Sunday, June 02, 2013 5:29:42 PM
Comes now, CDEX, Inc., ("Debtor"), Debtor in Possession, by and through counsel 18
undersigned, and files this Supplemental Reply to United States Trustee's Objection and Gemini Master
19
Fund, Ltd.' s Response to Debtor's Emergency Motion for Authority to Obtain Interim and Long-Term
20
Debtor in Possession Financing.
21
22 RESPONSE TO OBJECTION OF UNITED STATES TRUSTEE
23 Lenders Contacted by Debtor Regarding Financing Alternatives
24 The Chief Executive Officer of the debtor, Jeffery Brumfield, and Chief Financial Officer
25 Stephen McCommon have had contact with a number of potential financing sources.
26 1. On or about the first week of February, 2011, Mr. Brumfield met in New York with
27 eight investment banking firms through Alliance Advisors, the debtor's investment
28 relations/public relations firm at that time.
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1 2. Prior to filing for relief, several small firms offered to purchase some of the com
2 pany's debt in small amounts. These offers came with what the industry refers to as
3 "death spirals" and other toxic terms and conditions. As the debtor was not in default
4 at the time, it did not feel these offers were in its best interest._Around this time,
5 "Angel" investor Robert Stewart met with Steven Winters of Gemini Master Fund,
6 Ltd.
7 ("Gemini") to determine if there would be a possibility to work with the fund to
8 remove the debt. Mr. Stewart provided Gemini with a verbal offer, which was
9 rejected.
10 3.
11 4.
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15 5.
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Additional potential lenders were contacted by Mark McPartland.
Mr. McCommon contacted Michael Davis, Manager of Business Development with American Express to discuss the debtor obtaining an American Express credit card to use for the purchase of raw materials. Mr. McCommon was informed that the debtor would not qualify for an American Express card.
In the second quarter of2009, Mr. McCommon was in communication with Ian Norkin, Vice President-Client Manager of Bank of America, with the intent to establish a line of credit for the debtor. Bank of America informed Mr. McCommon that it could not extend a line of credit to the debtor.
19 Negotiations Regarding Issuance of Convertible Notes
20 The debtor has attached as Exhibit "A"a list of investors with whom it has had discussions,
21 which includes a description of its history with each of them.
22 Budget
23 The debtor has attached as Exhibit "B" its forecasted Use and Source of Funds.
24 RESPONSE TO CREDITOR GEMINI MASTER FUND, LTD'S RESPONSE TO DEBTOR'S
25 MOTION
26 Who the Investors are and Ability to Provide Financing
27 See Exhibit "A".
28 Other Efforts Made to Secure Financing
2
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1 See discussion above under "Lenders Contacted by Debtor Regarding Financing Alterna-
2 tives".
3 Debtor's Current and Expected Profitability
4 As reported to the Securities and Exchange Commission in the Debtor's 10-Q Quarterly
5 Financial Statement for the Quarter ended January 31, 2012, the Debtor recognized a net loss of
6 $382,277 for the quarter then ended. The Debtor's cash projection has a positive cash position of
7 $822,300 at the end of the first twelve months of operation after receiving full Debtor-in-possession 8 financing of $1,500,000.
9 Entities Expressing Interest in Debtor's Product
10 The debtor believes this is proprietary information and not for public distribution due to the
11 sensitive nature of the debtor's relationship with its clients and restrictions placed on the debtor by
12 those clients. Debtor is currently in active negotiations with seventeen potential clients representing
13 a possible twenty-six units with an additional eighteen hospitals considering placement.
14 Adequate Protection of Creditors
15 Use of the new financing according to the budget will allow the debtor to ship its product to
16 customers and continue in business.
17 UseofFunds
18 See Exhibit "B".
19 Terms of Debtor in Possession Financing
20 The debtor has attached as Exhibit "C" the Chapter 11 Funding Agreement, Promissory Note,
21 Term Sheet and Subscription Agreement to be signed by qualified investors.
22 Applicable Securities Laws
23 See discussion below under "RESPONSE TO ISSUES RAISED BY THE SECURITIES
24 AND EXCHANGE COMMISSION IN CORRESPONDENCE WITH DEBTOR"
25 RESPONSE TO ISSUES RAISED BY THE SECURITIES AND EXCHANGE COMMISSION IN
26 CORRESPONDENCE WITH DEBTOR
27 Prior to filing its Chapter 11 petition, the debtor was in the process of conducting a private
28 placement of units of its securities, each unit consisting of one share of its common stock and one
3
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1 common stock purchase warrant. The debtor wishes to continue its efforts to obtain funding to
2 operate its business but has determined that it cannot do so with its pool of potential investors
3 without providing some assurance that they will receive a first priority security interest in assets of
4 the debtor in the event the debtor is liquidated.
5
Accordingly, the debtor intends to accept funding :from these investors, in a private placement
6
which will fully comply with Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
7
thereunder. The debtor would enter into a "Chapter 11 Funding Agreement" with each such investor
8
and would provide the investor with a promissory note secured (with the Court's approval) by a first
9
priority security interest in assets of the debtor.
10
11 The debtor intends, and has agreed in discussions with potential investors, that each investor
12 will receive units of securities of the same composition as those that were to be issued in its ongoing
13 private placement upon the debtor's exit :from the Chapter 11 proceeding. It would not seek to have
14 these units or the underlying securities be :freely trading or otherwise avail itself of Section 1145 of
15 the Bankruptcy Code. Accordingly, the debtor will delete any language to the contrary from its
16 motion.
17 The debtor believes that the number of investors might approach 20. However, the more
18 likely number would lie between ten and 15, and it may be fewer than that. The persons solicited are
19 all business contacts of Debtor's management or its significant shareholders and, in fact, some are
20 existing shareholders of the debtor, having invested in prior offerings. The debtor is engaging in
21 direct conversations with these investors and has not engaged in any form of general solicitation with
22 respect to this private placement.
23
24 Accredited Investors
25 Each of these investors is believed by the debtor's management to be accredited within the
26 meaning of Section 501 of Regulation D and is sufficiently sophisticated with respect to financial
27 and business matters to be able to evaluate the risks of an investment in the debtor at this stage. The
28 debtor is requiring each investor to complete and sign a questionnaire certifying its accreditation and
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1 sophistication. Also, the debtor is providing each prospective investor with a Term Sheet outlining
2 the terms of the investment as well as the risks associated with it (and referring such prospective
3 investors to the Company's 10-K on file with the SEC for further risk disclosure with respect to its
4 business, industry, etc.
5
Offering Period
6
7 In order to address concerns of the SEC and certain creditors, the debtor has decided to
8 conduct the offering for only 60 days commencing on April 5, assuming the Court grants the motion
9 currently pending before the Court. The Company seeks to raise $1,500,000 in the offering but
1o cannot be certain as to the amount, if any, that it will be able to raise. The debtor intends to use the
11 proceeds of the offering to conduct its business during the pendency of the Chapter 11 proceeding
12 and to cover the cost of the proceeding.
13 ADDITIONAL INFORMATION REQUESTED BY SECURITIES AND EXCHANGE
COMMISSION
14 Duration of Bankruptcy
15 At the current time the debtor cannot predict with accuracy when it will emerge from
16 bankruptcy.
17 Status of ValiMed G4
18 Currently three units are in working order in final form. One is being used as the demonstra-
19 tion unit, another is the data gathering unit, and the third is being used as a laboratory device. The
20 following actions must take place before the product is ready to be shipped to the end user: comple-
21 tion of a minimum of fifty different signatures of drugs for the initial library; the units must be
22 certified by CE marking and Underwriter's Laboratory for use in hospital settings; the product must
23 be sent out for third-party testing; and the units must actually be built for delivery. With DIP
24 financing, the debtor anticipates being ready to ship the first units to customers by late May, 2012.
25 Satisfaction of Debt of Investors
26 Investors who invest during the pendency of the Proceeding will receive Promissory Notes
27 pursuant to the terms of a Chapter 11 Funding Agreement which each Investor will enter into with
28 the debtor. Inthe event of a conversion of the Proceeding under Chapter 7 of the United States
5
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1 Bankruptcy Code and a liquidation of the Company's assets thereunder, the Promissory Notes will be
2 entitled to be repaid out of any assets of the Company available therefore, on a first priority basis
3 under Section 364 of the United States Bankruptcy Code, ahead of all other creditors. In the event
4 the Company exits the Proceeding and continues its business, the Promissory Notes will convert into
5 Units at a price equal to the lesser of (a) $.05 per Unit and (b) the effective price per share at which
6 the obligations of the pre-petition creditors are converted into common stock (or equivalent
7 Company equity). Each Unit consists of (I) one (1) share of the debtor's Class A common stock, par
8 value $.005 per share (the "Common Shares") and (ii) a Warrant to purchase one (1) share of the
9 Company's Class A common stock (the "Warrants").
10 Board of Directors
11 Five individuals serve on the debtor's Board of Directors. Director Jeffery Brumfield is the
12 Chairman/Chief Executive Officer of the debtor.
13 Investors Comprising Pemco, LLC
14 See the List of Investors attached as Exhibit "A".
15
16 WHEREFORE Debtor respectfully requests this Court grant the requested relief.
17 DATED: April 4, 2012.
18
LAW OFFICES OF
19 ERIC SLOCUM SPARKS, P. C.
20
/s/ Sparks AZBAR #11726
21 Eric Slocum Sparks
Attorney for Debtors 22
COPIES of the foregoing
23 mailed/delivered/faxed
April 4, 2012, to:
24
Elizabeth C. Amorosi, Esq.
25 Asst. U.S. Trustee
United States Trustee
26 230 N. First Ave. #204
Phoenix, AZ 85003
27 Elizabeth.C.Amorosi@usdoj.gov
28
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6 EXHIBIT A
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Investor Detail
Pemco LLC:
Pemco LLC is a long time investor, current large shareholder, and one of the current unsecured senior note holders to the company. He has been provided with and CDEX has requested an updated investor questionnaire. Pemco LLC has pledged $ 100,000 and most likely will have wired his funds to escrow early next week. Four members comprise Pemco, LLC, all of whom are related.
Stan Piente:
Long time private placement investor and is a large shareholder of CDEX stock. Introduced the company to current CEO and is his personal friend. $50,000 in the escrow account
Milt Datsopolous:
Mr. Datsopolous is a long time private placement investor in CDEX, an attorney, and a high net worth investor. He is a large shareholder of well over one million shares of CDEX stock. He will provide CDEX with a current updated investor questionnaire. He has pledged an investment amount of $50,000.
Robert Stewart:
The very first private placement investor in CDEX, he is responsible for multiple private placement investments throughout the years, he is a high net individual and personal friend of the CEO. He also holds a large amount of shares in the company. He has pledged $50,000 dollars, with the possibility of another $225,000 dollars
KMT investments group:
It is a newly formed investment group that has been established in the form of an LLC. It was created for the sole purpose of making an investment into CDEX. It consists of three high net worth individuals that reside in the Tucson area. They were introduced to the company through our Medical Director Dr. Jason Terrell. They have provided the company with the investor questionnaire. They have collectively funded into the escrow account a totalof $75,000 dollars.
Ralph and Eileen Terrell:
They were introduced to the company through their son Dr. Jason Terrell, who currently serves as CDEX's Medical Director. They are high net individuals and have provided the company with an investor questionnaire. They have provided $100,000 dollars to the company and it is in the escrow account.
William Terrell:
He is the brother of Jason Terrell who is our Medical Director. He is a high net worth individual, and has provided the company with an investor questionnaire and has funded $50,000 into the escrow account.
Gary Caine:
He is a long standing shareholder of CDEX stock, and personal friend of Robert Stewart. Mr. Caine is a very high net worth investor. He has pledged $50,000 dollars, but is also considering additional funds of up to a total investment amount of $250,000 dollars.
Mike Parker:
He is a current large shareholder in CDEX stock, with over 1.5 million shares that he paid over one dollar in the open market I believe around 5 years ago. He is an extremely high net worth investor and a personal friend of the CEO. He is considering an investment in the neighborhood of $200,000 dollars.
Michael Henthorn:
He is a close personal friend and business partner with Dr. Jason Terrell. Although we do not yet have a questionnaire, we have been told that he will have no problem with meeting the criteria of being an accredited investor. He has pledged $50,000 dollars.
Sean Wang PhD.:
Dr. Wang is the CEO of one of our Vendors, and is certainly qualified as an accredited investor. He has extensive experience in the small cap investment arena, and Ibelieve that he took a company that he started through to public status with the IPO opening on the NASDAQ. He is considering an investment of up to $250,000 dollars. We do not have his questionnaire at this time.
Each Board member has been given the opportunity to participate, and they are in consideration.
Current CEO is planning on providing his deferred wages that are listed in the filing into the term sheet which represents a cash equivalent of $135,000 dollars upon approval of the Court.
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EXHIBITB
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(")
ru
Ul
CD Pledged investors
potential future investors
-->. BEGINNING CASH I'-)
PROJECTED USE OF FUNDS:
7\" OPERATING EXPENSES:
O Rent and Insurance
I'-) Utilities
.j::>. Professional (Lawyers, Auditors and Reporting to SEC)
Travel
"Tl 1 Trade Shows
O C..... Salaries/Wages/ Employer Contributions (5 Employees)
...., :S:: Commissions on Domestic Sales
:s;: Marketing/Public Relations/Web Site
Q) Research and Development /Trials/ Capital Equipment
O TOTAL OPERATING EXPENSES
CDEX INC.
FORECAST USE AND SOURCE OF FUNDS
For the 12-month period ending February 2013
March-12 April-12 May-12 June-12 July-12 August-12 September-12 October-12 November-12 December-12 January-13 February-13 TOTAL
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
575,000
8,334 8,334 8,334 8,334 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 100,000
1,666 1,666 1,666 1,666 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 20,000
6,000 1,500 1,500 6,000 10,000 1,500 6,000 1,500 1,500 1,500 20,000 1,500 58,500
5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
0 7,500 7,500 0 0 0 0 0 5,000 10,000 5,000 0 35,000
35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 420,000
0 250 500 750 1,000 1,250 1,500 5,250
3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
(gf)
PROJECTED REVENUES:
Q.. Medical Safety Division:
...., 0 Domestic Markets
.j::>. Rental/Lease ValiMed CCT
O Va Ii Med Maintenance Fees for CCT
- .j::>. Cuvette Sales
"'TI :::;;:: G4 Service Fees for Company Placements
C I'-) G4 Service Fees for Outside Sales Group Placements
::J Installation Fees for Company G4 Placemants
Installation Fees for G4 Outside Sales Group
::J Deposits for G4 Placements for Company
CD Deposits for G4 Placements for Outside Sales Group
"U..,
CD TOTAL ESTIMATED REVENUE
CD 0..
I'-) EST INCREASE/DECREASE IN CASH POSITION
Q., EST. ENDING CASH ON HAND (,0
-->.
I'-)
-->.
-->.
-->.
<D
(,0
0
0
CD
Ul
()
2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
5,000 5,000 5,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 33,000
5,000 12,500 22,500 25,000 30,000 35,000 40,000 45,000 50,000 55,000 320,000
0 0 0 0 2,500 5,000 7,500 10,000 12,500 15,000 52,500
8,000 12,000 16,000 4,000 8,000 8,000 8,000 8,000 8,000 8,000 88,000
0 0 4,000 4,000 4,000 4,000 4,000 4,000 24,000
5,000 7,500 10,000 2,500 5,000 5,000 5,000 5,000 5,000 5,000 55,000
2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 22,500
3/29/2012 5:55 PM lyearcashflow725kjust valimedg4 lof 1
CDEX INC.
FORECAST USE AND SOURCE OF FUNDS
For the 12-month period ending February 2013
TOTAL
Forecast
Pledged investors
575,000
potential future investors
925,000
BEGINNING CASH
1,500,000
PROJECTED USE OF FUNDS:
OPERATING EXPENSES:
Rent and Insurance
100,000
Utilities
20,000
Professional (Lawyers, Auditors and Reporting to SEC)
58,500
Travel
60,000
Trade Shows
35,000
Salaries/Wages/ Employer Contributions (5 Employees)
420,000
Commissions on Domestic Sales
5,250
Marketing/Public Relations/Web Site
36,000
Research and Development/ Trials/ Capital Equipment
155,000
TOTAL OPERATING EXPENSES
889,750
Cost to Produce Products Cost to Produce Cuvettes
4,950
Maintenance Inventory for G4's for the Domestic Markets
30,000
Cost to Produce G4 Company Placements
330,000
Cost to Produce G4 ISA Group Placements
90,000
Total Cost to Produce
454,950
PROJECTED REVENUES:
Medical Safety Division:
Domestic Markets
Rental/Lease ValiMed CCT
30,000
ValiMed Maintenance Fees for CCT
42,000
Cuvette Sales
33,000
G4 Service Fees for Company Placements
320,000
G4 Service Fees for Outside Sales Group Placements
52,500
Installation Fees for Company G4 Placemants
88,000
Installation Fees for G4 Outside Sales Group
24,000
Deposits for G4 Placements for Company
55,000
Deposits for G4 Placements for Outside Sales Group
22,500
TOTAL ESTIMATED REVENUE
667,000
EST INCREASE/DECREASE IN CASH POSITION
(677,700)
EST. ENDING CASH ON HAND
822,300
3/29/2012 5:52 PM
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5 EXHIBIT C
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CDEXINC.
SUPPLEMENT, DATED AS OF FEBRUARY 10, 2012, TO
CONFIDENTIAL TERM SHEET DATED DECEMBER 15, 2011 (THE "TERM SHEET") FOR
PRIVATE PLACEMENT OF UNITS
Explanatory Note: Subsequent to the issuance of the Term Sheet and funding of the Minimum Offering by certain investors, on February 10, 2012 (the ''Filing Date"), the Company filed a petition for relief under Chapter 11 of the United States Bankruptcy Code (the "Proceeding") in · the United States Bankruptcy Court for the District of Arizona (the "Court"). This February 10, 2012 Supplement is being provided to investors in the Offering (as such term is defined in the Term Sheet) who either (i) have funded their investment after the Filing Date or (ii) have agreed to allow their subscription proceeds to be governed by the additional terms set forth in this supplement and used by the Company as a Debtor-in-Possession during the pendency of the Proceeding. (See additional Risk Factors set forth in this Supplement for risks relating to the bankruptcy.)
Issuer............................ CDEX Inc. (OTCBB: CEXI (CEXIQ during the pendency of the
Proceeding) (the "Company") 4555 South Palo Verde, Suite 123
Tucson, Arizona 85714
(520)745-5172
Investors........................ All investors (the "Investors") in the Offering must be
"accredited investors" within the meaning of Rule 501 of Regulation D and must either have sufficient knowledge of financial and business matters as to be able to evaluate an investment in the Offering and make a sound investment decision or have a financial advisor who is able to make such an evaluation on the investor's behalf.
Debtor in Possession Funding; Conversion to Securities under
Offering........................
Risk Factors and Other Disclosure ..................... .
Promissory Notes: Investors who invest during the pendency of the Proceeding will receive Promissory Notes pursuant to the terms of a Chapter 11 Funding Agreement which each Investor will enter into with the Company. In the event of a conversion of the Proceeding into a proceeding under Chapter 7 of the United States Bankruptcy Code and a liquidation of the Company's assets thereunder, the Promissory Notes will be entitled to be repaid out of any assets of the Company available therefor, on a first priority basis under Section 364 of the United States Bankruptcy Code, ahead of all other creditors. In the event the Company exits the Proceeding and continues its business, the Promissory Notes will convert into Units at a price equal to the lesser of (a) $.05 per Unit and (b) the effective price per share at which the obligations of the pre-petition creditors are converted into common stock (or equivalent Company equity).
Units: Each Unit consists of (i) one (1) share of the Company's Class A common stock, par value $0.005 per share (the "Common Shares") and (ii) a Warrant to purchase one (1) share of the Company's Class A common stock (the "Warrants").
An investment in the Securities involves a high degree of risk and is only suitable for Investors who can afford a total loss of their investment in the Offering.
Because the Company has entered the Proceeding, its future is uncertain and an investment in the Offering poses a greater than usual risk of loss of investment. Although the funds invested during the pendency of the Proceeding will be held in escrow pending the Court's decision on the Section 364 motion, there can be no assurance that the court will grant the motion or that even if it does, giving the Investors who fund during the pendency of the Proceeding, the Company will have sufficient assets to satisfy the claims of such Investors.
Further information, including a detailed discussion of risk factors associated with the Company's business can be found in the Company's reports on Forms 10-K, 10-Q and 8-K and other public disclosure documents on file with the Securities and Exchange Commission at www.sec.gov.
Closing and Escrow .......... Pursuant to an Amended and Restated Escrow Agreement, a
copy of which is included in the package of offering materials under, all proceeds of this Offering will be placed into escrow (the "Escrow") with Madama Griffitts O'Hara LLP. All funds in escrow will be disbursed pursuant to Court order.
Restricted Securities.......... The Securities offered hereby are not being registered under the
Securities Act of 1933, as amended (the "Securities Act") for
resale or distribution and may not be sold or transferred without such registration except pursuant to a valid exemption therefrom or in accordance with Rule 144 under the Securities Act.
Placement Agent Fees ...... The Company currently has no intention to pay any
commissions or finders' fees in connection with this Offering or the issuance and sale of the Securities.
Initial Closing Conditions; Availability of Proceeds Following Initial
Closing............
The initial Closing shall be conditioned upon:
(i) The receipt by the Company of fully-executed subscription packages from the Investors for the purchase of the Minimum Offering of Securities; and
(ii) Delivery by Investors of funds into Escrow in the amount of the Minimum Offering; and
(iii) The satisfactory completion of all conditions under the Escrow Agreement.
Following the Initial Closing, the Escrow Agreement shall terminate and the Company shall receive the proceeds of any further subscriptions for Securities in the Offering directly into its operating account. The Company may use such proceeds immediately, in its sole discretion, in accordance with the "Use of Proceeds" set forth hereunder.
Use of Proceeds............... Subject to the risk factors set forth elsewhere in this
Supplement, the net proceeds from this Offering will be used to fund the Company's operations during the pendency of the Proceeding as well as expenses associated therewith. Upon conclusion of the Proceeding and assuming the Company does not enter a liquidation, any remaining proceeds may be used to settle certain debt obligations of the Company, on terms and conditions to be negotiated with the creditors in the sole discretion of management, and the balance will be used for working capital.
Termination of Offering . . . The Offering shall terminate upon the earliest to occur:
(i) The receipt by the Company of fully-executed subscription packages and corresponding funds in the amount of the Maximum Offering;
(ii) The lapse of sixty days from the date of the hearing granting the Section 364 motion; or
(iii) Earlier termination of the Offering by the Company or by Court order.
Governing Law and
Jurisdiction ................. . New York law (subject to the jurisdiction of the Court during the pendency of the Proceeding)
TIDS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE SECURITIES ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY TIDS NOTE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WIDCH IS EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION.
PROMISSORY NOTE
------- 2012
FOR VALUE RECEIVED, CDEX Inc., a Nevada corporation (the "Borrower"), promises to pay to the order of-------------------------
having an address at ("Lender"), the
sum of ($ , with interest, accrued but not compounded, on the unpaid balance outstanding from time to time at an annual rate equal to twelve percent (12%) ("Loan"). The Loan is made and this Note issued pursuant to that certain Chapter 11 Funding Agreement, of even date herewith (the "Funding Agreement"), and all terms capitalized but not defined herein shall have the meaning ascribed them in the Funding Agreement.
The entire unpaid principal balance of the Loan, together with accrued and unpaid interest, shall be due and payable immediately upon the liquidation of Borrower's assets pursuant to an order from the bankruptcy court having jurisdiction over the Borrower's estate in bankruptcy ("Maturity Date"). In the event that the Borrower shall exit its bankruptcy to continue as a going concern, then the balance of principal plus accrued interest due under this Note shall convert into the right to receive units in the Offering at a price of $0.05 per unit under the terms and conditions set forth in the Subscription Agreement.
Borrower hereby waives presentment, demand for payment, protest, notice of protest and notice of dishonor. No extension of time for payment of this Note or any installment hereof, no alteration, amendment or waiver of any provision of this Note and no release or substitution of any collateral securing Borrower's obligations hereunder shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower under this Note.
Any forbearance by the holder of this Note in exercising any right or remedy hereunder or under any other agreement or instrument in connection with the Loan or otherwise afforded by applicable law, shall not be a waiver or preclude the exercise of any right or remedy by the holder of this Note. The acceptance by the holder of this Note of payment of any sum payable hereunder after the due date of such payment shall not be a waiver of the right of the holder of this Note to require prompt payment when due of all other sums payable hereunder or to declare a default for
14? il?M.re 402-JMM Doc 49-3
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failure to make prompt payment.
In addition to the rights and remedies provided herein, the holder of this Note may exercise any other right or remedy in any other document, instrument or agreement evidencing, securing or otherwise relating to the indebtedness evidenced hereby in accordance with the terms thereof, or under applicable law, either simultaneously or in such order as the holder of this Note shall deem in its best interest, all of which rights and remedies shall be cumulative, and may be exercised concurrently, consecutively or in such order as Lender may elect in its sole and absolute discretion.
Borrower shall pay the Lender, upon demand, for all reasonable costs and expenses, including, but not limited to, reasonable attorney's fees, incurred in connection with the collection of this Note.
If this Note is transferred in any manner, the rights, remedies and other provisions herein shall apply with equal effect in favor of any subsequent holder hereof.
All payments of principal and interest hereunder are payable in lawful money of the United States of America at the office of Lender, or at such other place as the holder hereof shall designate to Borrower inwriting.
This Note shall be binding on the Borrower and its heirs, legal representatives, executors, successors and assigns, and shall inure to the benefit of Lender and its heirs, legal representatives, executors, successors and assigns.
This Note shall be governed by and construed in accordance with the laws of the State of New York (subject to the jurisdiction of the United States Bankruptcy Court in the District of Arizona, without regard to conflicts of laws considerations, subject in all events to the applicable federal bankruptcy laws.
If any terms or provision of this Note or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Note, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Note shall be valid and enforceable to the fullest extent permitted by law.
EACH OF LENDER AND BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO ANY TRIAL BY JURY IN ANY CLAIM, COUNTERCLAIM, CROSS-CLAIM, CAUSE OF ACTION OR PROCEEDING BASED UPON OR ARISING OUT OF OR IN CONNECTION WITH TIDS NOTE. TIDS WAIVER IS KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND FREELY MADE BY BORROWER AND LENDER. BORROWER AND LENDER ACKNOWLEDGE THAT Tms WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT BORROWER AND LENDER HAVE RELIED ON TIDS WAIVER IN ENTERING INTO TmS NOTE, AND THAT EACH OF THEM WILL CONTINUE TO RELY ON TIDS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT EACH HAS BEEN
0a'™14 1 2ei2l:f 1 m012fYbb}49_3
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REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN THE SIGNING OF TIDS NOTE AND IN THE MAKING OF TIDS WAIVER AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVE THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
1bisNote may not be changed or terminated orally.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first above written.
CDEXInc.
Name: Title:
SUBSCRIPTION AGREEMENT
CDEXInc.
4555 South Palo Verde, Suite 123
Tucson, Arizona 85714 Ladies and Gentlemen:
It is understood that the securities described below are being offered for sale pursuant to an exemption from the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"), and in particular, Regulation D.
1. Subscription. The undersigned (hereinafter referred to as the "Subscriber") hereby subscribes for the number of units (the "Units"), each consisting of (i) one (1) share of Class A common stock, par value $0.005 per share (the "Shares"), and (ii) a warrant to purchase one (1) share of Class A common stock at $[0.05] per share, set forth on the signature pages hereof which Units are to be issued by CDEX Inc. (the "Company"), a Nevada corporation. The Company is offering a minimum of 6,000,000 Units and a maximum of 70,000,000 Units (the "Offering"), pursuant to a Confidential Term Sheet, dated as of December _, 2011 (the "Term Sheet").
[Check one of the following:]
[ ] Accompanying this Subscription Agreement is Subscriber's check payable to the Company in the amount of$ ($0.05 multiplied by the number of Units purchased) in payment of the purchase price for the Units subscribed for hereby;
-OR-
[ ] Subscriber has wired to the Company in good funds and in accordance with the wiring instructions provided by the Company to the Subscriber the amount of $ _ ($0.05 multiplied by the number of Units purchased) (in payment of the purchase price for the Units subscribed for hereby.
Subscriber understands that the Company may utilize the proceeds of this offering after its receipt of proceeds in the minimum offering amount of $350,000. Upon the achievement by the Company of such minimum offering amount, all net proceeds will be deposited in the capital account of the Company and will be available for immediate use in accordance with the terms of the Term Sheet.
2. Representations, Warranties and Covenants of the Subscriber.
2.1 The undersigned, by executing and delivering this Subscription Agreement, hereby
·------ -, -
represents and warrants to the Company:
(a) The Subscriber is an "Accredited Investor" as that term is defined in Section 2(a)(15) of the Securities Act and Rule 501 of Regulation D promulgated thereunder.
Specifically, the Subscriber is (initial appropriate items):
(i) A bank defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(a)(l3) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (the "Investment Company Act") or a business development company as defined in Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 30l(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets greater than $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of BRISA, which is either a bank, savings and loan association, insurance company, or a registered investment advisor, or if the employee benefit plan has total assets greater than $5,000,000 or, if a self directed plan, with investment decisions made solely by persons that are accredited investors.
(ii) A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
(iii) An organization described in Section 50l(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets greater than $5 million.
(iv) a natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1 million excluding the Subscriber's primary residence.
(v) A natural person who had an individual income greater than $200,000 in each of the two most recent years or joint income with that person's spouse greater than $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
(vi) A trust, with total assets greater than $5 million not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the 2
prospective investment.)
(vii) an entity in which allofthe equity owners are Accredited Investors. (If this alternative is checked, the Subscriber must identify each equity owner and provide statements signed by each demonstrating how each is qualified as an accredited investor.)
(b) he, she or it and/or his, her or its attorney, accountant and/or purchaser representative have been afforded the opportunity to ask questions of and receive answers from the officers and directors of the Company concerning the terms and conditions of this private placement and to obtain any additional information which the officers and directors possess or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information provided to the Subscriber by the Company.
(c) he, she or it either personally has such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the proposed investment, or, together with a purchaser representative, and business and tax advisors, on whose advice he, she or it has relied, had such knowledge and experience;
(d) he, she or it has.adequate means of providing for current :financial needs and possible personal contingencies and is able to bear the economic risks of the investment (i.e., to afford a complete loss);
(e) he, she or it is aware that no trading market exists for the Units or the Warrants and that he, she or it likely will not be able to liquidate the investment hereunder until such time as (i) the Company has filed, and the SEC declared effective, a registration statement permitting the resale of the Shares or (ii) the shares may be sold pursuant to Rule 144 under the Securities Act;
(f) if an individual, he or she is a citizen of the United States (the Company shall have the right to waive this condition), at least 21 years of age and a bona fide resident and domiciliary (not a temporary or transient resident) of the state hereinafter set forth adjacent to the signature of the undersigned, and he has no present intention of becoming a resident of any other state or jurisdiction or an entity formed in the United States doing business in the state hereinafter set forth;
(g) there has been no change in the information previously supplied by the undersigned in the Questionnaire for prospective purchasers and such information is complete and accurate;
(h) The undersigned has fully read and considered the Term Sheet and the contents of the Term Sheet, including, without limitation, and the undersigned confirms that, except as set forth
. in the Term Sheet and the attachments thereto, no representations or warranties have been made to the undersigned by the Company or its principals, or any agent, employee or affiliate of any of them, and that in entering into this transaction he, she or it is not relying upon information, other than that contained in the Term Sheet and the attachments thereto, and the results of his, her or
its own independent investigation. The Subscriber has reviewed and understands all of the
. 3
reports on Forms 10-K, 10-Q and 8-K for the past year on file with the Securities and Exchange Commission (the "SEC") and has read all other reports and documents of the Company on file with the SEC as Subscriber deemed necessary to evaluate the investment hereunder.
2.2 The Subscriber hereby agrees not to sell, transfer or otherwise dispose of the Units unless, in the opinion of counsel to the Company, such sale, transfer or disposition may be legally made without (i) registration under the Securities Act, and/or (ii) registration and or qualification under then applicable state and/or federal statutes, or such sale, transfer or disposition shall have been so registered and/or qualified and an appropriate prospectus shall then be in effect.
3. Common Stock. Holders of Shares are entitled to dividends when and as declared by the Board of Directors from funds legally available therefor and, upon liquidation, are entitled to share pro rata in any distribution to shareholders after payment of any liquidation preference to holders of preferred stock, if any. Holders of Shares have the right to cast one vote for each share of Class A common stock held by such holders.
Neither the Shares, the Warrants nor the Units have been registered under the Securities Act and are being sold in reliance upon the exemption contained in Regulation D of the Securities Act. Purchasers of Units, will have no rights of registration and will not be able to sell and or otherwise dispose of their Shares, Warrants or the Units, unless a registration statement is in effect and/or an exemption from the registration requirements of the Securities Act is available.
4. Miscellaneous.
4.1 All notices or other communications given or made hereunder shall be in writing and shall be delivered by hand or mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned, at the respective address set forth herein, and to the Company at the address set forth above.
4.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and wholly performed in that state.
4.3. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by the party to be bound thereby.
4.4 This Agreement is not transferable or assignable by Subscriber.
4.5 All references in this Agreement to the "Subscriber" shall include all parties (other than the Company) who execute this Agreement. If the Subscriber is a corporation, partnership, trust or two or more individuals purchasing jointly, note the specific instructions for the Certificate of Corporate, Partnership, Trust and Joint Purchases. Please date and sign the
4
certificate.
5. Acceptance of Subscription. It is understood that this subscription is not binding upon the Company until the Company accepts it, and that the Company has the right to accept or reject this subscription in whole or in part in its sole and complete discretion. If this subscription is rejected in whole, the Company shall return the subscription amount to Subscriber, without interest, and the Company and Subscriber shall have no further obligation to each other hereunder. In the event of a partial rejection of this subscription, a pro rated amount of the subscription amount will be returned to Subscriber, without interest.
[TIDS SPACE LEFT BLANK INTENTIONALLY]
5
INDIVIDUALS
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber and by the Company on the respective dates set forth below.
Amount of Purchase Price Number of Units Price Per Unit (Check Enclosed)
x $----- $
Social Security No. Individual Signature(s):
Date Signature of Subscriber
Printed Name
Telephone No. Street
City State Zip
Date Signature of Co-Subscriber
Social Security No. Printed Name
Telephone No. Street
City State Zip Subscription Accepted by:
CDEXInc.
Date:. _
CORPORATIONS, TRUSTS OR PARTNERSHIPS
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber and by the Company on the respective dates set forth below.
Number of Units Price Per Unit
Amount of Purchase Price (Check Enclosed)
x $_ $ Corporation, Trust or Partnership:
Date Printed Name of Subscriber
By:
Signature of Authorized Signatory
Tax Identification No. Telephone No.
Street Address of Subscriber City State Zip Subscription Accepted by: CDEXInc.
By:
Date:
Printed Name of Authorized Signatory
SPECIAL SUBSCRIPTION INSTRUCTIONS FOR CORPORATE, PARTNERSHIP, TRUST, AND JOINT SUBSCRIBERS
Ifthe subscriber is a corporation, partnership, trust, or other entity or joint purchaser, the following additional instructions must be followed. INFORMATION ADDITIONAL TO THAT REQUESTED BELOW MAY ALSO BE REQUIRED BY THE COMPANY IN SOME CASES.
I. Certificate. The subscriber must date and sign the Certificate below, and, if requested by the Company, the subscriber may also be required to provide an opinion of counsel to the same effect as this Certificate or a copy of (a) the corporation's articles of incorporation, bylaws and authorizing resolution, (b) the partnership agreement, or (c) the trust agreement, as applicable.
II. Subscription Agreement.
A. Corporations. An authorized officer of the corporation must date, sign, and complete the Subscription Agreement with information concerning the corporation. The officer should print the name of the corporation above his signature, and print his name and office below his signature.
B. Partnerships. An authorized partner must date, sign, and complete the Subscription Agreement with information concerning the partnership. The partner should print the name of the partnership above his signature, and print his name and the words "general partner" below his signature.
C. Trusts. In the case of a trust, the authorized trustee should date, sign, and complete the Subscription Agreement with information concerning the trust. The trustee should print the name of the trust above his signature, and print his name and the word "trustee" below his signature. In addition, an authorized trustee should also provide information requested in the Subscription Agreement as it pertains to him as an individual.
D. Joint Ownership. In all cases, each individual must date, sign, and complete the Subscription Agreement. Joint subscribers must state if they are purchasing the Shares as joint tenants with the right of survivorship, tenants in common, or community property, and each must execute the Subscription Agreement signature page.
CERTIFICATE FOR CORPORATE, PARTNERSHIP, TRUST, AND JOINT PURCHASERS
Ifthe subscriber is a corporation, partnership, trust, joint purchaser, or other entity, an authorized officer, partner, or trustee must complete, date, and sign this Certificate.
CERTIFICATE
I hereby certify that:
a. The subscriber has been duly formed and is validly existing and has full power and authority to invest in Image Technology Laboratories, Inc.
b. The Subscription Agreement has been duly and validly authorized, executed, and delivered by the subscriber and, upon acceptance by the Company, will constitute the valid, binding, and enforceable obligation of the subscriber.
Dated: ---
Name of corporation, partnership, trust or joint purchases (please print)
Signature and title of authorized officer, partner, trustee, or joint purchaser
CHAPTER 11FUNDING AGREEMENT
This AGREEMENT, is entered into as of the day of , 2012 by and between CDEX Inc. (the "Company") and (the "Investor").
WHEREAS, the parties have entered into a Subscription Agreement, dated as of , 2012 (the "Subscription Agreement"), under the terms of a private offering (the "Offering") pursuant to which the Investor agreed to purchase ' units at a price of $0.05 per unit (or$ in the aggregate), each unit consisting of one share of Class A common stock and a warrant to purchase one share of Class A common stock in the Company at an exercise price of $0.05 per share, the proceeds of which are currently held in escrow with Madama Griffitts O'Hara LLP, as escrow agent (the "Escrow Agent") pending achievement of the Minimum Offering amount;
WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the shareholders and creditors of the Company that it file a petition (the "Chapter 11 Filing") under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Arizona (the "Court");
WHEREAS, the Company requires funding to cover the expenses of the Chapter 11 Filing and to continue its operations during the pendency of the Chapter 11 bankruptcy, and the Investor has agreed to apply the proceeds currently held in escrow pursuant to the Subscription Agreement to provide such funding on the terms and conditions set forth herein; and
WHEREAS, the parties understand and acknowledge that the Company will continue to seek additional funding from other investors on similar terms under obligations which will rank pari passu with that of the Investor hereunder.
NOW THEREFORE, In consideration of the premises and other good and valuable consideration, the parties agree as follows:
1. The Investor hereby agrees to lend the Company up to $ (the "Loan") to cover the expenses of its Chapter 11 Filing as set forth on Schedule 1hereto and to continue its operations during the pendency of the Chapter 11 bankruptcy, subject to entry of an order by the Court to grant the Investor a first priority position with respect to the amount of the Loan. The proceeds of the Loan shall be diverted from proceeds of the Offering currently held by the Escrow Agent in accordance with joint written instructions delivered to the Escrow Agent by the parties hereto and upon approval of the Court.
2. Upon execution of this Agreement and following an order from the Court granting the Company financing motion under Section 364 of the Bankruptcy Code and ordering release of the Loan proceeds to the Company, the Company shall issue to the investor a Promissory Note in the original principal amount of the Loan bearing interest at a rate of 12% per annum, in substantially the form attached hereto as Exhibit A (the "Note"). The Company shall deliver the Note to the Escrow Agent, to be held in escrow and delivered to the Investor immediately prior to the release of the Loan proceeds. The Company agrees
that immediately following the Chapter 11 Filing, it will petition the bankruptcy court for an order granting the Investor a first priority security interest with respect to the Loan; provided, however, that the Investor acknowledges and agrees that the Company will seek additional funding on substantially the same terms as provided hereunder and under the Note which shall also be subject to a first priority
security interests and rank pari passu with the obligation created hereby and by the Note . Upon receipt of such an order granting the Investor a first priority security interest with respect to the Loan, the parties shall instruct the Escrow Agent in writing to deliver the Note to the Investor and to release to the
Company from its escrow funds in the amount of the Loan as needed to cover expenses of the Chapter 11 Filing.
3. In the event that the Company exits its bankruptcy under Chapter 11 to continue operating as a going concern, the parties agree that the Note shall be converted into the right to receive shares in the Offering in an aggregate amount equal to the balance due thereunder and shall thereafter be of no further force or effect. In such event, the proceeds of the funding shall revert back to their prior status as an investment in the Offering under the terms and conditions set forth in the Subscription Agreement. The parties shall so instruct the Escrow Agent in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CDEXINC.
By:
Name:
Title:
INVESTOR:
Printed Name:
undersigned, and files this Supplemental Reply to United States Trustee's Objection and Gemini Master
19
Fund, Ltd.' s Response to Debtor's Emergency Motion for Authority to Obtain Interim and Long-Term
20
Debtor in Possession Financing.
21
22 RESPONSE TO OBJECTION OF UNITED STATES TRUSTEE
23 Lenders Contacted by Debtor Regarding Financing Alternatives
24 The Chief Executive Officer of the debtor, Jeffery Brumfield, and Chief Financial Officer
25 Stephen McCommon have had contact with a number of potential financing sources.
26 1. On or about the first week of February, 2011, Mr. Brumfield met in New York with
27 eight investment banking firms through Alliance Advisors, the debtor's investment
28 relations/public relations firm at that time.
1
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1 2. Prior to filing for relief, several small firms offered to purchase some of the com
2 pany's debt in small amounts. These offers came with what the industry refers to as
3 "death spirals" and other toxic terms and conditions. As the debtor was not in default
4 at the time, it did not feel these offers were in its best interest._Around this time,
5 "Angel" investor Robert Stewart met with Steven Winters of Gemini Master Fund,
6 Ltd.
7 ("Gemini") to determine if there would be a possibility to work with the fund to
8 remove the debt. Mr. Stewart provided Gemini with a verbal offer, which was
9 rejected.
10 3.
11 4.
12
13
14
15 5.
16
17
18
Additional potential lenders were contacted by Mark McPartland.
Mr. McCommon contacted Michael Davis, Manager of Business Development with American Express to discuss the debtor obtaining an American Express credit card to use for the purchase of raw materials. Mr. McCommon was informed that the debtor would not qualify for an American Express card.
In the second quarter of2009, Mr. McCommon was in communication with Ian Norkin, Vice President-Client Manager of Bank of America, with the intent to establish a line of credit for the debtor. Bank of America informed Mr. McCommon that it could not extend a line of credit to the debtor.
19 Negotiations Regarding Issuance of Convertible Notes
20 The debtor has attached as Exhibit "A"a list of investors with whom it has had discussions,
21 which includes a description of its history with each of them.
22 Budget
23 The debtor has attached as Exhibit "B" its forecasted Use and Source of Funds.
24 RESPONSE TO CREDITOR GEMINI MASTER FUND, LTD'S RESPONSE TO DEBTOR'S
25 MOTION
26 Who the Investors are and Ability to Provide Financing
27 See Exhibit "A".
28 Other Efforts Made to Secure Financing
2
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1 See discussion above under "Lenders Contacted by Debtor Regarding Financing Alterna-
2 tives".
3 Debtor's Current and Expected Profitability
4 As reported to the Securities and Exchange Commission in the Debtor's 10-Q Quarterly
5 Financial Statement for the Quarter ended January 31, 2012, the Debtor recognized a net loss of
6 $382,277 for the quarter then ended. The Debtor's cash projection has a positive cash position of
7 $822,300 at the end of the first twelve months of operation after receiving full Debtor-in-possession 8 financing of $1,500,000.
9 Entities Expressing Interest in Debtor's Product
10 The debtor believes this is proprietary information and not for public distribution due to the
11 sensitive nature of the debtor's relationship with its clients and restrictions placed on the debtor by
12 those clients. Debtor is currently in active negotiations with seventeen potential clients representing
13 a possible twenty-six units with an additional eighteen hospitals considering placement.
14 Adequate Protection of Creditors
15 Use of the new financing according to the budget will allow the debtor to ship its product to
16 customers and continue in business.
17 UseofFunds
18 See Exhibit "B".
19 Terms of Debtor in Possession Financing
20 The debtor has attached as Exhibit "C" the Chapter 11 Funding Agreement, Promissory Note,
21 Term Sheet and Subscription Agreement to be signed by qualified investors.
22 Applicable Securities Laws
23 See discussion below under "RESPONSE TO ISSUES RAISED BY THE SECURITIES
24 AND EXCHANGE COMMISSION IN CORRESPONDENCE WITH DEBTOR"
25 RESPONSE TO ISSUES RAISED BY THE SECURITIES AND EXCHANGE COMMISSION IN
26 CORRESPONDENCE WITH DEBTOR
27 Prior to filing its Chapter 11 petition, the debtor was in the process of conducting a private
28 placement of units of its securities, each unit consisting of one share of its common stock and one
3
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1 common stock purchase warrant. The debtor wishes to continue its efforts to obtain funding to
2 operate its business but has determined that it cannot do so with its pool of potential investors
3 without providing some assurance that they will receive a first priority security interest in assets of
4 the debtor in the event the debtor is liquidated.
5
Accordingly, the debtor intends to accept funding :from these investors, in a private placement
6
which will fully comply with Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
7
thereunder. The debtor would enter into a "Chapter 11 Funding Agreement" with each such investor
8
and would provide the investor with a promissory note secured (with the Court's approval) by a first
9
priority security interest in assets of the debtor.
10
11 The debtor intends, and has agreed in discussions with potential investors, that each investor
12 will receive units of securities of the same composition as those that were to be issued in its ongoing
13 private placement upon the debtor's exit :from the Chapter 11 proceeding. It would not seek to have
14 these units or the underlying securities be :freely trading or otherwise avail itself of Section 1145 of
15 the Bankruptcy Code. Accordingly, the debtor will delete any language to the contrary from its
16 motion.
17 The debtor believes that the number of investors might approach 20. However, the more
18 likely number would lie between ten and 15, and it may be fewer than that. The persons solicited are
19 all business contacts of Debtor's management or its significant shareholders and, in fact, some are
20 existing shareholders of the debtor, having invested in prior offerings. The debtor is engaging in
21 direct conversations with these investors and has not engaged in any form of general solicitation with
22 respect to this private placement.
23
24 Accredited Investors
25 Each of these investors is believed by the debtor's management to be accredited within the
26 meaning of Section 501 of Regulation D and is sufficiently sophisticated with respect to financial
27 and business matters to be able to evaluate the risks of an investment in the debtor at this stage. The
28 debtor is requiring each investor to complete and sign a questionnaire certifying its accreditation and
4
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1 sophistication. Also, the debtor is providing each prospective investor with a Term Sheet outlining
2 the terms of the investment as well as the risks associated with it (and referring such prospective
3 investors to the Company's 10-K on file with the SEC for further risk disclosure with respect to its
4 business, industry, etc.
5
Offering Period
6
7 In order to address concerns of the SEC and certain creditors, the debtor has decided to
8 conduct the offering for only 60 days commencing on April 5, assuming the Court grants the motion
9 currently pending before the Court. The Company seeks to raise $1,500,000 in the offering but
1o cannot be certain as to the amount, if any, that it will be able to raise. The debtor intends to use the
11 proceeds of the offering to conduct its business during the pendency of the Chapter 11 proceeding
12 and to cover the cost of the proceeding.
13 ADDITIONAL INFORMATION REQUESTED BY SECURITIES AND EXCHANGE
COMMISSION
14 Duration of Bankruptcy
15 At the current time the debtor cannot predict with accuracy when it will emerge from
16 bankruptcy.
17 Status of ValiMed G4
18 Currently three units are in working order in final form. One is being used as the demonstra-
19 tion unit, another is the data gathering unit, and the third is being used as a laboratory device. The
20 following actions must take place before the product is ready to be shipped to the end user: comple-
21 tion of a minimum of fifty different signatures of drugs for the initial library; the units must be
22 certified by CE marking and Underwriter's Laboratory for use in hospital settings; the product must
23 be sent out for third-party testing; and the units must actually be built for delivery. With DIP
24 financing, the debtor anticipates being ready to ship the first units to customers by late May, 2012.
25 Satisfaction of Debt of Investors
26 Investors who invest during the pendency of the Proceeding will receive Promissory Notes
27 pursuant to the terms of a Chapter 11 Funding Agreement which each Investor will enter into with
28 the debtor. Inthe event of a conversion of the Proceeding under Chapter 7 of the United States
5
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1 Bankruptcy Code and a liquidation of the Company's assets thereunder, the Promissory Notes will be
2 entitled to be repaid out of any assets of the Company available therefore, on a first priority basis
3 under Section 364 of the United States Bankruptcy Code, ahead of all other creditors. In the event
4 the Company exits the Proceeding and continues its business, the Promissory Notes will convert into
5 Units at a price equal to the lesser of (a) $.05 per Unit and (b) the effective price per share at which
6 the obligations of the pre-petition creditors are converted into common stock (or equivalent
7 Company equity). Each Unit consists of (I) one (1) share of the debtor's Class A common stock, par
8 value $.005 per share (the "Common Shares") and (ii) a Warrant to purchase one (1) share of the
9 Company's Class A common stock (the "Warrants").
10 Board of Directors
11 Five individuals serve on the debtor's Board of Directors. Director Jeffery Brumfield is the
12 Chairman/Chief Executive Officer of the debtor.
13 Investors Comprising Pemco, LLC
14 See the List of Investors attached as Exhibit "A".
15
16 WHEREFORE Debtor respectfully requests this Court grant the requested relief.
17 DATED: April 4, 2012.
18
LAW OFFICES OF
19 ERIC SLOCUM SPARKS, P. C.
20
/s/ Sparks AZBAR #11726
21 Eric Slocum Sparks
Attorney for Debtors 22
COPIES of the foregoing
23 mailed/delivered/faxed
April 4, 2012, to:
24
Elizabeth C. Amorosi, Esq.
25 Asst. U.S. Trustee
United States Trustee
26 230 N. First Ave. #204
Phoenix, AZ 85003
27 Elizabeth.C.Amorosi@usdoj.gov
28
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6 EXHIBIT A
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Investor Detail
Pemco LLC:
Pemco LLC is a long time investor, current large shareholder, and one of the current unsecured senior note holders to the company. He has been provided with and CDEX has requested an updated investor questionnaire. Pemco LLC has pledged $ 100,000 and most likely will have wired his funds to escrow early next week. Four members comprise Pemco, LLC, all of whom are related.
Stan Piente:
Long time private placement investor and is a large shareholder of CDEX stock. Introduced the company to current CEO and is his personal friend. $50,000 in the escrow account
Milt Datsopolous:
Mr. Datsopolous is a long time private placement investor in CDEX, an attorney, and a high net worth investor. He is a large shareholder of well over one million shares of CDEX stock. He will provide CDEX with a current updated investor questionnaire. He has pledged an investment amount of $50,000.
Robert Stewart:
The very first private placement investor in CDEX, he is responsible for multiple private placement investments throughout the years, he is a high net individual and personal friend of the CEO. He also holds a large amount of shares in the company. He has pledged $50,000 dollars, with the possibility of another $225,000 dollars
KMT investments group:
It is a newly formed investment group that has been established in the form of an LLC. It was created for the sole purpose of making an investment into CDEX. It consists of three high net worth individuals that reside in the Tucson area. They were introduced to the company through our Medical Director Dr. Jason Terrell. They have provided the company with the investor questionnaire. They have collectively funded into the escrow account a totalof $75,000 dollars.
Ralph and Eileen Terrell:
They were introduced to the company through their son Dr. Jason Terrell, who currently serves as CDEX's Medical Director. They are high net individuals and have provided the company with an investor questionnaire. They have provided $100,000 dollars to the company and it is in the escrow account.
William Terrell:
He is the brother of Jason Terrell who is our Medical Director. He is a high net worth individual, and has provided the company with an investor questionnaire and has funded $50,000 into the escrow account.
Gary Caine:
He is a long standing shareholder of CDEX stock, and personal friend of Robert Stewart. Mr. Caine is a very high net worth investor. He has pledged $50,000 dollars, but is also considering additional funds of up to a total investment amount of $250,000 dollars.
Mike Parker:
He is a current large shareholder in CDEX stock, with over 1.5 million shares that he paid over one dollar in the open market I believe around 5 years ago. He is an extremely high net worth investor and a personal friend of the CEO. He is considering an investment in the neighborhood of $200,000 dollars.
Michael Henthorn:
He is a close personal friend and business partner with Dr. Jason Terrell. Although we do not yet have a questionnaire, we have been told that he will have no problem with meeting the criteria of being an accredited investor. He has pledged $50,000 dollars.
Sean Wang PhD.:
Dr. Wang is the CEO of one of our Vendors, and is certainly qualified as an accredited investor. He has extensive experience in the small cap investment arena, and Ibelieve that he took a company that he started through to public status with the IPO opening on the NASDAQ. He is considering an investment of up to $250,000 dollars. We do not have his questionnaire at this time.
Each Board member has been given the opportunity to participate, and they are in consideration.
Current CEO is planning on providing his deferred wages that are listed in the filing into the term sheet which represents a cash equivalent of $135,000 dollars upon approval of the Court.
1
2
3
4
5
EXHIBITB
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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21
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23
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(")
ru
Ul
CD Pledged investors
potential future investors
-->. BEGINNING CASH I'-)
PROJECTED USE OF FUNDS:
7\" OPERATING EXPENSES:
O Rent and Insurance
I'-) Utilities
.j::>. Professional (Lawyers, Auditors and Reporting to SEC)
Travel
"Tl 1 Trade Shows
O C..... Salaries/Wages/ Employer Contributions (5 Employees)
...., :S:: Commissions on Domestic Sales
:s;: Marketing/Public Relations/Web Site
Q) Research and Development /Trials/ Capital Equipment
O TOTAL OPERATING EXPENSES
CDEX INC.
FORECAST USE AND SOURCE OF FUNDS
For the 12-month period ending February 2013
March-12 April-12 May-12 June-12 July-12 August-12 September-12 October-12 November-12 December-12 January-13 February-13 TOTAL
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
575,000
8,334 8,334 8,334 8,334 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 100,000
1,666 1,666 1,666 1,666 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 20,000
6,000 1,500 1,500 6,000 10,000 1,500 6,000 1,500 1,500 1,500 20,000 1,500 58,500
5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
0 7,500 7,500 0 0 0 0 0 5,000 10,000 5,000 0 35,000
35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 420,000
0 250 500 750 1,000 1,250 1,500 5,250
3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
(gf)
PROJECTED REVENUES:
Q.. Medical Safety Division:
...., 0 Domestic Markets
.j::>. Rental/Lease ValiMed CCT
O Va Ii Med Maintenance Fees for CCT
- .j::>. Cuvette Sales
"'TI :::;;:: G4 Service Fees for Company Placements
C I'-) G4 Service Fees for Outside Sales Group Placements
::J Installation Fees for Company G4 Placemants
Installation Fees for G4 Outside Sales Group
::J Deposits for G4 Placements for Company
CD Deposits for G4 Placements for Outside Sales Group
"U..,
CD TOTAL ESTIMATED REVENUE
CD 0..
I'-) EST INCREASE/DECREASE IN CASH POSITION
Q., EST. ENDING CASH ON HAND (,0
-->.
I'-)
-->.
-->.
-->.
<D
(,0
0
0
CD
Ul
()
2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
5,000 5,000 5,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 33,000
5,000 12,500 22,500 25,000 30,000 35,000 40,000 45,000 50,000 55,000 320,000
0 0 0 0 2,500 5,000 7,500 10,000 12,500 15,000 52,500
8,000 12,000 16,000 4,000 8,000 8,000 8,000 8,000 8,000 8,000 88,000
0 0 4,000 4,000 4,000 4,000 4,000 4,000 24,000
5,000 7,500 10,000 2,500 5,000 5,000 5,000 5,000 5,000 5,000 55,000
2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 22,500
3/29/2012 5:55 PM lyearcashflow725kjust valimedg4 lof 1
CDEX INC.
FORECAST USE AND SOURCE OF FUNDS
For the 12-month period ending February 2013
TOTAL
Forecast
Pledged investors
575,000
potential future investors
925,000
BEGINNING CASH
1,500,000
PROJECTED USE OF FUNDS:
OPERATING EXPENSES:
Rent and Insurance
100,000
Utilities
20,000
Professional (Lawyers, Auditors and Reporting to SEC)
58,500
Travel
60,000
Trade Shows
35,000
Salaries/Wages/ Employer Contributions (5 Employees)
420,000
Commissions on Domestic Sales
5,250
Marketing/Public Relations/Web Site
36,000
Research and Development/ Trials/ Capital Equipment
155,000
TOTAL OPERATING EXPENSES
889,750
Cost to Produce Products Cost to Produce Cuvettes
4,950
Maintenance Inventory for G4's for the Domestic Markets
30,000
Cost to Produce G4 Company Placements
330,000
Cost to Produce G4 ISA Group Placements
90,000
Total Cost to Produce
454,950
PROJECTED REVENUES:
Medical Safety Division:
Domestic Markets
Rental/Lease ValiMed CCT
30,000
ValiMed Maintenance Fees for CCT
42,000
Cuvette Sales
33,000
G4 Service Fees for Company Placements
320,000
G4 Service Fees for Outside Sales Group Placements
52,500
Installation Fees for Company G4 Placemants
88,000
Installation Fees for G4 Outside Sales Group
24,000
Deposits for G4 Placements for Company
55,000
Deposits for G4 Placements for Outside Sales Group
22,500
TOTAL ESTIMATED REVENUE
667,000
EST INCREASE/DECREASE IN CASH POSITION
(677,700)
EST. ENDING CASH ON HAND
822,300
3/29/2012 5:52 PM
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Cas 4: 12-bk-02402-JMM Doc 49-3 Filed 04/04/12 Entered 04/04/12 11:19:30 Desc Fundi g Agreement Promissory Note Term Sheet Subscription Agreement Page 1 of 19
CDEXINC.
SUPPLEMENT, DATED AS OF FEBRUARY 10, 2012, TO
CONFIDENTIAL TERM SHEET DATED DECEMBER 15, 2011 (THE "TERM SHEET") FOR
PRIVATE PLACEMENT OF UNITS
Explanatory Note: Subsequent to the issuance of the Term Sheet and funding of the Minimum Offering by certain investors, on February 10, 2012 (the ''Filing Date"), the Company filed a petition for relief under Chapter 11 of the United States Bankruptcy Code (the "Proceeding") in · the United States Bankruptcy Court for the District of Arizona (the "Court"). This February 10, 2012 Supplement is being provided to investors in the Offering (as such term is defined in the Term Sheet) who either (i) have funded their investment after the Filing Date or (ii) have agreed to allow their subscription proceeds to be governed by the additional terms set forth in this supplement and used by the Company as a Debtor-in-Possession during the pendency of the Proceeding. (See additional Risk Factors set forth in this Supplement for risks relating to the bankruptcy.)
Issuer............................ CDEX Inc. (OTCBB: CEXI (CEXIQ during the pendency of the
Proceeding) (the "Company") 4555 South Palo Verde, Suite 123
Tucson, Arizona 85714
(520)745-5172
Investors........................ All investors (the "Investors") in the Offering must be
"accredited investors" within the meaning of Rule 501 of Regulation D and must either have sufficient knowledge of financial and business matters as to be able to evaluate an investment in the Offering and make a sound investment decision or have a financial advisor who is able to make such an evaluation on the investor's behalf.
Debtor in Possession Funding; Conversion to Securities under
Offering........................
Risk Factors and Other Disclosure ..................... .
Promissory Notes: Investors who invest during the pendency of the Proceeding will receive Promissory Notes pursuant to the terms of a Chapter 11 Funding Agreement which each Investor will enter into with the Company. In the event of a conversion of the Proceeding into a proceeding under Chapter 7 of the United States Bankruptcy Code and a liquidation of the Company's assets thereunder, the Promissory Notes will be entitled to be repaid out of any assets of the Company available therefor, on a first priority basis under Section 364 of the United States Bankruptcy Code, ahead of all other creditors. In the event the Company exits the Proceeding and continues its business, the Promissory Notes will convert into Units at a price equal to the lesser of (a) $.05 per Unit and (b) the effective price per share at which the obligations of the pre-petition creditors are converted into common stock (or equivalent Company equity).
Units: Each Unit consists of (i) one (1) share of the Company's Class A common stock, par value $0.005 per share (the "Common Shares") and (ii) a Warrant to purchase one (1) share of the Company's Class A common stock (the "Warrants").
An investment in the Securities involves a high degree of risk and is only suitable for Investors who can afford a total loss of their investment in the Offering.
Because the Company has entered the Proceeding, its future is uncertain and an investment in the Offering poses a greater than usual risk of loss of investment. Although the funds invested during the pendency of the Proceeding will be held in escrow pending the Court's decision on the Section 364 motion, there can be no assurance that the court will grant the motion or that even if it does, giving the Investors who fund during the pendency of the Proceeding, the Company will have sufficient assets to satisfy the claims of such Investors.
Further information, including a detailed discussion of risk factors associated with the Company's business can be found in the Company's reports on Forms 10-K, 10-Q and 8-K and other public disclosure documents on file with the Securities and Exchange Commission at www.sec.gov.
Closing and Escrow .......... Pursuant to an Amended and Restated Escrow Agreement, a
copy of which is included in the package of offering materials under, all proceeds of this Offering will be placed into escrow (the "Escrow") with Madama Griffitts O'Hara LLP. All funds in escrow will be disbursed pursuant to Court order.
Restricted Securities.......... The Securities offered hereby are not being registered under the
Securities Act of 1933, as amended (the "Securities Act") for
resale or distribution and may not be sold or transferred without such registration except pursuant to a valid exemption therefrom or in accordance with Rule 144 under the Securities Act.
Placement Agent Fees ...... The Company currently has no intention to pay any
commissions or finders' fees in connection with this Offering or the issuance and sale of the Securities.
Initial Closing Conditions; Availability of Proceeds Following Initial
Closing............
The initial Closing shall be conditioned upon:
(i) The receipt by the Company of fully-executed subscription packages from the Investors for the purchase of the Minimum Offering of Securities; and
(ii) Delivery by Investors of funds into Escrow in the amount of the Minimum Offering; and
(iii) The satisfactory completion of all conditions under the Escrow Agreement.
Following the Initial Closing, the Escrow Agreement shall terminate and the Company shall receive the proceeds of any further subscriptions for Securities in the Offering directly into its operating account. The Company may use such proceeds immediately, in its sole discretion, in accordance with the "Use of Proceeds" set forth hereunder.
Use of Proceeds............... Subject to the risk factors set forth elsewhere in this
Supplement, the net proceeds from this Offering will be used to fund the Company's operations during the pendency of the Proceeding as well as expenses associated therewith. Upon conclusion of the Proceeding and assuming the Company does not enter a liquidation, any remaining proceeds may be used to settle certain debt obligations of the Company, on terms and conditions to be negotiated with the creditors in the sole discretion of management, and the balance will be used for working capital.
Termination of Offering . . . The Offering shall terminate upon the earliest to occur:
(i) The receipt by the Company of fully-executed subscription packages and corresponding funds in the amount of the Maximum Offering;
(ii) The lapse of sixty days from the date of the hearing granting the Section 364 motion; or
(iii) Earlier termination of the Offering by the Company or by Court order.
Governing Law and
Jurisdiction ................. . New York law (subject to the jurisdiction of the Court during the pendency of the Proceeding)
TIDS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE SECURITIES ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY TIDS NOTE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WIDCH IS EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION.
PROMISSORY NOTE
------- 2012
FOR VALUE RECEIVED, CDEX Inc., a Nevada corporation (the "Borrower"), promises to pay to the order of-------------------------
having an address at ("Lender"), the
sum of ($ , with interest, accrued but not compounded, on the unpaid balance outstanding from time to time at an annual rate equal to twelve percent (12%) ("Loan"). The Loan is made and this Note issued pursuant to that certain Chapter 11 Funding Agreement, of even date herewith (the "Funding Agreement"), and all terms capitalized but not defined herein shall have the meaning ascribed them in the Funding Agreement.
The entire unpaid principal balance of the Loan, together with accrued and unpaid interest, shall be due and payable immediately upon the liquidation of Borrower's assets pursuant to an order from the bankruptcy court having jurisdiction over the Borrower's estate in bankruptcy ("Maturity Date"). In the event that the Borrower shall exit its bankruptcy to continue as a going concern, then the balance of principal plus accrued interest due under this Note shall convert into the right to receive units in the Offering at a price of $0.05 per unit under the terms and conditions set forth in the Subscription Agreement.
Borrower hereby waives presentment, demand for payment, protest, notice of protest and notice of dishonor. No extension of time for payment of this Note or any installment hereof, no alteration, amendment or waiver of any provision of this Note and no release or substitution of any collateral securing Borrower's obligations hereunder shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower under this Note.
Any forbearance by the holder of this Note in exercising any right or remedy hereunder or under any other agreement or instrument in connection with the Loan or otherwise afforded by applicable law, shall not be a waiver or preclude the exercise of any right or remedy by the holder of this Note. The acceptance by the holder of this Note of payment of any sum payable hereunder after the due date of such payment shall not be a waiver of the right of the holder of this Note to require prompt payment when due of all other sums payable hereunder or to declare a default for
14? il?M.re 402-JMM Doc 49-3
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failure to make prompt payment.
In addition to the rights and remedies provided herein, the holder of this Note may exercise any other right or remedy in any other document, instrument or agreement evidencing, securing or otherwise relating to the indebtedness evidenced hereby in accordance with the terms thereof, or under applicable law, either simultaneously or in such order as the holder of this Note shall deem in its best interest, all of which rights and remedies shall be cumulative, and may be exercised concurrently, consecutively or in such order as Lender may elect in its sole and absolute discretion.
Borrower shall pay the Lender, upon demand, for all reasonable costs and expenses, including, but not limited to, reasonable attorney's fees, incurred in connection with the collection of this Note.
If this Note is transferred in any manner, the rights, remedies and other provisions herein shall apply with equal effect in favor of any subsequent holder hereof.
All payments of principal and interest hereunder are payable in lawful money of the United States of America at the office of Lender, or at such other place as the holder hereof shall designate to Borrower inwriting.
This Note shall be binding on the Borrower and its heirs, legal representatives, executors, successors and assigns, and shall inure to the benefit of Lender and its heirs, legal representatives, executors, successors and assigns.
This Note shall be governed by and construed in accordance with the laws of the State of New York (subject to the jurisdiction of the United States Bankruptcy Court in the District of Arizona, without regard to conflicts of laws considerations, subject in all events to the applicable federal bankruptcy laws.
If any terms or provision of this Note or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Note, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Note shall be valid and enforceable to the fullest extent permitted by law.
EACH OF LENDER AND BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO ANY TRIAL BY JURY IN ANY CLAIM, COUNTERCLAIM, CROSS-CLAIM, CAUSE OF ACTION OR PROCEEDING BASED UPON OR ARISING OUT OF OR IN CONNECTION WITH TIDS NOTE. TIDS WAIVER IS KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND FREELY MADE BY BORROWER AND LENDER. BORROWER AND LENDER ACKNOWLEDGE THAT Tms WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT BORROWER AND LENDER HAVE RELIED ON TIDS WAIVER IN ENTERING INTO TmS NOTE, AND THAT EACH OF THEM WILL CONTINUE TO RELY ON TIDS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT EACH HAS BEEN
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REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN THE SIGNING OF TIDS NOTE AND IN THE MAKING OF TIDS WAIVER AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVE THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
1bisNote may not be changed or terminated orally.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first above written.
CDEXInc.
Name: Title:
SUBSCRIPTION AGREEMENT
CDEXInc.
4555 South Palo Verde, Suite 123
Tucson, Arizona 85714 Ladies and Gentlemen:
It is understood that the securities described below are being offered for sale pursuant to an exemption from the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"), and in particular, Regulation D.
1. Subscription. The undersigned (hereinafter referred to as the "Subscriber") hereby subscribes for the number of units (the "Units"), each consisting of (i) one (1) share of Class A common stock, par value $0.005 per share (the "Shares"), and (ii) a warrant to purchase one (1) share of Class A common stock at $[0.05] per share, set forth on the signature pages hereof which Units are to be issued by CDEX Inc. (the "Company"), a Nevada corporation. The Company is offering a minimum of 6,000,000 Units and a maximum of 70,000,000 Units (the "Offering"), pursuant to a Confidential Term Sheet, dated as of December _, 2011 (the "Term Sheet").
[Check one of the following:]
[ ] Accompanying this Subscription Agreement is Subscriber's check payable to the Company in the amount of$ ($0.05 multiplied by the number of Units purchased) in payment of the purchase price for the Units subscribed for hereby;
-OR-
[ ] Subscriber has wired to the Company in good funds and in accordance with the wiring instructions provided by the Company to the Subscriber the amount of $ _ ($0.05 multiplied by the number of Units purchased) (in payment of the purchase price for the Units subscribed for hereby.
Subscriber understands that the Company may utilize the proceeds of this offering after its receipt of proceeds in the minimum offering amount of $350,000. Upon the achievement by the Company of such minimum offering amount, all net proceeds will be deposited in the capital account of the Company and will be available for immediate use in accordance with the terms of the Term Sheet.
2. Representations, Warranties and Covenants of the Subscriber.
2.1 The undersigned, by executing and delivering this Subscription Agreement, hereby
·------ -, -
represents and warrants to the Company:
(a) The Subscriber is an "Accredited Investor" as that term is defined in Section 2(a)(15) of the Securities Act and Rule 501 of Regulation D promulgated thereunder.
Specifically, the Subscriber is (initial appropriate items):
(i) A bank defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(a)(l3) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (the "Investment Company Act") or a business development company as defined in Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 30l(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets greater than $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of BRISA, which is either a bank, savings and loan association, insurance company, or a registered investment advisor, or if the employee benefit plan has total assets greater than $5,000,000 or, if a self directed plan, with investment decisions made solely by persons that are accredited investors.
(ii) A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
(iii) An organization described in Section 50l(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets greater than $5 million.
(iv) a natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1 million excluding the Subscriber's primary residence.
(v) A natural person who had an individual income greater than $200,000 in each of the two most recent years or joint income with that person's spouse greater than $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
(vi) A trust, with total assets greater than $5 million not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the 2
prospective investment.)
(vii) an entity in which allofthe equity owners are Accredited Investors. (If this alternative is checked, the Subscriber must identify each equity owner and provide statements signed by each demonstrating how each is qualified as an accredited investor.)
(b) he, she or it and/or his, her or its attorney, accountant and/or purchaser representative have been afforded the opportunity to ask questions of and receive answers from the officers and directors of the Company concerning the terms and conditions of this private placement and to obtain any additional information which the officers and directors possess or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information provided to the Subscriber by the Company.
(c) he, she or it either personally has such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the proposed investment, or, together with a purchaser representative, and business and tax advisors, on whose advice he, she or it has relied, had such knowledge and experience;
(d) he, she or it has.adequate means of providing for current :financial needs and possible personal contingencies and is able to bear the economic risks of the investment (i.e., to afford a complete loss);
(e) he, she or it is aware that no trading market exists for the Units or the Warrants and that he, she or it likely will not be able to liquidate the investment hereunder until such time as (i) the Company has filed, and the SEC declared effective, a registration statement permitting the resale of the Shares or (ii) the shares may be sold pursuant to Rule 144 under the Securities Act;
(f) if an individual, he or she is a citizen of the United States (the Company shall have the right to waive this condition), at least 21 years of age and a bona fide resident and domiciliary (not a temporary or transient resident) of the state hereinafter set forth adjacent to the signature of the undersigned, and he has no present intention of becoming a resident of any other state or jurisdiction or an entity formed in the United States doing business in the state hereinafter set forth;
(g) there has been no change in the information previously supplied by the undersigned in the Questionnaire for prospective purchasers and such information is complete and accurate;
(h) The undersigned has fully read and considered the Term Sheet and the contents of the Term Sheet, including, without limitation, and the undersigned confirms that, except as set forth
. in the Term Sheet and the attachments thereto, no representations or warranties have been made to the undersigned by the Company or its principals, or any agent, employee or affiliate of any of them, and that in entering into this transaction he, she or it is not relying upon information, other than that contained in the Term Sheet and the attachments thereto, and the results of his, her or
its own independent investigation. The Subscriber has reviewed and understands all of the
. 3
reports on Forms 10-K, 10-Q and 8-K for the past year on file with the Securities and Exchange Commission (the "SEC") and has read all other reports and documents of the Company on file with the SEC as Subscriber deemed necessary to evaluate the investment hereunder.
2.2 The Subscriber hereby agrees not to sell, transfer or otherwise dispose of the Units unless, in the opinion of counsel to the Company, such sale, transfer or disposition may be legally made without (i) registration under the Securities Act, and/or (ii) registration and or qualification under then applicable state and/or federal statutes, or such sale, transfer or disposition shall have been so registered and/or qualified and an appropriate prospectus shall then be in effect.
3. Common Stock. Holders of Shares are entitled to dividends when and as declared by the Board of Directors from funds legally available therefor and, upon liquidation, are entitled to share pro rata in any distribution to shareholders after payment of any liquidation preference to holders of preferred stock, if any. Holders of Shares have the right to cast one vote for each share of Class A common stock held by such holders.
Neither the Shares, the Warrants nor the Units have been registered under the Securities Act and are being sold in reliance upon the exemption contained in Regulation D of the Securities Act. Purchasers of Units, will have no rights of registration and will not be able to sell and or otherwise dispose of their Shares, Warrants or the Units, unless a registration statement is in effect and/or an exemption from the registration requirements of the Securities Act is available.
4. Miscellaneous.
4.1 All notices or other communications given or made hereunder shall be in writing and shall be delivered by hand or mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned, at the respective address set forth herein, and to the Company at the address set forth above.
4.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and wholly performed in that state.
4.3. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by the party to be bound thereby.
4.4 This Agreement is not transferable or assignable by Subscriber.
4.5 All references in this Agreement to the "Subscriber" shall include all parties (other than the Company) who execute this Agreement. If the Subscriber is a corporation, partnership, trust or two or more individuals purchasing jointly, note the specific instructions for the Certificate of Corporate, Partnership, Trust and Joint Purchases. Please date and sign the
4
certificate.
5. Acceptance of Subscription. It is understood that this subscription is not binding upon the Company until the Company accepts it, and that the Company has the right to accept or reject this subscription in whole or in part in its sole and complete discretion. If this subscription is rejected in whole, the Company shall return the subscription amount to Subscriber, without interest, and the Company and Subscriber shall have no further obligation to each other hereunder. In the event of a partial rejection of this subscription, a pro rated amount of the subscription amount will be returned to Subscriber, without interest.
[TIDS SPACE LEFT BLANK INTENTIONALLY]
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INDIVIDUALS
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber and by the Company on the respective dates set forth below.
Amount of Purchase Price Number of Units Price Per Unit (Check Enclosed)
x $----- $
Social Security No. Individual Signature(s):
Date Signature of Subscriber
Printed Name
Telephone No. Street
City State Zip
Date Signature of Co-Subscriber
Social Security No. Printed Name
Telephone No. Street
City State Zip Subscription Accepted by:
CDEXInc.
Date:. _
CORPORATIONS, TRUSTS OR PARTNERSHIPS
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber and by the Company on the respective dates set forth below.
Number of Units Price Per Unit
Amount of Purchase Price (Check Enclosed)
x $_ $ Corporation, Trust or Partnership:
Date Printed Name of Subscriber
By:
Signature of Authorized Signatory
Tax Identification No. Telephone No.
Street Address of Subscriber City State Zip Subscription Accepted by: CDEXInc.
By:
Date:
Printed Name of Authorized Signatory
SPECIAL SUBSCRIPTION INSTRUCTIONS FOR CORPORATE, PARTNERSHIP, TRUST, AND JOINT SUBSCRIBERS
Ifthe subscriber is a corporation, partnership, trust, or other entity or joint purchaser, the following additional instructions must be followed. INFORMATION ADDITIONAL TO THAT REQUESTED BELOW MAY ALSO BE REQUIRED BY THE COMPANY IN SOME CASES.
I. Certificate. The subscriber must date and sign the Certificate below, and, if requested by the Company, the subscriber may also be required to provide an opinion of counsel to the same effect as this Certificate or a copy of (a) the corporation's articles of incorporation, bylaws and authorizing resolution, (b) the partnership agreement, or (c) the trust agreement, as applicable.
II. Subscription Agreement.
A. Corporations. An authorized officer of the corporation must date, sign, and complete the Subscription Agreement with information concerning the corporation. The officer should print the name of the corporation above his signature, and print his name and office below his signature.
B. Partnerships. An authorized partner must date, sign, and complete the Subscription Agreement with information concerning the partnership. The partner should print the name of the partnership above his signature, and print his name and the words "general partner" below his signature.
C. Trusts. In the case of a trust, the authorized trustee should date, sign, and complete the Subscription Agreement with information concerning the trust. The trustee should print the name of the trust above his signature, and print his name and the word "trustee" below his signature. In addition, an authorized trustee should also provide information requested in the Subscription Agreement as it pertains to him as an individual.
D. Joint Ownership. In all cases, each individual must date, sign, and complete the Subscription Agreement. Joint subscribers must state if they are purchasing the Shares as joint tenants with the right of survivorship, tenants in common, or community property, and each must execute the Subscription Agreement signature page.
CERTIFICATE FOR CORPORATE, PARTNERSHIP, TRUST, AND JOINT PURCHASERS
Ifthe subscriber is a corporation, partnership, trust, joint purchaser, or other entity, an authorized officer, partner, or trustee must complete, date, and sign this Certificate.
CERTIFICATE
I hereby certify that:
a. The subscriber has been duly formed and is validly existing and has full power and authority to invest in Image Technology Laboratories, Inc.
b. The Subscription Agreement has been duly and validly authorized, executed, and delivered by the subscriber and, upon acceptance by the Company, will constitute the valid, binding, and enforceable obligation of the subscriber.
Dated: ---
Name of corporation, partnership, trust or joint purchases (please print)
Signature and title of authorized officer, partner, trustee, or joint purchaser
CHAPTER 11FUNDING AGREEMENT
This AGREEMENT, is entered into as of the day of , 2012 by and between CDEX Inc. (the "Company") and (the "Investor").
WHEREAS, the parties have entered into a Subscription Agreement, dated as of , 2012 (the "Subscription Agreement"), under the terms of a private offering (the "Offering") pursuant to which the Investor agreed to purchase ' units at a price of $0.05 per unit (or$ in the aggregate), each unit consisting of one share of Class A common stock and a warrant to purchase one share of Class A common stock in the Company at an exercise price of $0.05 per share, the proceeds of which are currently held in escrow with Madama Griffitts O'Hara LLP, as escrow agent (the "Escrow Agent") pending achievement of the Minimum Offering amount;
WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the shareholders and creditors of the Company that it file a petition (the "Chapter 11 Filing") under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Arizona (the "Court");
WHEREAS, the Company requires funding to cover the expenses of the Chapter 11 Filing and to continue its operations during the pendency of the Chapter 11 bankruptcy, and the Investor has agreed to apply the proceeds currently held in escrow pursuant to the Subscription Agreement to provide such funding on the terms and conditions set forth herein; and
WHEREAS, the parties understand and acknowledge that the Company will continue to seek additional funding from other investors on similar terms under obligations which will rank pari passu with that of the Investor hereunder.
NOW THEREFORE, In consideration of the premises and other good and valuable consideration, the parties agree as follows:
1. The Investor hereby agrees to lend the Company up to $ (the "Loan") to cover the expenses of its Chapter 11 Filing as set forth on Schedule 1hereto and to continue its operations during the pendency of the Chapter 11 bankruptcy, subject to entry of an order by the Court to grant the Investor a first priority position with respect to the amount of the Loan. The proceeds of the Loan shall be diverted from proceeds of the Offering currently held by the Escrow Agent in accordance with joint written instructions delivered to the Escrow Agent by the parties hereto and upon approval of the Court.
2. Upon execution of this Agreement and following an order from the Court granting the Company financing motion under Section 364 of the Bankruptcy Code and ordering release of the Loan proceeds to the Company, the Company shall issue to the investor a Promissory Note in the original principal amount of the Loan bearing interest at a rate of 12% per annum, in substantially the form attached hereto as Exhibit A (the "Note"). The Company shall deliver the Note to the Escrow Agent, to be held in escrow and delivered to the Investor immediately prior to the release of the Loan proceeds. The Company agrees
that immediately following the Chapter 11 Filing, it will petition the bankruptcy court for an order granting the Investor a first priority security interest with respect to the Loan; provided, however, that the Investor acknowledges and agrees that the Company will seek additional funding on substantially the same terms as provided hereunder and under the Note which shall also be subject to a first priority
security interests and rank pari passu with the obligation created hereby and by the Note . Upon receipt of such an order granting the Investor a first priority security interest with respect to the Loan, the parties shall instruct the Escrow Agent in writing to deliver the Note to the Investor and to release to the
Company from its escrow funds in the amount of the Loan as needed to cover expenses of the Chapter 11 Filing.
3. In the event that the Company exits its bankruptcy under Chapter 11 to continue operating as a going concern, the parties agree that the Note shall be converted into the right to receive shares in the Offering in an aggregate amount equal to the balance due thereunder and shall thereafter be of no further force or effect. In such event, the proceeds of the funding shall revert back to their prior status as an investment in the Offering under the terms and conditions set forth in the Subscription Agreement. The parties shall so instruct the Escrow Agent in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CDEXINC.
By:
Name:
Title:
INVESTOR:
Printed Name:
Ole Crowe
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