, timing or distribution of the Common Stock offered by the Company under such registration statement or if the registration rights granted by the Company to the Priority Holders require that the securities held by the Priority Holders be given priority, then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.02(b). The notice required to be provided in this Section 2.02(a) to Holders shall be provided on a Business Day pursuant to Section 3.02 hereof and receipt of such notice shall be deemed to be received by Holders on the next Business Day. Holder shall then have three (3) Business Days after such deemed receipt of the notice to request inclusion of Registrable Securities in the Underwritten Offering by providing a written notice (“ Piggy Back Registration Notice ”) to the Company within such period. If no Piggy Back Registration Notice from a Holder is received within the specified time, then such Holder shall have no further right to participate in such Underwritten Offering. If a Holder decides not include some or all of its Registrable Securities in any registration statement filed by the Company as described in this Section 2.02(a) as stated in the Piggy Back Registration Notice, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to the offering by the Company of its securities, all upon the terms and conditions set forth herein. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Company shall determine for any reason not to undertake or to delay such Underwritten Offering, the Company may, at its election, give written notice of such determination to the Holders the timely provided a Piggy Back Registration Rights Agreement and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such offering by giving written notice to the Company of such withdrawal up to and including the Business Day immediately preceding the Business Day on which the underwriters price such offering.

 

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(b) Priority of Piggyback Rights . If the Managing Underwriter or Underwriters of any proposed Underwritten Offering of Company Common Stock included in an Underwritten Offering involving Included Registrable Securities advises the Company that the total amount of Company Common Stock that the Selling Holders and any other persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have an adverse effect on the price, timing or distribution of the Company Common Stock offered or the market for the Company Common Stock or if the rights provided by the Company to Priority Holders do not permit inclusion of the Registrable Shares held by the Holders, then the Company Common Stock to be included in such Underwritten Offering shall include the number of Registrable Securities that such Managing Underwriter or Underwriters advises the Company can be sold without having such adverse effect or such Registrable Shares held by the Holders that may be permitted under such agreement or agreements by the Company and the Priority Holders, with such number to be allocated (i) first, to the Company and (ii) second, pro rata among the Selling Holders who have requested participation in such Underwritten Offering and any other person holding Company securities who may also be including any such securities for sale in such Underwritten Offering based, for each Selling Holder or other person, on the fraction derived by dividing (x) the number of shares of Company Common Stock proposed to be sold by such Selling Holder or other person in such Underwritten Offering by (y) the aggregate number of shares of Company Common Stock proposed to be sold by all Selling Holders and other persons in such Underwritten Offering. For clarity, the Managing Underwriter or Underwriters (and the Company in order to not breach its agreement with a Priority Holder) shall have the ability to fully cut back any Registrable Securities in connection with the Underwritten Offering without limiting the shares of Common Stock or other securities to be registered in such Underwritten Offering. If any Selling Holder or other person does not agree to the terms of any such underwriting, such Selling Holder or other person, as the case may be, may be excluded from the Underwritten Offering by written notice from the Company or the Managing Underwriter. Any Registrable Securities or other Company securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the Managing Underwriter or Underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the Selling Holders or other person or persons requesting additional inclusion in accordance with the formula contained in this Section 2.02(b). The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.02 at any time whether or not any Holder has elected to include securities in such registration.

 

(c) Notwithstanding the provisions of this Section 2.02, the Company shall not have any obligation under this Section 2.02 if a Registration Statement permitting the sale the Registrable Securities has been effective or from and after the date that is 6 months after the Consummation Date.

 

(d) Notwithstanding any provision of this Agreement to the contrary, the Company shall not have any obligation under this Section 2.02 to register any Registrable Securities with respect to any registration of securities by the Company under Registration Statement (registration number 33-195745) or any registration of securities with respect to a merger of Cardax Pharmaceuticals, Inc. with and into the Company or any subsidiary of the Company.

 

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Section 2.03 Sale Procedures . In connection with its obligations contained in Section 2.01, the Company will:

 

(a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement;

 

(b) furnish to each Selling Holder (i) as far in advance as reasonably practicable before filing the Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed, and provide each such Selling Holder five (5) Business Days to object in writing to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing the Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of the Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement or other registration statement;

 

(c) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall reasonably request, provided , however, that the Company will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject;

 

(d) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the filing of the Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective, and (ii) any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for amendments or supplements to the Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;

 

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(e) immediately notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Registration Statement or any other registration statement contemplated by this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, (ii) the issuance or overt threat of issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose, or (iii) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Company agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;

 

(f) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission;

 

(g) make available to the appropriate representatives of the Managing Underwriter and Selling Holders access to such information and the Company personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided, however, that the Company need not disclose any information to any such representative unless and until such representative has entered into a confidentiality agreement with the Company;

 

(h) cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Company are then listed;

 

(i) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders to consummate the disposition of such Registrable Securities;

 

(j) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and

 

(k) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition of such Registrable Securities.

 

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Each Selling Holder, upon receipt of notice from the Company of the happening of any event of the kind described in subsection (e) of this Section 2.04, shall forthwith discontinue disposition of the Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (e) of this Section 2.04 or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Company, such Selling Holder will, or will request the managing underwriter or underwriters, if any, to deliver to the Company (at the Company’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

 

Each Holder shall provide all information that is reasonably requested by the Company with respect to the selling stockholder information that is required to be included in a Registration Statement and matters to determine the accuracy of the information that is required to be so disclosed (the “Selling Stockholder Information”). Notwithstanding any provisions of this Agreement to the contrary, the Company shall not be required to include any Registrable Shares of any Holder in any Registration Statement if such Holder does not provide in writing confirmation as to the Selling Stockholder Information of such Holder and the Holder shall no longer have any rights under Section 2.01 or 2.04 if such Holder does not timely respond to such request for Selling Stockholder Information or does not provide such confirmation with respect to the Registration Statement that is filed in accordance with Section 2.01.

 

Section 2.04 Expenses .

 

(a) Certain Definitions . “ Registration Expenses ” means all expenses incident to the Company’s performance under or compliance with this Agreement to effect the registration of Registrable Securities under the Registration Statement pursuant to Section 2.01 or an Underwritten Offering pursuant to Section 2.02 and the disposition of such securities, including, without limitation, all registration, filing, securities exchange listing and annual maintenance fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, transfer taxes and fees of transfer agents and registrars, all word processing, duplicating and printing expenses, the fees and disbursements of counsel and independent public accountants for the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance. Except as otherwise provided in Section 2.05 hereof, the Company shall not be responsible for legal or other professional or similar fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder. In addition, the Company shall not be responsible for any “ Selling Expenses , ” which means all underwriting fees, discounts and selling commissions allocable to the sale of the Registrable Securities under the Registration Statement.

 

(b) Expenses . The Company will pay all reasonable Registration Expenses as determined in good faith, including, in the case of an Underwritten Offering, whether or not any sale is made pursuant to such Underwritten Offering. Each Selling Holder shall pay all Selling Expenses in connection with any sale of its Registrable Securities hereunder and pay all taxes related to the sale of the securities.

 

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Section 2.05 Indemnification .

 

(a) By the Company . In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each Selling Holder thereunder, its directors and officers, and each underwriter, pursuant to the applicable underwriting agreement with such underwriter, of Registrable Securities thereunder and each person, if any, who controls such Selling Holder or underwriter within the meaning of the Securities Act and the Exchange Act, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “ Losses ”), joint or several, to which such Selling Holder or underwriter or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, its directors and officers, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings; provided , however, that the Company will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder, such underwriter or such controlling person in writing specifically for use in the Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such director, officer or controlling person, and shall survive the transfer of such securities by such Selling Holder.

 

(b) By Each Selling Holder . Each Selling Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and officers, and each person, if any, who controls the Company within the meaning of the Securities Act or of the Exchange Act to the same extent as the foregoing indemnity from the Company to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Registration Statement or prospectus supplement relating to the Registrable Securities, or any amendment or supplement thereto; provided , however , that the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification.

 

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(c) Notice . Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 2.06. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.06 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided , however , that, (i) if the indemnifying party has failed to assume the defense and employ counsel or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnified party shall settle any action brought against it with respect to which it is entitled to indemnification hereunder without the consent of the indemnifying party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnifying party.

 

(d) Contribution . If the indemnification provided for in this Section 2.06 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified patty or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however , that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.

 

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(e) Other Indemnification . The provisions of this Section 2.06 shall be in addition to any other rights to indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise.

 

Section 2.06 Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

 

(a) Make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 of the Securities Act, at all times from and after the date hereof;

 

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at all times from and after the date hereof, and

 

(c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration; provided that the Company’s obligations pursuant to this Section 2.07(c) shall be deemed satisfied with respect to any document that is publicly available, free of charge, on the Commission’s EDGAR website.

 

Section 2.07 Transfer or Assignment of Registration Rights . The rights to cause the Company to register Registrable Securities granted to the Investors by the Company under this Article II may be transferred or assigned by any Investor to one or more transferee(s) or assignee(s) of at least one thousand (1,000) shares of Registrable Securities or to an Affiliate of such Investor. The Company shall be given written notice prior to any said transfer or assignment, stating the name and address of each such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned. Each such transferee shall assume in writing responsibility for its portion of the obligations of such Investor under this Agreement be executing a counterpart signature page hereto pursuant to which such transferee agrees to be bound by all terms and conditions contained in this Agreement.

 

Section 2.08 Limitation on Subsequent Registration Rights . From and after the date hereof, the Company shall not (except in connection with the issuance of securities as consideration to the sellers of any Company or business acquired by the Company), without the prior written consent of the a Majority-in-Interest of the Investors (or their respective permitted assignees), enter into any agreement with any current or future holder of any securities of the Company that alters, restricts, or otherwise limits the registration rights granted hereunder or that would allow such current or future holder to require the Company to include securities in any registration statement filed by the Company on a basis that is superior (as opposed to pari passu ) in any way to the registration rights granted to the Investors hereunder; provided, that the Company may register the securities that are subject to a registration statement (registration number 33-195745) or any registration of securities with respect to a merger of Cardax Pharmaceuticals, Inc. with and into the Company or any subsidiary of the Company.

 

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ARTICLE III
MISCELLANEOUS

 

Section 3.01 Termination . This Agreement shall terminate upon the earlier of: (a) with respect to a particular Holder, from and after the date that is six months after the Consummation Date, assuming that the Company has complied with its obligations under Section 2.07, and all of the Registrable Securities may be sold assuming that the Investors are the only Holders and no such Holder is an Affiliate (as defined by the Securities Act) of the Company, (b) a Change of Control, but only as long as all Registrable Securities (or any securities for which such Registrable Securities are exchanged in such transaction) may be sold by the Holder or Holders thereof without restriction pursuant to Rule 144 or Rule 145 immediately following the closing of such Change of Control or the Registrable Securities are exchanged for securities that are registered under the Securities Act or for cash consideration, (c) five (5) years following the date first set forth above; or (d) if a registration statement covering the Registrable Securities has been filed and declared effective, then three (3) years following the date first set forth above or the date that warrants purchased under the Subscription Agreement that represent 80% of the Registrable Shares underlying such warrants have been exercised.

 

Section 3.02 Communications . All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, courier service or personal delivery:

 

(a) if to an Investors, to the address set forth under such Investor’s signature block in accordance with the provisions of this Section 3.02,

 

(b) if to a transferee of the Investor, to such transferee at the address provided pursuant to Section 2.08 above, and

 

(c) if to the Company, to the address set forth under the Company’s signature block in accordance with the provisions of this Section 3.02.

 

All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent via Internet electronic mail; and when actually received, if sent by any other means.

 

Section 3.03 Effectiveness . This Agreement shall be effective automatically and without further action on the part of any party hereto on the final closing date of the Offering as conclusively determined by the Company. Any person that purchases securities issues by the Company in any closing related to the Offering may become a party to this Agreement.

 

Section 3.04 Amendments and Waivers . This Agreement may be amended, and any provision of it may be waived, only by a written agreement executed by the Company and a Majority-in-Interest of the Investors; provided , however , that no such consent shall be required to amend this Agreement to add as parties Investors purchasing Company securities in the Offering.

 

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Section 3.05 Successor and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

 

Section 3.06 Assignment of Rights . All or any portion of the rights and obligations of the Investors under this Agreement may be transferred or assigned by the Investors in accordance with Section 2.08 hereof.

 

Section 3.07 Independent Nature of Investors’ Obligations and Rights . The obligations of each Investor under this Agreement are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or the Subscription Agreement. Nothing contained herein, and no action taken by any Investor pursuant hereto shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or a group with respect to such obligations or the transactions contemplated by this Agreement or the Subscription Agreement. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with enforcing its rights and obligations under this Agreement. Each Investor will be entitled to independently protect an enforce its rights, including without limitation the rights arising out of this Agreement and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Agreement for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

 

Section 3.08 Aggregation of Purchased Common Stock . All Company Common Stock held or acquired by persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

 

Section 3.09 Recapitalization, Exchanges, etc. Affecting the Common Stock . The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all securities of the Company or any successor, assign or acquirer of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date of this Agreement.

 

Section 3.10 Specific Performance . Damages in the event of breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such person from pursuing any other rights and remedies at law or in equity which such person may have.

 

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Section 3.11 Counterparts; Facsimile Signatures . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Facsimile or other electronically transmitted signatures, including by email attachment, shall be deemed originals for all purposes of this Agreement.

 

Section 3.12 Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

Section 3.13 Governing Law . The laws of the State of California shall govern this Agreement without regard to principles of conflict of laws.

 

Section 3.14 Severability of Provisions . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

 

Section 3.15 Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Company set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

Section 3.16 No Presumption . If any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Registration Rights Agreement on the date first written above.

 

  CARDAX, INC.
   
  By:  
  Name:  
  Title:  

 

  With a copy to:
     
    Herrick, Feinstein LLP
    2 Park Ave
    New York, NY 10016
    Facsimile: (212) 592-1500
    Attention: Richard Morris
     
  and  
     
    Cardax, Inc.
    2800 Woodlawn Drive
    Honolulu, HI 96822
    Facsimile: (808) 237-5901
    Attention: David G. Watumull, CEO

 

[Signatures of the Investors on the Following Pages]

 

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Signature page of an Investor to the Registration Rights Agreement

 

If the Investor is an individual:   If the Investor is not an individual:
     
      Name of Investor
Print Name:  
   
  By:
  Name:
  Title:
Address for notices:    
     
     
     
     
     
     
   
Facsimile:    
   
Email:    

 

 
 

 

Schedule I

Schedule of Investors

 

Investor Name, Address and Other
Information

(retained by the Company)

 
 
 
 
 
 

 

 
 

 

SUBSCRIPTION AGREEMENT

 

BY AND BETWEEN

 

CARDAX, INC.

 

AND

 

THE PURCHASERS PARTY HERETO

 

DATED AS OF __________ ___, 2015

 

 
 

 

TABLE OF CONTENTS

 

    Page
     
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II PURCHASE AND SALE 3
2.1 Closing 3
2.2 Deliveries 4
2.3 Closing Conditions 4
ARTICLE III REPRESENTATIONS AND WARRANTIES 5
3.1 Representations and Warranties of the Company 5
3.2 Representations and Warranties of the Purchasers 6
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 8
4.1 Transfer Restrictions 8
4.2 Non-Public Information 10
4.3 Equal Treatment of Purchasers 10
4.4 Use of Proceeds 10
4.5 Form D; Blue Sky Filings 10
4.6 Replacement of Certificates 11
4.7 Registration Rights Agreement 11
4.8 Most Favored Nation or Anti-Dilution Right 11
ARTICLE V MISCELLANEOUS 12
5.1 Fees and Expenses 12
5.2 Entire Agreement 12
5.3 Notices 12
5.4 Amendments; Waivers 13
5.5 Headings 13
5.6 Successors and Assigns 13
5.7 Third-Party Beneficiaries 13
5.8 Governing Law; Exclusive Jurisdiction 13
5.9 Attorney Fees 14
5.1 Survival 14
5.11 Counterparts and Execution 14
5.12 Severability 14
5.13 Independent Nature of Purchasers’ Obligations and Rights 15
5.14 Saturdays, Sundays, Holidays, etc 15
5.15 Construction 15
5.16 WAIVER OF JURY TRIAL 15

 

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Schedules:

 

Schedule A   Wire Transfer Instructions and Unit Price Payment Information
     
Schedule B   Supplement of Certain Risk Factors
     
Schedule C   Certain Matters Regarding the Plan of Distribution of the Offering of the Units
     
Exhibits:    
     
Exhibit I   Form of the Class D Warrant
     
Exhibit II   Form of the Class E Warrant
     
Exhibit II   Form of the Registration Rights Agreement

 

ii
 

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (this “ Agreement ”) is dated as of the date set forth on the signature page hereof, by and among Cardax, Inc., a Delaware corporation (the “ Company ”), and each Person that is a Purchaser under the terms of this Agreement. Certain capitalized terms used in this Agreement are defined in Section 1.1 .

 

WHEREAS, the Company is a public company with its shares of common stock, par value $0.001 per share (“ Common Stock ”) traded on the OTCQB under the symbol “CDXI”.

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder, the Company desires to sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase Units (each, a “ Unit ”), where each Unit has: (i) one share of Common Stock; (ii) two Class D Warrants (each, a “ Class D Warrant ”), each Class D Warrant entitling the Purchaser of a Unit to purchase one share of Common Stock at a price per share of $0.10, subject to certain adjustment as more fully described in this Agreement in the form attached to this Agreement as Exhibit I ; and (iii) one Class E Warrant entitling the Purchaser of a Unit to purchase three quarters (0.75) of one share of Common Stock at a price per share of $0.1667, subject to certain adjustment as more fully described in this Agreement in the form attached to this Agreement as Exhibit II (each, a “ Class E Warrant ” and, together with a Class D Warrant, each, a “ Warrant ” and, collectively, the “ Warrants ”).

 

WHEREAS, this Agreement and the offering of the Units by the Company are part of an offering of an aggregate amount that is up to $3,500,000 (or such greater amount as may be determined by the Company) and that in such offering there will be purchases and sales of units that are similar to the Units purchased under this Agreement by the Purchaser on similar terms and conditions; provided, however, the Company reserves the right to suspend or terminate any additional purchases and sales of such similar units and to change the terms and conditions with respect to the offering of any such units or other securities by or on behalf of the Company;

 

WHEREAS, the purchase price for each Unit (“ Unit Price ”) shall be $0.30.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the Company and the Purchasers, intending to be legally bound hereby, hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1 Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

1
 

 

Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Closing ” means the closing of the purchase and sale of the Units pursuant to Section 2.1.

 

Closing Date ” means the Trading Day on which the Purchasers purchase the Units under the terms of this Agreement, including payment to the Company of the Purchase Price payable by each of the Purchasers.

 

Commission ” means the United States Securities and Exchange Commission.

 

Common Stock ” shall have the meaning ascribed to such term in the recitals to this Agreement.

 

Company Counsel ” means Herrick, Feinstein LLP, 2 Park Avenue, New York, NY 10016.

 

Company Sub ” means Cardax Pharma, Inc., a Delaware corporation and a wholly owned subsidiary of the Company.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Execution Date Information ” shall have the meaning ascribed to such term in Section 3.2(f) .

 

Offering ” means this offering of the Units.

 

Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

Purchaser ” means a Person that is a party to this Agreement as a purchaser, or his, her or its successors and assigns.

 

Securities ” means all Units, Common Stock, Warrants, and shares of the Company’s Common Stock, into which the Warrants are exercisable.

 

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Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Shares ” means newly issued shares of the Company’s Common Stock, issued or issuable to each Purchaser pursuant to the exercise of the Warrant, which shares, when issued in accordance with the terms of such securities, shall be duly authorized, validly issued, fully paid and non-assessable.

 

Short Sale ” means any securities transaction in which a Person sells a number of shares or other units of a security that are not owned by such Person at the time of such sale.

 

Subscription Amount ” means, as to each Purchaser, the aggregate amount to be paid for Units purchased hereunder which shall equal the number of Units to be purchased by such Purchaser multiplied by the Unit Price in United States dollars, which amount shall be paid by the Purchaser making a payment to the Company as provided in this Agreement.

 

Subsidiary ” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

Trading Day ” means a day on which the principal Trading Market is open for trading.

 

Trading Market ” means any of the following markets or exchanges on which the Company’s Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or the OTC Bulletin Board (or any successors to any of the foregoing).

 

Transaction Documents ” means this Agreement and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

ARTICLE II
PURCHASE AND SALE

 

2.1 Closing.

 

(a) The Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.

 

(b) On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company shall issue and sell to each of the Purchasers, and each of the Purchasers, severally and not jointly, shall purchase, that number of Units that is set forth on the signature page of such Purchaser to the extent accepted by the Company.

 

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(c) Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of the Company or such other location as the Company may designate to the Purchaser.

 

2.2 Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser accepted by the Company, this Agreement duly executed by the Company.

 

(b) On the date that this Agreement is executed and delivered by a Purchaser to the Company and the Company accepts the subscription of such Purchaser (with such acceptance to be evidenced by the Company’s counter signature of the Purchaser’s signature page herein below), such Purchaser shall deliver or cause to be delivered to the Company:

 

(i) a check or wire transfer of the Subscription Amount of such Purchaser in accordance with the payment or wire transfer instructions set forth on Schedule A to this Agreement; and

 

(ii) a counterpart of this Agreement duly executed by such Purchaser.

 

(c) On the Closing Date, the Company and each of the Purchasers shall close the purchase and sale of the Units and the Company shall deliver or cause to be delivered to each Purchaser evidence of the issuance and delivery of the shares of Common Stock and Warrants to be purchased by each Purchaser by appropriate instructions to the stock transfer agent of the Company.

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless such representation is made as of a specific date therein in which case such representation and warranty shall be accurate as of such date); and

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed.

 

(b) The respective obligations of each of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) The representations and warranties made by the Company in this Agreement shall be true and correct in all material respects (provided that any such representations and warranties that are by their terms qualified by materiality shall (as so qualified) be true in all respects) as of the date hereof and at and as of the time of the Closing as though such representations and warranties were made at and as of such time (except in any case that representations and warranties that expressly speak as of a specified date or time need only be true and correct (subject to the foregoing parenthetical as to materiality) as of such specified date or time);

 

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(ii) The Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the Closing;

 

(iii) Without limiting item (ii) above, the Company shall have delivered to the Purchasers each of the items required to be delivered by it pursuant to Section 2.2(c);

 

(iv) No preliminary or permanent injunction or other order that declares this Agreement invalid or unenforceable in any respect or that prevents the consummation of the transactions contemplated hereby shall be in effect; and

 

(v) From the date hereof to the Closing Date, the Commission shall not have issued a stop trading order with respect to the Company’s Common Stock.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company . The Company hereby makes the following representations and warranties to each Purchaser as of the date hereof and as of the Closing Date (unless such representation is made as of a specific date therein in which case such representation and warranty shall be accurate as of such date):

 

(a) Organization and Qualification . Each of the Company and the Company Sub is an entity duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.

 

(b) Capitalization . The capitalization of the Company is properly reflected by the SEC Filings.

 

(c) Private Placement . Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Units to the Purchasers as contemplated hereby. The issuance and sale of the Units hereunder does not contravene the rules and regulations of the Trading Market applicable to the Company.

 

(d) Disclosure .

 

(i) Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information within the meaning of the Exchange Act.

 

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(ii) The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2.

 

(e) SEC Filings . The documents (“ SEC Filings ”) that have been filed by the Company with the Securities and Exchange Commission do not (as amended and supplemented) contain a material misstatement of fact or does not omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, as interpreted by the Exchange Act.

 

3.2 Representations and Warranties of the Purchasers . Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants, severally and not jointly, as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a) Organization; Authority.

 

(i) Such Purchaser is either an individual or an entity that is duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.

 

(ii) The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.

 

(iii) Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (A) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (B) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (C) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Own Account . Such Purchaser understands that each of the shares of Common Stock and the Warrants and the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Units as principal for its own account and not with a view to or for distributing or reselling such Units (or the shares of Common Stock or Warrants or Shares) or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other person to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Units hereunder in the ordinary course of its business or investment strategy.

 

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(c) Purchaser Status . At the time such Purchaser was offered the Units, it was, and as of the date hereof it is an “accredited investor” as defined in Rule 501 under the Securities Act; or (ii) a Non U.S. Person within the meaning of Regulation S under the Securities Act.

 

(d) Experience of Such Purchaser . Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the shares of Common Stock or Warrants (and the Shares), and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the shares of Common Stock, the Warrants and Shares and, at the present time, is able to afford a complete loss of such investment.

 

(e) Certain Transactions and Confidentiality . Other than consummating the transactions contemplated hereunder, such Purchaser shall not directly or indirectly, nor shall any Person acting on behalf of or pursuant to any understanding with such Purchaser, execute any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of date of this Agreement and the Closing Date. Notwithstanding the foregoing, the limitation set forth in this Section 3.2(e) shall not be applicable to any investments of a Purchaser that are made or disposed of without the discretion of such Purchaser. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction and shall use the information provided in this Agreement or any investment presentation provided to such Purchaser only in consideration of making an investment in the Units.

 

(f) Disclosure .

 

(i) Each Purchaser acknowledges and agrees that the information provided and available to the Purchaser at the time that this Agreement is executed and delivered (including, but not limited to the SEC Filings) (the “ Execution Date Information ”) may not include all of the material information that would be provided to a purchaser of securities in an offering of securities that is registered under the Securities Act and included in a prospectus that is required to be delivered in accordance with Section 5 of the Securities Act.

 

(ii) Each Purchaser agrees that it has had an unrestricted opportunity to: (a) obtain additional information concerning the offering of the Units, including without limitation, information concerning the Company and any other matters relating directly or indirectly to the purchase of the Units by such Purchaser; and (b) ask questions of, and receive answers from, the executives of the Company concerning the terms and conditions of this offering of Units and to obtain such additional information as may have been necessary to verify the accuracy of the information contained in the investor presentation provided to the Purchaser or any other information that may have been provided to the Purchaser.

 

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(iii) Each Purchaser acknowledges and agrees that no Person is authorized by the Company and no Person will be authorized by the Company or any of its Affiliates to provide any information regarding the solicitation of investment interest or the offering of the Units other than the information that is provided in the investor presentation provided by the Company and such other information or documentation that is provided expressly by the Company to the Purchasers for such purposes.

 

(iv) Each Purchaser and/or Purchaser’s advisor acknowledges that it has received and reviewed the SEC Filings, including the summary of risks contained in the “Risk Factors” sections in such documents and Schedule B and certain matters regarding the plan of distribution of the offering of the Units set forth in Schedule C and had access to or been furnished with sufficient facts and information to evaluate an investment in the Company and a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Company and all such questions have been answered to the full satisfaction of the Purchaser.

 

(g) Due diligence . Each Purchaser acknowledges and agrees that it has: (A) carefully reviewed the investor presentation; (B) performed its own due diligence investigation and has been furnished with other materials that it considers relevant to the purchase of the Units; and (C) is not relying upon, and has not relied upon, any statement, representation or warranty made by any person, except for the statements, representations and warranties contained in this Agreement.

 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The shares of Common Stock, the Warrants and Shares may only be disposed of in compliance with state and federal securities laws. After the Final Closing Date, the Company agrees to take appropriate action to promptly prepare and file a registration statement with the SEC to register the Shares under the Securities Act, it being acknowledged that there is no assurance that all of the Shares will be included in a registration statement that is declared effective under the Securities Act. In connection with any transfer of any of shares of Common Stock or Warrants or Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred shares of Common Stock or Warrants or Shares under the Securities Act.

 

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(b) Legend on Share Certificates . The Purchasers agree to the imprinting, so long as is required by this Section 4.1 , of a legend on any of the certificates representing the shares of Common Stock or Warrants or Shares in the following form:

 

THIS SECURITY HAS NOT 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

(c) The legends set forth in Section 4.1(b) shall, to the fullest extent permitted, be removed , (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such shares of Common Stock or Warrants or Shares pursuant to Rule 144, (iii) if such shares of Common Stock or Warrants or Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such shares of Common Stock or Warrants or Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).

 

(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees that such Purchaser will sell any shares of Common Stock or Warrants or Shares only pursuant to either: (i) the registration requirements of the Securities Act, including any applicable prospectus delivery requirements; or (ii) an exemption therefrom, and that if shares of Common Stock or Warrants or Shares are sold pursuant to any such effective registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing shares of Common Stock or Warrants or Shares as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

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4.2 Non-Public Information . Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser, agent or counsel shall have entered into a written agreement with the Company regarding the confidentiality and use of such information or such Person is otherwise obligated to maintain the confidentiality of such information and not use such information in violation of applicable law. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in evaluating and providing any information it receives in connection with its consideration of purchasing any of the Units.

 

4.3 Equal Treatment of Purchasers . No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the Purchasers. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Shares, the shares of the Company’s Common Stock issuable upon the exercise of the Warrants or otherwise. The provisions of this Agreement do not, and in no manner shall be interpreted to, restrict the right, ability and authority of the Company to sell any securities, including securities identical to, exchangeable for, convertible into, or similar to, any of the securities offered and sold under this Agreement.

 

4.4 Use of Proceeds . The Company will use the proceeds of this Offering, net of expenses described in Schedule C , for its operations. The Company has adopted a budget that includes a 50% deferral of cash compensation payable to its Executive Chairman, Chief Executive Officer, and Chief Science Officer; a 25% deferral of cash compensation payable to its Vice President of Operations and Vice President of Research; and a 10% deferral of cash compensation payable to its other employees. The Company will make appropriate additional cash compensation deferrals if substantially less funds are raised by the Company in this Offering and any other offering of securities. The Company will not decrease such deferrals or increase the cash compensation payable to such person (other than for cost of living increases) until at least one of the following occurs: (1) the Company raises more than $5 million in the aggregate from this Offering and any other offerings; (2) the Company enters into a strategic partnership where the cash fees to be paid within eighteen months of the final closing of this Offering, when combined with the proceeds from the Offering and any other offerings, exceed $5 million; or (3) the Company has positive cash flows for any fiscal quarter.

 

4.5 Form D; Blue Sky Filings . The Company shall timely file a Form D with respect to the Units as required under Regulation D, provide a copy thereof, promptly upon request of any Purchaser, and take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Units for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and provide evidence of such actions promptly upon request of any Purchaser.

 

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4.6 Replacement of Certificates . If any certificate or instrument evidencing any shares of Common Stock or Warrants or Shares is mutilated, lost, stolen or destroyed, the Company shall cause the Company to, and the Company shall, issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement shares of Common Stock or Warrants or Shares and may be required to provide an indemnity in favor of the Company.

 

4.7 Registration Rights Agreement . The Company shall execute and deliver and shall duly perform its obligations under that certain Registration Rights Agreement (the “Registration Rights Agreement”) in the form attached to this Agreement as Exhibit III .

 

4.8 Most Favored Nation or Anti-Dilution Right .

 

(a) The Company agrees to provide to the Purchaser the right (“ Anti-Dilution Right ”) to receive additional shares of Common Stock and to exchange or amend its Class D Warrants for warrants that are issued by the Company to investors in an offering (a “ Qualified Financing ”) that (x) has aggregate gross proceeds of $250,000 or more that (y) is received by the Company on or prior to March 31, 2016 so that the Purchaser shall, immediately after receiving such additional shares of Common Stock and such exchange or amendment, participate in the Qualified Financing on substantially similar terms with respect to the average price per share of Common Stock (including the price for shares of Common Stock issuable upon the exercise of the Class D Warrants) that an investor pays assuming the full conversion or exercise of warrants or similar rights that are issued in the Qualified Financing. In connection with this Anti-Dilution Right, the consideration for any such additional shares of Common Stock or exchange or amendment of the Class D Warrant shall be the Subscription Price paid by the Purchaser (and, if applicable, the exchange of the Class D Warrant) and the Purchaser shall keep its Class E Warrant without any change, amendment or supplement.

 

(b) Prior to the final closing of a Qualified Financing, the Company shall provide the Purchaser with a notice (the “ Qualified Financing Notice ”) which shall include a copy of the offering documentation provided by the Company to solicit investment in the Qualified Financing and describe in reasonable detail the procedures required for the Purchaser to exercise its Anti-Dilution Right. The Purchaser may exercise its Anti-Dilution Right by providing a notice to such effect to the offices of the Company on or prior to the date that is thirty (30) days after the date that the Purchaser received the Qualified Financing Notice. If the Purchaser does not duly and timely exercise its Anti-Dilution Right and the Qualified Financing is consummated, then the Purchaser shall be deemed to have waived its Anti-Dilution Right. For avoidance of doubt, the Anti-Dilution Right shall terminate on the date that is the earlier of the date that the Purchaser does not duly and timely exercise its Anti-Dilution Right as described in this Section 4.8 or March 31, 2016.

 

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ARTICLE V
MISCELLANEOUS

 

5.1 Fees and Expenses .

 

(a) Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

 

(b) Certain disclosures regarding the Company are summarized in Schedule C , attached hereto.

 

5.2 Entire Agreement . The Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3 Notices .

 

(a) All notices (including any consent required of any party to this Agreement) given or permitted to be provided pursuant to this Agreement shall be in writing and shall be made by hand delivery, by facsimile, or overnight air courier guaranteeing next business day delivery addressed as follows:

 

  (i) If such notice is to the Company, then to the Company at
     
    2800 Woodlawn Drive
    Suite 129
    Honolulu, Hawaii 96822
    Fax: +1 808 237 5901
    Attention: David G. Watumull
       President & Chief Executive Officer

 

  With a copy of each notice to (which copy shall not constitute notice):
  Herrick, Feinstein LLP
  2 Park Avenue
  New York, NY 10016
  Attn: Richard M. Morris, Esq.
  Fax: (212) 545-3371

 

(ii) If such notice is to a Purchaser, then to the address of the Purchaser set forth on the signature page of such Purchaser to this Agreement.

 

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(b) Change of Address . Any Purchaser may change the address that notices should be delivered to it by delivering a notice with the corrected information to the Company. The Company may change the address that notices should be delivered to it by delivering a notice with the corrected information to each Purchaser then a party to this Agreement. In each case, such corrected information to be effective only upon delivery of such notice.

 

(c) Deemed Delivery . Except as otherwise expressly provided in this Agreement, each such notice shall be deemed given, delivered and received at the time delivered by hand, if personally delivered; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next business day delivery.

 

5.4 Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except by means of a written agreement signed, in the case of an amendment, by the Company and each of the Purchasers subject to such waiver, modification, supplement or amendment. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.5 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger); except that all rights and obligations of the Company under this Agreement shall be assigned to, and assumed by, the Company effective on Closing Date, provided that no such assignment shall relieve the Company of any of its obligations hereunder. Any Purchaser may assign any or all of its rights under this Agreement to any Person; provided that such assignment is approved by the Company, which approval shall not be unreasonably withheld, delayed or conditioned and such transferee agrees in writing to be bound by the provisions of the Transaction Documents that apply to the “Purchasers” and such transferee is able and makes the representations and warranties to the Company provided under Section 3.2.

 

5.7 Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.8 Governing Law; Exclusive Jurisdiction.

 

(a) All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.

 

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(b) Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan.

 

(c) Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

5.9 Attorney Fees . If one or more parties shall commence an action, suit or proceeding to enforce any provision of the Transaction Documents, then the prevailing party or parties in such action, suit or proceeding shall be reimbursed by the other party or parties to such action, suit or proceeding for the reasonable attorneys’ fees and other costs and expenses incurred by the prevailing party or parties with the investigation, preparation and prosecution of such action, suit or proceeding.

 

5.10 Survival . The representations and warranties contained herein shall survive the Closing and the delivery of the Units for the applicable statute of limitations.

 

5.11 Counterparts and Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.12 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

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5.13 Independent Nature of Purchasers’ Obligations and Rights . The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented, or has had the opportunity to be represented, by its own separate legal counsel in its review and negotiation of the Transaction Documents.

 

5.14 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.

 

5.15 Construction . The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto.

 

5.16 WAIVER OF JURY TRIAL.

 

EACH PARTY TO THIS AGREEMENT HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH PARTY TO THIS AGREEMENT AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY TO THIS AGREEMENT IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

 

(Remainder of page intentionally left blank.
Next page is signature page.)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Cardax, inc.

 

By:    
Name:  
Title:  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOR PURCHASERS FOLLOWS.]

 

 
 

 

[PURCHASER SIGNATURE PAGES TO SUBSCRIPTION AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Subscription Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser:  

 

Signature of Authorized Signatory of Purchaser :  

 

Name of Authorized Signatory:  

 

Title of Authorized Signatory:  

 

Email Address of Authorized Signatory:  

 

Facsimile Number of Authorized Signatory:  

 

Address for Notice to Purchaser:  
   
   
   
   

 

Address for Delivery of Units to Purchaser (if not same as address for notice):

 

Subscription Amount: $_________________(U.S.)

 

Number of Units: _________________

 

Social Security or EIN Number: _______________________

 

Bank or Brokerage Account Information:

 

[Each Purchaser shall also deliver the applicable tax forms such as the Form W-9 and a certificate that they are an accredited investor, unless waived by the Company]

 

Accepted by the Company for ___________ Units:

 

CARDAX, INC. Date: _______________

 

By:    
Name:  
Title :  

 

 
 

 

EXHIBIT I

 

Form of the Class D Warrant

(Attached Hereto)

 

 
 

 

EXHIBIT II

 

Form of the Class E Warrant

(Attached Hereto)

 

 
 

 

Exhibit III

 

Form of the Registration Rights Agreement

(Attached Hereto)

 

 
 

 

SCHEDULE A

 

Wire Transfer Instructions

 

Checks shall be made payable to the order of

 

“Cardax Pharma, Inc.”

 

Wire Transfers shall be made in accordance with the following:

 

  Bank Name: Bank of Hawaii
  SWIFT Code: BOHIUS77
  Routing #: 121301028
  Account #: 0090-287176
  Account Name: Cardax Pharma, Inc.

 

In addition, the following information shall be provided with each payment:

 

Name of Purchaser:  

 

Address of Purchaser:  
   
   
   
   
   

 

 
 

 

Schedule B

Certain Additional Risk Factors

 

In addition to the risk factors that are summarized in the Company’s SEC Filings, you should

 

An investment in our Common Stock, and Warrants involves a high degree of risk. You should carefully consider the risks summarized in the Company’s SEC Filings, together with all of the other information provided to you in this Offering, before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our shares of Common Stock could decline, and you may lose all or part of your investment. You should read the section entitled “Forward-Looking Statements” included in our SEC Filings for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements.

 

The terms of the Offering, the price for the shares of Common Stock and Warrants, including the exercise price, were not independently valued and may not be indicative of the future price of our Common Stock.

 

Our board of directors determined the terms and conditions of the Offering, including the price per share for each Unit of Common Stock and the Warrant. The price per Unit and the exercise price were not necessarily determined to be equal to the market price of the Company’s Common Stock on the OTCQB or the fair value of the Company. If you purchase Units in the Offering, you may not be able to sell any of the securities at or above the subscription price. The trading price of the Company’s Common Stock will be determined by the marketplace, and will be influenced by many factors outside of the Company’s control, including consumer acceptance of the Company’s astaxanthin consumer health products, prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of pharmaceutical and nutraceutical companies, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded. Accordingly, we cannot assure you that if you purchase Units in the Offering you will later be able to sell those Units at or above the subscription price.

 

The Securities are “Restricted Securities” under the Securities Act and there is no assurance that they will be registered

 

The Units sold in this Offering and the Common Stock issuable upon exercise of the Warrants will be restricted securities under United States federal and applicable state securities laws. The Common Stock will be restricted securities unless and until the shares of Common Stock are registered as contemplated by the terms of the Registration Rights Agreement. Restricted securities may not be transferred, sold or otherwise disposed of in the United States, except as permitted under United States federal and state securities laws, pursuant to registration or an exemption therefrom. You should be prepared to hold the Securities sold and the Common Stock issuable upon the exercise of the Warrants for an indefinite period.

 

None of the Shares of Common Stock issued in the Offering or upon the exercise of the Warrants may be sold unless, at the time of such intended sale, there is a current registration statement covering the resale of the securities or there exists an exemption from registration under the Securities Act, and such securities have been registered, qualified, or deemed to be exempt under applicable securities or “blue sky” laws in the state of residence of the seller or in the state where sales are being affected.

 

Schedule B | Page 1
 

 

Investors have been provided with certain registration rights with regards to the underlying shares, however, no assurance can be given when, if ever, such proposed registration of the underlying shares will be declared effective by the SEC or if such proposed registration statement is declared effective that all of the shares of Common Stock sold in the Offering and underlying the Warrants will be included in such registration statement and be permitted to be offered on a delayed or continuous basis. If the SEC does not declare effective a registration statement covering the resale of the Shares, investors will be precluded from disposing of such Shares unless such Shares may become eligible to be disposed of under the exemptions provided by Rule 144 under the Securities Act without restriction. If the Shares are not registered for resale under the Securities Act, or exempt therefrom, and registered or qualified under applicable securities or “blue sky” laws, or deemed exempt therefrom, the value of the Securities will be greatly reduced.

 

Investors will be relying on management’s judgment regarding the use of proceeds from this Offering and we may apply the proceeds to uses that may not increase the value of your investment or improve our operating results.

 

We expect to use the proceeds of this Offering to further develop our technology and infrastructure, hire additional personnel, including management-level employees, begin focused and targeted marketing efforts, and for general working capital purposes. Our management will have broad discretion with respect to the use of the net proceeds from this Offering and investors will be relying on the judgment of our management regarding the application of these proceeds. We cannot assure you that the net proceeds will be used for purposes that ultimately increase our results of operations, business prospects or the value of your investment.

 

An investment in the Company is speculative and there can be no assurance of any return on any such investment.

 

An investment in the company is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

 

Insufficient Capital

 

While there is a condition to closing that the Company must have subscriptions of at least $25,000 before it can close on any subscriptions for this Offering (including amounts funded in any prior closings), there can be no assurance or guarantee that the Company will raise sufficient capital, through this Offering, to meet the Company’s business objectives. The audited financial statements include a going concern qualification and the Company has significant liquidity issues. The Company has adopted an austerity budget and would need $3 million in this Offering or other capital transactions to fund its operations as contemplated in the Use of Proceeds for one year. There can be no assurance that other obligations that are necessary for the Company will not be incurred or that the budgeted expenditures will not be subject to any material increase.

 

Because this Offering provides for separate closings, there cannot be any assurance that the Company would be able to raise sufficient capital to fund its annual budget.

 

*****

 

Schedule B | Page 2
 

 

Schedule C

Plan of Distribution

 

PLAN OF PLACEMENT

 

The Company seeks to raise up to $3,500,000 through the offering of units (“ Units ”) consisting of: (i) one share of Common Stock; (ii) two Class D Warrants, each to purchase one share of Common Stock at a price per share of $0.10; and (iii) one Class E Warrant to purchase three quarters (0.75) of one share of Common Stock at a price per share of $0.1667. The price per Unit (“ Unit Price ”) is $0.30.

 

The Offering of the units will be by the Company and through one or more placement agents or registered broker-dealers. Any such person will be paid certain fees, costs and expenses required under the applicable placement agent or similar agreement from the gross proceeds of the Offering.

 

The Company may retain Vertical Trading Group, LLC d/b/a The Vertical Group (“Vertical”), a registered broker dealer, as a non-exclusive placement agent in the Offering. Vertical would receive:

 

  a cash fee that is equal to 8% of the gross proceeds invested by purchasers of the units that were introduced by Vertical to us and who were not either (x) current or prior investors in the Company or Cardax Pharmaceuticals, Inc. or (y) previously introduced to the Company by any other placement agent or broker-dealer that has an agreement with the Company (the “Introduced Investors”); and
     
  warrants for the purchase of 8% of the aggregate number of shares of common stock sold to Introduced Investors, including shares of common stock that may be purchased by Introduced Investors by the exercising the warrants included in the units (“Agent Warrants”). The Agent Warrants grant Vertical the right to purchase our shares of common stock at a price per share equal to $0.167 and may be exercised on a “cashless exercise” basis and the same anti-dilution protections that are provided in the warrants granted with a unit.

 

Vertical may compensate participating broker/dealers, including its affiliates, in its discretion, from fees paid to it.

 

There can be no assurance that any or all of the Units being offered will be sold. In the event this Offering is cancelled or a subscription is rejected, all funds received by the Company shall be returned to each Investor without interest or penalty. The Shares are being offered solely to Accredited Investors (as such term is defined in Rule 501 promulgated under the Act) and this Offering is being conducted in a manner intended to comply with Rule 506(b) of Regulation D promulgated by the Securities and Exchange Commission; provided that the Company may offer its securities under any other exemption from the registration requirements of the Act, including Regulation S.

 

The Company’s officers, directors and employees, as well as officers, directors and employees of Vertical or any other placement agent, may purchase Units.

 

Schedule C | Page 1
 

 

The Company reserves the right to accept or reject any subscription in its sole discretion for any reason whatsoever and to withdraw this Offering at any time prior to acceptance of the subscriptions received. Subscription funds paid by a Subscriber whose subscription is rejected will be returned promptly without interest or deduction. Closings will be held from time to time as determined by the Company.

 

The minimum subscription for this offering is $25,000, though the Company may accept subscriptions in smaller amounts, in its sole discretion.

 

The Company will pay all legal and other expenses and costs related to this Offering from the gross proceeds of this Offering. The Company will also pay cash and other compensation to any broker / dealer that is entitled to such compensation under any existing placement agent agreement, or any similar agreement, with respect to persons that were introduced by such broker / dealer to the Company, to the extent required under such agreements. Such agreements are included as exhibits in the SEC Filings of the Company and provide, generally, for cash compensation of 10% and issuance of warrants equal to 10% to 15% of the shares that are issued.

 

*****

 

Schedule C | Page 2
 

 

WARRANT NUMBER
D _______________

 

CARDAX, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

THIS CERTIFIES THAT, for value received, ________________________________ (together with its successors and assigns, the “ Holder ”), commencing _____________ (the “ Date of Issue ”) is entitled to purchase, subject to the conditions set forth below, at any time and from time to time, in whole or in part, during the Exercise Period (as defined in Section 1.3 ), that number of fully paid and non-assessable shares (the “ Shares ”) of common stock, par value $0.001 per share (“ Common Stock ”), of Cardax, Inc., a Delaware corporation (the “ Company ”), that is not more than the Warrant Share Number (as defined in Section 1.1 ), subject to the further provisions of this warrant to purchase newly issued shares of Common Stock (the “ Warrant ”), at the Warrant Exercise Price (as defined in Section 1.2 ), subject to the further provisions of this Warrant.

 

1. EXERCISE OF WARRANT

 

The terms and conditions upon which this Warrant may be exercised, and the shares of Common Stock covered hereby which may be purchased hereunder, are as follows:

 

1.1. Warrant.

 

(a) The Company hereby issues to the Holder this Warrant.

 

 
 

 

(b) The number of Shares that the Holder is entitled to purchase under the terms and conditions of this Warrant (the “ Warrant Share Number ”) is equal to one (1) Share for each Warrant.

 

(c) For the purposes of this Agreement, the following terms shall have the respective meanings ascribed thereto in this Section 1.1(c) :

 

(i) “ Affiliate ” shall have the meaning ascribed to such term under the Securities Act and the regulations promulgated thereunder.

 

(ii) “ Business Day ” shall mean any date that the banks and the securities markets are in New York, New York open for business for the conduct of business in the regular course on such date.

 

(iii) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

(iv) “ Person ” shall mean any individual, trust or entity or governmental authority or agency.

 

1.2. The Warrant Exercise Price . The exercise price for the Warrant (the “ Warrant Exercise Price ”) shall be equal, per share, to $0.10, subject to adjustment as provided in Section 4 :

 

1.3. Method of Exercise .

 

(a) The Holder of this Warrant may exercise, in whole or in part, the purchase rights evidenced by this Warrant during the period commencing on the Date of Issue of this Warrant and ending on March 31, 2020, unless extended by the Company in its sole discretion (the “ Exercise Period ”). Such exercise shall be effected by:

 

(i) the surrender of the Warrant, together with a duly executed copy of the form of subscription attached hereto (a “ Notice of Exercise ”), to the Secretary of the Company at its principal offices;

 

(ii) the payment to the Company, by certified check or bank draft payable to its order, of an amount equal to the aggregate Warrant Exercise Price for the number of Shares for which the purchase rights hereunder are being exercised; and

 

(iii) the delivery to the Company, if necessary, to assure compliance with federal and state securities laws, of an instrument executed by the Holder certifying that the Shares are being acquired for the sole account of the Holder and not with a view to any resale or distribution.

 

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(b) Conditions to Exercise of the Warrant .

 

(i) Notwithstanding the provisions of any provision of this Warrant, including Section 1.3 , the exercise of this Warrant is contingent upon the Company’s satisfaction that the issuance of the Shares for which this Warrant is being exercised is exempt from the requirements of the Securities Act and all applicable state securities laws or the Shares are duly registered under the Securities Act. The Holder of this Warrant agrees to execute any and all documents deemed necessary by the Company to effect the exercise of this Warrant.

 

(ii) Notwithstanding anything to the contrary contained herein, the number of Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (the “ Beneficial Ownership ”, does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise) (the “ Maximum Percentage ”). For the avoidance of doubt, except as otherwise provided herein in connection with a transaction described in Section 4.3 (a “ Fundamental Transaction ”), this Warrant may not be exercised in whole or in part if the Holder’s Beneficial Ownership (as calculated herein) exceeds the Maximum Percentage prior to such exercise. For such purposes, “ Beneficial Ownership ” shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction of this Warrant or under any other provision of Section 4 . This restriction may not be waived except by the Holder providing a notice to the Company as provided herein. For any reason at any time, upon the written or oral request of the Holder, the Company shall promptly confirm in writing (which may be by electronic mail) to the Holder the number of shares of Common Stock then outstanding. To the extent that the limitation contained in this Section 1.3(b)(ii) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination other than its obligation in this Section 1.3(b)(ii) above to, upon the Holder’s request, confirm in writing to the Holder the number of shares of Common Stock then outstanding. Notwithstanding any provision of this Section 1.3(b)(ii) to the contrary, the limitations on the exercise of this Warrant under this Section 1.3(b)(ii) shall not be applicable from and after the date that is 61 days after the date that the Holder provides written notice to the Company that the Holder elects to have Beneficial Ownership of the Company’s Common Stock in excess of the Maximum Percentage, in which case such Holder shall have the right to exercise this Warrant without the limitations of this Section 1.3(b)(ii) ; provided , that the limitations of this Section 1.3(b)(ii) shall again be applicable to any assignee of this Warrant until 61 days after such assignee provides such notice to the Company.

 

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1.4. Issuance of Shares . In the event the purchase rights evidenced by this Warrant are exercised in whole or in part, one or more certificates for the purchased Shares shall be issued as soon as practicable thereafter to the Holder.

 

1.5. Partial Exercise . If this Warrant shall have been exercised only in part, then the Company shall, at the time of delivery of the certificate or certificates for the Shares purchased upon such exercise, also deliver to the Holder a new Warrant evidencing the remaining outstanding unexercised balance of Shares purchasable hereunder.

 

1.6. Cancellation . Notwithstanding anything in this Warrant to the contrary, this Warrant shall be cancelled, and shall not be exercisable, if it is not exercised before the expiration of the Exercise Period.

 

2. TRANSFER RESTRICTIONS

 

2.1. Transfer . This Warrant and the Shares issuable upon exercise hereof are “restricted securities” as such term is defined by the rules and regulations promulgated under the Securities Act. This Warrant and the Shares issuable upon exercise hereof may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of this Warrant or the Shares issuable upon exercise hereof, other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of the transferred Warrant or Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Warrant and the Agreement and shall have the rights and obligations of a Holder under this Warrant and the Agreement.

 

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2.2. Legend .

 

(a) The Holder agrees to the imprinting of a legend on any of the Shares issuable upon exercise hereof in the following form:

 

THIS SECURITY HAS NOT 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

(b) Notwithstanding the foregoing, certificates evidencing this Warrant or the Shares issuable upon exercise hereof shall not contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of this Warrant or such Shares issuable upon exercise hereof pursuant to Rule 144, (iii) if this Warrant or such Shares issuable upon exercise hereof are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to this Warrant or such Shares issuable upon exercise hereof and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).

 

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2.3. Sale . The Holder agrees that the Holder will sell this Warrant or any Shares issuable upon exercise hereof only pursuant to either: (i) the registration requirements of the Securities Act, including any applicable prospectus delivery requirements; or (ii) an exemption therefrom, and that if this Warrant or any Shares issuable upon exercise hereof are sold pursuant to any such effective registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing the Shares or this Warrant is predicated upon the Company’s reliance upon this understanding.

 

3. Fractional Shares

 

Notwithstanding that the number of Shares purchasable upon the exercise of this Warrant may have been adjusted pursuant to the terms hereof, the Company shall nonetheless not be required to issue fractions of Shares upon exercise of this Warrant or to distribute certificates that evidence fractional shares, provided that in lieu of any fraction shares, the Company shall make a cash payment to the Holder in an amount equal to the fair market value (as determined by the Board of Directors of the Company in its reasonable good faith) of such fractional share.

 

4. ANTIDILUTION PROVISIONS

 

4.1. Stock Splits and Combinations . If the Company shall at any time subdivide or combine its outstanding shares of Common Stock, this Warrant shall, after that subdivision or combination, evidence the right to purchase the number of shares of Common Stock that would have been issuable as a result of that change with respect to the shares of Common Stock which were purchasable under this Warrant immediately before that subdivision or combination. If the Company shall at any time subdivide the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that subdivision shall be proportionately decreased, and, if the Company shall at any time combine the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that combination shall be proportionately increased. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.2. Reclassification, Exchange And Substitution . If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the Holder of this Warrant shall, on its exercise, be entitled to purchase for the same aggregate consideration, in lieu of the Common Stock that the Holder would have been entitled to purchase but for such change, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to purchase by the Holder on exercise of this Warrant immediately before that change.

 

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4.3. Reorganizations, Mergers, Consolidations Or Sale Of Assets . If at any time there shall be a capital reorganization of the Company’s Common Stock (other than a combination, reclassification, exchange, or subdivision of shares provided for elsewhere above) or merger or consolidation of the Company with or into another entity, or the sale of the Company’s properties and assets as, or substantially as, an entirety to any other person or entity, then, as a part of such reorganization, merger, consolidation or sale, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified in this Warrant and upon payment of the Warrant Exercise Price then in effect, the number of shares of Common Stock or other securities or property of the Company, or of the successor entity resulting from such merger or consolidation, to which a holder of the Common Stock deliverable upon exercise of this Warrant would have been entitled in such capital reorganization, merger, or consolidation or sale if this Warrant had been exercised immediately before that capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder of this Warrant after the reorganization, merger, consolidation, or sale to the end that the provisions of this Warrant (including adjustment of the Warrant Exercise Price then in effect and number of Shares purchasable upon exercise of this Warrant) shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. The Company shall, within thirty (30) days after making such adjustment, give written notice (by first class mail, postage prepaid) to the Holder of this Warrant at the address of the Holder shown on the Company’s books. That notice shall set forth, in reasonable detail, the event requiring the adjustment and the method by which the adjustment was calculated, and specify the Warrant Exercise Price then in effect after the adjustment and the increased or decreased number of Shares or the other shares or property purchasable upon exercise of this Warrant. When appropriate, that notice may be given in advance and include as part of the notice required under other provisions of this Warrant.

 

5. Reservation of Stock Issuable Upon Exercise.

 

The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the exercise of this Warrant such number of its shares of Common Stock as shall from time to time be sufficient to effect the exercise of this Warrant and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant, in addition to such other remedies as shall be available to the Holder of this Warrant, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but un-issued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

 

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6. RIGHTS PRIOR TO EXERCISE OF WARRANT

 

6.1. This Warrant does not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to receive dividends or other distributions, to exercise any preemptive rights, to vote, or to consent or to receive notice as a stockholder of the Company. If, however, at any time prior to the termination of this Warrant and prior to its exercise, any of the following events shall occur:

 

(a) the Company shall declare any dividend payable in any securities upon its shares of Common Stock or make any distribution (other than a regular cash dividend) to the Holders of its shares of Common Stock; or

 

(b) the Company shall offer to the holders of its shares of Common Stock any additional Warrant of Common Stock or securities convertible into or exchangeable for shares of Common Stock or any right to subscribe for or purchase any thereof; or

 

(c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, sale, transfer or lease of all or substantially all of its property, assets and business as an entirety) shall be proposed and action by the Company with respect thereto has been approved by the Company’s Board of Directors;

 

then in any one or more of said events the Company shall give notice in writing of such event to the Holder at the last address of the Holder as it shall appear on the Company’s records at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividends, distribution, or subscription rights, or for the determination of stockholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to publish, mail or receive such notice or any defect therein or in the publication or mailing thereof shall not affect the validity of any action taken in connection with such dividend, distribution or subscription rights, or such proposed dissolution, liquidation or winding up. Each person in whose name any certificate for shares of Common Stock is to be issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which this instrument was surrendered and payment of the Warrant Exercise Price was made, irrespective of the date of delivery of such stock certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares of Common Stock at the close of business on the next succeeding date on which the stock transfer books are open.

 

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7. SUCCESSORS AND ASSIGNS

 

The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder hereof and their respective successors and permitted assigns.

 

8. LOSS OR MUTILATION

 

8.1. Upon receipt by the Company of satisfactory evidence of the ownership of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the case of loss, theft, or destruction, upon receipt by the Company of indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of such Warrant and upon surrender and cancellation of such Warrant, the Company shall execute and deliver in lieu thereof a new Warrant representing the right to purchase an equal number of shares of Common Stock.

 

8.2. The Holder also acknowledges that each of the Shares issuable upon the due exercise hereof will be subject to any transfer restrictions in the Company’s Articles of Incorporation, including a right of first refusal to the Company, and the certificate or certificates evidencing the Shares will bear a legend to this effect.

 

9. TERMINATION DATE

 

This Warrant shall terminate upon the sooner of (a) the expiration of the Exercise Period; or (b) the exercise of all or any portion of this Warrant pursuant to the terms of Section 1 hereof.

 

10. GOVERNING LAW

 

This Warrant and any dispute, disagreement or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the internal laws of the State of New York without regard to conflicts of law.

 

11. HEADINGS

 

The headings and captions used in this Warrant are used only for convenience and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.

 

12. NOTICES.

 

All notices or other communications given or made hereunder shall be in writing and shall be mailed by certified mail, delivered by professional courier or hand, or transmitted via email or facsimile, to such party’s address as set forth in the Warrant Register, or such other address as the Holder or the Company shall notify the other in writing as above provided. Any notice sent in accordance with this section shall be effective on the date three days after the date of mailing or, if delivered by hand or professional courier, or transmitted via email or facsimile with delivery receipt (or acknowledgement or confirmation which may be by electronic means), on the date of delivery, provided, however, that notices to the Company will be effective upon receipt.

 

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13. SEVERABILITY.

 

If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of this Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

 

14. Registration and Transfer of Warrants, etc .

 

14.1. Warrant Register; Ownership of Warrants . Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “ Warrant Register ”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a Warrant Agent or the Company’s transfer agent. The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof and the Holder for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

 

15. certain other provisions

 

15.1. Any reference to an action or event to occur on a specified date that is not a Business Day shall be a reference to the immediately following Business Day.

 

15.2. Any calculations of the number of Shares to be issued upon the exercise of this Warrant, in whole or in part, shall be made by the Company and, absent manifest error, such calculation shall be conclusive and binding.

 

15.3. The terms and conditions of this Warrant shall not be amended, modified or supplemented other than in accordance with a written amendment signed by the Holder and the Company that specifically provides for such amendment, modification or supplement.

 

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16. Cooperation in the Registration of Shares.

 

The Company shall have the right and obligation to register the Shares under the terms and conditions of that certain Registration Rights Agreement by and among the Company the initial holder of this Warrant and the holder of other Class D Warrants. In any such registration by the Company, the Holder shall cooperate with the Company and provide the Company with all information reasonably requested from time to time by the Company.

 

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In Witness Whereof, the parties have executed this Warrant as of the date first written above.

 

  COMPANY
     
  Cardax, Inc.
     
  By:  
  Name:
  Title:

 

 

HOLDER

 

     
     
By:    
     
Name:    
     
Title:    

 

 
 

 

NOTICE OF WARRANT EXERCISE

 

To: Cardax, Inc.

2800 Woodlawn Drive

Suite 129

Honolulu, HI 96822

 

Gentlemen:

 

The undersigned, __________________________________, hereby elects to purchase, pursuant to the provisions of the foregoing Warrant held by the undersigned, ________________ shares of the common stock (“ Common Stock ”) of Cardax, Inc.

 

Payment of the purchase price of __________ per Share required under such Warrant accompanies this notice.

 

The undersigned hereby represents and warrants that the undersigned is acquiring such Common Stock for the account of the undersigned and not for resale or with a view to distribution of such Common Stock or any part hereof; that the undersigned is fully aware of the transfer restrictions affecting restricted securities under the pertinent securities laws and the undersigned understands that the shares purchased hereby are restricted securities and that the certificate or certificates evidencing the same will bear a legend to that effect.

 

By its delivery of this Notice of Warrant Exercise, the undersigned represents and warrants to the Company that (unless indicated below) in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 1.3(b)(ii) of this Warrant to which this notice relates.

 

If the number of shares of Common Stock purchased (and/or canceled) hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased (or canceled) be issued and delivered as follows:

 

ISSUE TO:    
  (NAME OF HOLDER)  
     
     
  (ADDRESS, INCLUDING ZIP CODE)  
     
     
  (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
   
DELIVER TO:    
     
  (NAME)  

 

 
 

 

NOTICE OF WARRANT EXERCISE

Page 2

 

     
  (ADDRESS, INCLUDING ZIP CODE)  

 

DATED: _________, ____.

 

Signature:    
Name:    
Title:    
Address:    
     

 

 
 

 

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.

 

 
 

 

 

WARRANT NUMBER

E _______________

 

CARDAX, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”) OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

THIS CERTIFIES THAT, for value received, ________________________________ (together with its successors and assigns, the “ Holder ”), commencing _____________ (the “ Date of Issue ”) is entitled to purchase, subject to the conditions set forth below, at any time and from time to time, in whole or in part, during the Exercise Period (as defined in Section 1.3 ), that number of fully paid and non-assessable shares (the “ Shares ”) of common stock, par value $0.001 per share (“ Common Stock ”), of Cardax, Inc., a Delaware corporation (the “ Company ”), that is not more than the Warrant Share Number (as defined in Section 1.1 ), subject to the further provisions of this warrant to purchase newly issued shares of Common Stock (the “ Warrant ”), at the Warrant Exercise Price (as defined in Section 1.2 ), subject to the further provisions of this Warrant.

 

1.   EXERCISE OF WARRANT

 

The terms and conditions upon which this Warrant may be exercised, and the shares of Common Stock covered hereby which may be purchased hereunder, are as follows:

 

1.1. Warrant.

 

(a) The Company hereby issues to the Holder this Warrant.

 

 
 

 

(b) The number of Shares that the Holder is entitled to purchase under the terms and conditions of this Warrant (the “ Warrant Share Number ”) is equal to three quarters (0.75) of one (1) Share for each Warrant.

 

(c) For the purposes of this Agreement, the following terms shall have the respective meanings ascribed thereto in this Section 1.1(c) :

 

(i) “ Affiliate ” shall have the meaning ascribed to such term under the Securities Act and the regulations promulgated thereunder.

 

(ii) “ Business Day ” shall mean any date that the banks and the securities markets are in New York, New York open for business for the conduct of business in the regular course on such date.

 

(iii) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

(iv) “ Person ” shall mean any individual, trust or entity or governmental authority or agency.

 

1.2. The Warrant Exercise Price. The exercise price for the Warrant (the “ Warrant Exercise Price ”) shall be equal, per share, to $0.1667, subject to adjustment as provided in Section 4 :

 

1.3. Method of Exercise .

 

(a) The Holder of this Warrant may exercise, in whole or in part, the purchase rights evidenced by this Warrant during the period commencing on the Date of Issue of this Warrant and ending on March 31, 2020, unless extended by the Company in its sole discretion (the “ Exercise Period ”). Such exercise shall be effected by:

 

(i) the surrender of the Warrant, together with a duly executed copy of the form of subscription attached hereto (a “ Notice of Exercise ”), to the Secretary of the Company at its principal offices;

 

(ii) the payment to the Company, by certified check or bank draft payable to its order, of an amount equal to the aggregate Warrant Exercise Price for the number of Shares for which the purchase rights hereunder are being exercised; and

 

(iii) the delivery to the Company, if necessary, to assure compliance with federal and state securities laws, of an instrument executed by the Holder certifying that the Shares are being acquired for the sole account of the Holder and not with a view to any resale or distribution.

 

2
 

 

(b) Conditions to Exercise of the Warrant .

 

(i) Notwithstanding the provisions of any provision of this Warrant, including Section 1.3 , the exercise of this Warrant is contingent upon the Company’s satisfaction that the issuance of the Shares for which this Warrant is being exercised is exempt from the requirements of the Securities Act and all applicable state securities laws or the Shares are duly registered under the Securities Act. The Holder of this Warrant agrees to execute any and all documents deemed necessary by the Company to effect the exercise of this Warrant.

 

(ii) Notwithstanding anything to the contrary contained herein, the number of Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (the “ Beneficial Ownership ”, does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise) (the “ Maximum Percentage ”). For the avoidance of doubt, except as otherwise provided herein in connection with a transaction described in Section 4.3 (a “ Fundamental Transaction ”), this Warrant may not be exercised in whole or in part if the Holder’s Beneficial Ownership (as calculated herein) exceeds the Maximum Percentage prior to such exercise. For such purposes, “ Beneficial Ownership ” shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction of this Warrant or under any other provision of Section 4 . This restriction may not be waived except by the Holder providing a notice to the Company as provided herein. For any reason at any time, upon the written or oral request of the Holder, the Company shall promptly confirm in writing (which may be by electronic mail) to the Holder the number of shares of Common Stock then outstanding. To the extent that the limitation contained in this Section 1.3(b)(ii) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination other than its obligation in this Section 1.3(b)(ii) above to, upon the Holder’s request, confirm in writing to the Holder the number of shares of Common Stock then outstanding. Notwithstanding any provision of this Section 1.3(b)(ii) to the contrary, the limitations on the exercise of this Warrant under this Section 1.3(b)(ii) shall not be applicable from and after the date that is 61 days after the date that the Holder provides written notice to the Company that the Holder elects to have Beneficial Ownership of the Company’s Common Stock in excess of the Maximum Percentage, in which case such Holder shall have the right to exercise this Warrant without the limitations of this Section 1.3(b)(ii) ; provided , that the limitations of this Section 1.3(b)(ii) shall again be applicable to any assignee of this Warrant until 61 days after such assignee provides such notice to the Company.

 

3
 

 

1.4. Issuance of Shares . In the event the purchase rights evidenced by this Warrant are exercised in whole or in part, one or more certificates for the purchased Shares shall be issued as soon as practicable thereafter to the Holder.

 

1.5. Partial Exercise . If this Warrant shall have been exercised only in part, then the Company shall, at the time of delivery of the certificate or certificates for the Shares purchased upon such exercise, also deliver to the Holder a new Warrant evidencing the remaining outstanding unexercised balance of Shares purchasable hereunder.

 

1.6. Cancellation . Notwithstanding anything in this Warrant to the contrary, this Warrant shall be cancelled, and shall not be exercisable, if it is not exercised before the expiration of the Exercise Period.

 

2. TRANSFER RESTRICTIONS

 

2.1. Transfer . This Warrant and the Shares issuable upon exercise hereof are “restricted securities” as such term is defined by the rules and regulations promulgated under the Securities Act. This Warrant and the Shares issuable upon exercise hereof may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of this Warrant or the Shares issuable upon exercise hereof, other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Holder, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of the transferred Warrant or Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Warrant and the Agreement and shall have the rights and obligations of a Holder under this Warrant and the Agreement.

 

4
 

 

2.2. Legend .

 

(a) The Holder agrees to the imprinting of a legend on any of the Shares issuable upon exercise hereof in the following form:

 

THIS SECURITY HAS NOT 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

(b) Notwithstanding the foregoing, certificates evidencing this Warrant or the Shares issuable upon exercise hereof shall not contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of this Warrant or such Shares issuable upon exercise hereof pursuant to Rule 144, (iii) if this Warrant or such Shares issuable upon exercise hereof are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to this Warrant or such Shares issuable upon exercise hereof and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).

 

5
 

 

2.3. Sale . The Holder agrees that the Holder will sell this Warrant or any Shares issuable upon exercise hereof only pursuant to either: (i) the registration requirements of the Securities Act, including any applicable prospectus delivery requirements; or (ii) an exemption therefrom, and that if this Warrant or any Shares issuable upon exercise hereof are sold pursuant to any such effective registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing the Shares or this Warrant is predicated upon the Company’s reliance upon this understanding.

 

3. Fractional Shares

 

Notwithstanding that the number of Shares purchasable upon the exercise of this Warrant may have been adjusted pursuant to the terms hereof, the Company shall nonetheless not be required to issue fractions of Shares upon exercise of this Warrant or to distribute certificates that evidence fractional shares, provided that in lieu of any fraction shares, the Company shall make a cash payment to the Holder in an amount equal to the fair market value (as determined by the Board of Directors of the Company in its reasonable good faith) of such fractional share.

 

4. ANTIDILUTION PROVISIONS

 

4.1. Stock Splits and Combinations . If the Company shall at any time subdivide or combine its outstanding shares of Common Stock, this Warrant shall, after that subdivision or combination, evidence the right to purchase the number of shares of Common Stock that would have been issuable as a result of that change with respect to the shares of Common Stock which were purchasable under this Warrant immediately before that subdivision or combination. If the Company shall at any time subdivide the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that subdivision shall be proportionately decreased, and, if the Company shall at any time combine the outstanding shares of Common Stock, the Warrant Exercise Price then in effect immediately before that combination shall be proportionately increased. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.2. Reclassification, Exchange And Substitution . If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the Holder of this Warrant shall, on its exercise, be entitled to purchase for the same aggregate consideration, in lieu of the Common Stock that the Holder would have been entitled to purchase but for such change, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to purchase by the Holder on exercise of this Warrant immediately before that change.

 

6
 

 

4.3. Reorganizations, Mergers, Consolidations Or Sale Of Assets . If at any time there shall be a capital reorganization of the Company’s Common Stock (other than a combination, reclassification, exchange, or subdivision of shares provided for elsewhere above) or merger or consolidation of the Company with or into another entity, or the sale of the Company’s properties and assets as, or substantially as, an entirety to any other person or entity, then, as a part of such reorganization, merger, consolidation or sale, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified in this Warrant and upon payment of the Warrant Exercise Price then in effect, the number of shares of Common Stock or other securities or property of the Company, or of the successor entity resulting from such merger or consolidation, to which a holder of the Common Stock deliverable upon exercise of this Warrant would have been entitled in such capital reorganization, merger, or consolidation or sale if this Warrant had been exercised immediately before that capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder of this Warrant after the reorganization, merger, consolidation, or sale to the end that the provisions of this Warrant (including adjustment of the Warrant Exercise Price then in effect and number of Shares purchasable upon exercise of this Warrant) shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. The Company shall, within thirty (30) days after making such adjustment, give written notice (by first class mail, postage prepaid) to the Holder of this Warrant at the address of the Holder shown on the Company’s books. That notice shall set forth, in reasonable detail, the event requiring the adjustment and the method by which the adjustment was calculated, and specify the Warrant Exercise Price then in effect after the adjustment and the increased or decreased number of Shares or the other shares or property purchasable upon exercise of this Warrant. When appropriate, that notice may be given in advance and include as part of the notice required under other provisions of this Warrant.

 

5. Reservation of Stock Issuable Upon Exercise.

 

The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the exercise of this Warrant such number of its shares of Common Stock as shall from time to time be sufficient to effect the exercise of this Warrant and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant, in addition to such other remedies as shall be available to the Holder of this Warrant, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but un-issued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

 

7
 

 

6. RIGHTS PRIOR TO EXERCISE OF WARRANT

 

6.1. This Warrant does not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to receive dividends or other distributions, to exercise any preemptive rights, to vote, or to consent or to receive notice as a stockholder of the Company. If, however, at any time prior to the termination of this Warrant and prior to its exercise, any of the following events shall occur:

 

(a) the Company shall declare any dividend payable in any securities upon its shares of Common Stock or make any distribution (other than a regular cash dividend) to the Holders of its shares of Common Stock; or

 

(b) the Company shall offer to the holders of its shares of Common Stock any additional Warrant of Common Stock or securities convertible into or exchangeable for shares of Common Stock or any right to subscribe for or purchase any thereof; or

 

(c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, sale, transfer or lease of all or substantially all of its property, assets and business as an entirety) shall be proposed and action by the Company with respect thereto has been approved by the Company’s Board of Directors;

 

then in any one or more of said events the Company shall give notice in writing of such event to the Holder at the last address of the Holder as it shall appear on the Company’s records at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividends, distribution, or subscription rights, or for the determination of stockholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to publish, mail or receive such notice or any defect therein or in the publication or mailing thereof shall not affect the validity of any action taken in connection with such dividend, distribution or subscription rights, or such proposed dissolution, liquidation or winding up. Each person in whose name any certificate for shares of Common Stock is to be issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which this instrument was surrendered and payment of the Warrant Exercise Price was made, irrespective of the date of delivery of such stock certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares of Common Stock at the close of business on the next succeeding date on which the stock transfer books are open.

 

8
 

 

7. SUCCESSORS AND ASSIGNS

 

The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder hereof and their respective successors and permitted assigns.

 

8. LOSS OR MUTILATION

 

8.1. Upon receipt by the Company of satisfactory evidence of the ownership of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the case of loss, theft, or destruction, upon receipt by the Company of indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of such Warrant and upon surrender and cancellation of such Warrant, the Company shall execute and deliver in lieu thereof a new Warrant representing the right to purchase an equal number of shares of Common Stock.

 

8.2. The Holder also acknowledges that each of the Shares issuable upon the due exercise hereof will be subject to any transfer restrictions in the Company’s Articles of Incorporation, including a right of first refusal to the Company, and the certificate or certificates evidencing the Shares will bear a legend to this effect.

 

9. TERMINATION DATE

 

This Warrant shall terminate upon the sooner of (a) the expiration of the Exercise Period; or (b) the exercise of all or any portion of this Warrant pursuant to the terms of Section 1 hereof.

 

10. GOVERNING LAW

 

This Warrant and any dispute, disagreement or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the internal laws of the State of New York without regard to conflicts of law.

 

11. HEADINGS

 

The headings and captions used in this Warrant are used only for convenience and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.

 

12. NOTICES.

 

All notices or other communications given or made hereunder shall be in writing and shall be mailed by certified mail, delivered by professional courier or hand, or transmitted via email or facsimile, to such party’s address as set forth in the Warrant Register, or such other address as the Holder or the Company shall notify the other in writing as above provided. Any notice sent in accordance with this section shall be effective on the date three days after the date of mailing or, if delivered by hand or professional courier, or transmitted via email or facsimile with delivery receipt (or acknowledgement or confirmation which may be by electronic means), on the date of delivery, provided, however, that notices to the Company will be effective upon receipt.

 

9
 

 

13. SEVERABILITY.

 

If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Warrant and the balance of this Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

 

14. Registration and Transfer of Warrants, etc .

 

14.1. Warrant Register; Ownership of Warrants . Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “ Warrant Register ”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a Warrant Agent or the Company’s transfer agent. The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof and the Holder for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

 

15. certain other provisions

 

15.1. Any reference to an action or event to occur on a specified date that is not a Business Day shall be a reference to the immediately following Business Day.

 

15.2. Any calculations of the number of Shares to be issued upon the exercise of this Warrant, in whole or in part, shall be made by the Company and, absent manifest error, such calculation shall be conclusive and binding.

 

15.3. The terms and conditions of this Warrant shall not be amended, modified or supplemented other than in accordance with a written amendment signed by the Holder and the Company that specifically provides for such amendment, modification or supplement.

 

10
 

 

16. Cooperation in the Registration of Shares.

 

The Company shall have the right and obligation to register the Shares under the terms and conditions of that certain Registration Rights Agreement by and among the Company the initial holder of this Warrant and the holder of other Class E Warrants. In any such registration by the Company, the Holder shall cooperate with the Company and provide the Company with all information reasonably requested from time to time by the Company.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

11
 

 

In Witness Whereof, the parties have executed this Warrant as of the date first written above.

 

  COMPANY
   
  Cardax, Inc.
     
  By:  
  Name:
  Title:

 

HOLDER

 

     
     
By:    
     
Name:    
     
Title:    

 

 
 

 

NOTICE OF WARRANT EXERCISE

 

To: Cardax, Inc.

2800 Woodlawn Drive

Suite 129

Honolulu, HI 96822

 

Gentlemen:

 

The undersigned, ___________________________, hereby elects to purchase, pursuant to the provisions of the foregoing Warrant held by the undersigned, __________ shares of the common stock (“ Common Stock ”) of Cardax, Inc.

 

Payment of the purchase price of __________ per Share required under such Warrant accompanies this notice.

 

The undersigned hereby represents and warrants that the undersigned is acquiring such Common Stock for the account of the undersigned and not for resale or with a view to distribution of such Common Stock or any part hereof; that the undersigned is fully aware of the transfer restrictions affecting restricted securities under the pertinent securities laws and the undersigned understands that the shares purchased hereby are restricted securities and that the certificate or certificates evidencing the same will bear a legend to that effect.

 

By its delivery of this Notice of Warrant Exercise, the undersigned represents and warrants to the Company that (unless indicated below) in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 1.3(b)(ii) of this Warrant to which this notice relates.

 

If the number of shares of Common Stock purchased (and/or canceled) hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased (or canceled) be issued and delivered as follows:

 

ISSUE TO:    
  (NAME OF HOLDER)  
     
     
  (ADDRESS, INCLUDING ZIP CODE)  
     
     
  (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)  
     
DELIVER TO:    
     
     
  (NAME)  

 

 
 

 

NOTICE OF WARRANT EXERCISE

Page 2

 

     
  (ADDRESS, INCLUDING ZIP CODE)  

 

DATED: __________, ____.

 

Signature:    
Name:    
Title:    
Address:    
     

 

 
 

 

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.