Exhibit 10.2

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of July 30,
2020, by and between Cardax, Inc., a Delaware corporation (the “Company”), and
_______________ (the “Purchaser”). Certain capitalized terms used in this
Agreement are defined in Section 1.1.

 

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

 

WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”);

 

WHEREAS, subject to the terms and conditions set forth in this Agreement the
Company desires to sell to the Purchaser and the Purchaser desires to purchase
the “Securities” (as defined below) for aggregate consideration of
$_______________:

 

(a)       a convertible promissory note (the “Note”), in the form attached
hereto as Exhibit I, with an aggregate principal amount of $_______________,
convertible into shares of Common Stock at $____, subject to adjustment and upon
the terms and conditions set forth in the Transaction Documents; and

 

(b)       a warrant (the “Warrant”), in the form attached hereto as Exhibit II,
exercisable for 5 years from issuance, to purchase __________ shares of Common
Stock at a price per share of $____, subject to adjustment and upon the terms
and conditions set forth in the Transaction Documents.

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

“Closing Date” means the date of this Agreement.

 

 

 

 

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

 

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

 

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

 

“Registration Statement” means the registration statement filed by the Company
with the Securities and Exchange Commission for the public offering of Common
Stock and warrants to purchase Common Stock (registration no. 333-233281).

 

“Securities” means the Note, the Warrant, and any shares of Common Stock issued
or issuable to the Purchaser under the Note and the Warrant.

 

“Securities Purchase Amount” means the aggregate amount to be paid for the
Securities, which amount shall be paid by the Purchaser making a payment to the
Company as provided in this Agreement.

 

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

 

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

 

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

 

ARTICLE II

PURCHASE AND SALE

 

2.1       Closing.

 

(a)       On the Closing Date, the Purchaser shall purchase the Securities and
the Company shall issue the Securities.

 

2.2       Deliveries.

 

(a)       On the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company a check or wire transfer of the Securities Purchase
Amount of the Purchaser in accordance with the check or wire transfer
instructions set forth on Schedule A to this Agreement.

 

(b)       On the Closing Date, the Company and the Purchaser shall close the
purchase and sale of the Securities and the Company shall promptly deliver or
cause to be delivered to the Purchaser evidence of the issuance and delivery of
the Securities by appropriate instructions to the stock transfer agent of the
Company.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

(b)       Capitalization. The capitalization of the Company is properly
reflected in all material respects by the SEC Filings as of the date indicated
in such filings.

 

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

 

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

 

(e)       Financing Needs. The Company requires immediate financing through the
offering of the securities under this Agreement to acquire additional funds for
certain working capital and general corporate purposes that are due and payable
within 30 days and if not paid would cause a material adverse effect to the
Company, including the payment of payroll and other cash compensation and
insurance. Accordingly, the purpose of the offering under this Agreement is
different than the planned use of proceeds from the public offering described in
the Registration Statement.

 

3.2       Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows (unless as of a specific date therein):

 

(a)       Organization; Authority.

 

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

 

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

 

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

 

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

 

(c)       Purchaser Status. At the time the Purchaser was offered the
Securities, it was, and as of the date hereof it is an “accredited investor” as
defined in Rule 501 under the Securities Act; or (ii) a Non U.S. Person within
the meaning of Regulation S under the Securities Act. The information provided
by the Purchaser to the Company in the Certificate of Accredited Investor Status
is true and correct.

 

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

 

(e)       No Short Sales. The Purchaser shall not directly or indirectly, nor
shall any Person acting on behalf of or pursuant to any understanding with the
Purchaser, execute any Short Sales of the securities of the Company while the
Note is outstanding.

 

(f)       Disclosure.

 

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

 

(ii)       The Purchaser agrees that it has had an opportunity to conduct its
due diligence on the investment and in connection therewith: (a) obtain
additional information concerning investment in the Securities, including
without limitation, information concerning the Company and any other matters
relating directly or indirectly to the purchase of the Securities by the
Purchaser; (b) ask questions of, and receive answers from, the executives of the
Company concerning the terms and conditions of investment in the Securities and
to obtain such additional information as may have been necessary to verify the
accuracy of any information that may have been provided to the Purchaser; and
(c) acknowledges that the only information the Purchaser relied upon is
information or documentation that was provided expressly by the Company to the
Purchaser for such purposes. The Purchaser acknowledges that it has had
information about the Company based on its investments in the Company and by
reference to the SEC Filings other than the Registration Statement.

 

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(iii)       The Purchaser and/or Purchaser’s advisor acknowledges that it has
received and reviewed the SEC Filings, including the summary of risks contained
in the “Risk Factors” sections in such documents and Schedule B and certain
matters regarding the use of proceeds set forth in Section 4.3 and had access to
or been furnished with sufficient facts and information to evaluate an
investment in the Company and a reasonable opportunity to ask questions of and
receive answers from a person or persons acting on behalf of the Company
concerning the Company and all such questions have been answered to the full
satisfaction of the Purchaser. The Purchaser acknowledges that in addition to
the risks summarized in Schedule B, there is a risk that the public offering
contemplated by the Registration Statement will not be consummated, that the
Company may abandon the Registration Statement for any reason, including without
limitation, market conditions or any decision by the lead underwriter described
therein, which decision is in the sole and absolute discretion of such
underwriter. The Purchaser acknowledges it would purchase the securities to be
issued by the Company under this Agreement even if the Company does not complete
the public offering described in the Registration Statement.

 

(g)       Solicitation. The Purchaser acknowledges that it did not become
interested in the purchase of securities to be issued by the Company through any
general solicitation or advertisement, including the Registration Statement. The
Purchaser acknowledges that it has a substantive, preexisting personal
investment relationship with the Company based on its ownership of Common Stock
and warrants and several investments by the Purchaser. The Purchaser was
solicited by the Company via direct solicitation by the Chief Executive Officer
of the Company (the “CEO”), who has a personal relationship with the Purchaser,
and a determination by the CEO that the Purchaser has the means and is likely to
continue its investment interest in the Company. The Purchaser acknowledges that
it was solicited by the Company for interest in the securities to be issued by
the Company under this Agreement and that the Purchaser was not identified or
contacted through the marketing of the public offering under the Registration
Statement and the Purchaser did not independently contact the Company as a
result of any solicitation by any broker dealer, including the lead underwriter
specified in the Registration Statement.

 

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

 

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Transfer Restrictions.

 

(a)       The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of any of the
Securities other than pursuant to an effective registration statement or Rule
144, to the Company or to an Affiliate of the Purchaser, the Company may require
the transferor thereof to provide to the Company an opinion of counsel selected
by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Securities under the Securities Act.

 

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(b)       Legend on Share Certificates. The Purchaser agrees to the imprinting,
so long as is required by this Section 4.1, of a legend on any of the
certificates representing the Securities in the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

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

 

(d)       The Purchaser agrees that it will sell any Securities only pursuant to
either: (i) the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements; or (ii) an exemption therefrom, and
that if the Securities are sold pursuant to any such effective registration
statement, they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges that the removal of the restrictive legend from
certificates representing the Securities set forth in this Section 4.1 is
predicated upon the Company’s reliance upon this understanding.

 

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

 

4.3       Use of Proceeds. The Company will use the proceeds from this
transaction for its product development, commercialization, and general
corporate purposes.

 

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

 

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ARTICLE V
MISCELLANEOUS

 

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

 

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

 

5.3       Notices. All notices (including any consent required of any party to
the Transaction Documents) given or permitted to be provided pursuant to the
Transaction Documents shall be in writing and shall be mailed by certified mail,
delivered by professional courier or hand, or transmitted via email. The
Purchaser may change the address that notices should be delivered to it by
delivering a notice with the corrected information to the Company. The Company
may change the address that notices should be delivered to it by delivering a
notice with the corrected information to the Purchaser then a party to this
Agreement. In each case, such corrected information to be effective only upon
delivery of such notice. Except as otherwise expressly provided in the
Transaction Documents, each such notice shall be effective on the date three
days after the date of mailing or, if delivered by hand or professional courier,
or transmitted via email with delivery receipt (or acknowledgement or
confirmation which may be by electronic means), on the date of delivery,
provided, however, that notices to the Company will be effective upon receipt.

 

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

 

5.5       Headings. The headings in the Transaction Documents are for
convenience only, do not constitute a part of the Transaction Documents and
shall not be deemed to limit or affect any of the provisions thereof.

 

5.6       Successors and Assigns. The Transaction Documents shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign the Transaction Documents or any rights or
obligations thereunder without the prior written consent of the Purchaser (other
than by merger). The Purchaser may assign any or all of its rights under this
Agreement to any Person; provided that such assignment is approved by the
Company, which approval shall not be unreasonably withheld, delayed or
conditioned and such transferee agrees in writing to be bound by the provisions
of the Transaction Documents that apply to the “Purchaser” and such transferee
is able and makes the representations and warranties to the Company provided
under Section 3.2.

 

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5.7       Third-Party Beneficiaries. The Transaction Documents are intended for
the benefit of the parties thereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision thereof be enforced
by, any other Person.

 

5.8       Governing Law. The Transaction Documents are to be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to the conflict of laws principles thereof.

 

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

 

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

 

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

 

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

 

5.13       Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.

 

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

 

[signature page follows]

 

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

 

Cardax, inc.         By:     Name:   Title:         [Name of Purchaser]        
By:       Name:   Title:  

 

 

 

 

SCHEDULE A

 

Check and Wire Transfer Instructions

 

[provided separately]

 

 

 

 

SCHEDULE B

 

Certain Additional Risk Factors

 

In addition to the risk factors summarized in the Company’s SEC Filings, you
should consider the following:

 

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

 

The terms of this transaction and the purchase price for the Securities were not
independently valued and may not be indicative of the future price of Common
Stock.

 

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

 

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

 

The Securities will be restricted securities under United States federal and
applicable state securities laws. The Securities will be restricted securities
unless and until the Securities are registered. Restricted securities may not be
transferred, sold or otherwise disposed of in the United States, except as
permitted under United States federal and state securities laws, pursuant to
registration or an exemption therefrom. You should be prepared to hold the
Securities for an indefinite period.

 

The Securities may not be sold unless, at the time of such intended sale, there
is a current registration statement covering the resale of the securities or
there exists an exemption from registration under the Securities Act, and such
securities have been registered, qualified, or deemed to be exempt under
applicable securities or “blue sky” laws in the state of residence of the seller
or in the state where sales are being affected.

 

If there is not an effective registration statement covering the resale of the
Securities, you will be precluded from disposing of such shares unless such
shares may become eligible to be disposed of under the exemptions provided by
Rule 144 under the Securities Act without restriction. If the Securities are not
registered for resale under the Securities Act, or exempt therefrom, and
registered or qualified under applicable securities or “blue sky” laws, or
deemed exempt therefrom, the value of the Securities will be greatly reduced.

 

Insufficient Capital

 

There can be no assurance or guarantee that the Company will raise sufficient
capital, through this transaction or otherwise, to meet the Company’s business
objectives or fund its operations. The audited financial statements of the
Company include a going concern qualification and the Company has significant
liquidity issues, including that described in the SEC Filings. There can be no
assurance that other obligations that are necessary for the Company will not be
incurred or that the budgeted expenditures will not be subject to any material
increase.

 

*****

 

 

 

 

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

 

Principal Amount: $_______________ Issue Date: July 30, 2020 Purchase Price:
$_______________  

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, Cardax, Inc., a Delaware corporation (the “Company”), hereby
promises to pay to the order of _______________ (together with its successors
and assigns, the “Holder”), or shall have paid pursuant to the terms hereunder,
the principal sum of $_______________ on _______________ (the “Maturity Date”),
unless extended by mutual written agreement of the parties, or such earlier date
as required or permitted hereunder, and to pay interest to the Holder on the
outstanding principal amount in accordance with the provisions hereof.
Notwithstanding the foregoing, repayment of this Note may be amortized upon the
Maturity Date in accordance with Section 4.2. This convertible promissory note
(the “Note”) is issued pursuant to the terms of that certain Securities Purchase
Agreement (the “Purchase Agreement”) by and between the Company and the Holder,
and may be prepaid or converted into common stock of the Holder, par value
$0.001 per share (the “Common Stock”) as set forth herein. By acceptance of this
Note, each party agrees to be bound by the applicable terms of the Purchase
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement.

 

The following terms shall apply to this Note:

 

Article I. MANNER OF PAYMENT

 

1.1       Method of Payment. All payments hereunder shall be made in lawful
money of the United States of America no later than 5:00 PM on the date on which
such payment is due by check, certified check payable to the Holder, or by wire
transfer of immediately available funds to the Holder’s account at a bank
specified by the Holder in writing to the Company from time to time.

 

1.2       Business Day Convention. Whenever any amount expressed to be due by
the terms of this Note is due on any day that is not a business day, the same
shall instead be due on the next succeeding business day. As used in this Note,
the term “business day” shall mean any day except any Saturday, any Sunday, any
day that is a federal legal holiday in the United States, or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.

 

Article II. INTEREST

 

2.1       Interest Rate. Except as otherwise provided herein, the outstanding
principal amount of the Note shall bear interest at a rate (the “Interest Rate”)
of _______________ (__%) per annum from the date hereof and shall continue on
the outstanding principal amount of the Note until paid or converted in full in
accordance with the provisions hereof.

 

 

 

 

2.2       Interest Payments. The Company shall pay interest in cash to the
Holder (i) monthly in arrears, on or prior to the 10th calendar day of each
month, beginning on the first such date after the Issue Date, (ii) on each
Conversion Date (as to that principal amount then being converted, less any such
interest amount then being converted), (iii) on each Prepayment Date (as to that
principal amount then being paid), and (iv) on the Maturity Date (as to that
principal amount then being paid, if any) (each such date, an “Interest Payment
Date”).

 

2.3       Interest Calculations. Interest shall be calculated on the basis of a
year of 365/366 days, as the case may be, and the actual number of days elapsed.
Interest shall accrue on the Issue Date but shall not accrue on any Conversion
Date (as to that principal amount then being converted), on any Prepayment Date
(as to that principal amount then being paid), on the Maturity Date (as to that
principal amount then being paid, if any), or on up to the first 10 calendar
days of each month wherein an Amortization Payment is being made pursuant to
Section 4.2 (as to that principal amount then being paid).

 

2.4       Default Interest. Upon an Event of Default (as defined in Section
6.1), the Interest Rate shall be equal to twelve percent (12%) per annum from
the date thereof until cured or waived.

 

2.5       Interest Rate Limitation. If at any time and for any reason
whatsoever, the interest rate payable on the Note shall exceed the maximum rate
of interest permitted to be charged by the Holder to the Company under
applicable law, such interest rate shall be reduced automatically to the maximum
rate of interest permitted to be charged under applicable law. That portion of
each sum paid attributable to that portion of such interest rate that exceeds
the maximum rate of interest permitted by applicable law shall be deemed a
voluntary prepayment of principal.

 

Article III. CONVERSION

 

3.1       Method of Conversion. At any time while this Note is outstanding, this
Note shall be convertible, in whole or in part, into shares (the “Conversion
Shares”) of Common Stock at the Conversion Price (as defined below), at the
option of the Holder, at any time and from time to time. The Holder shall effect
conversions by delivering to the Company a Notice of Conversion, the form of
which is attached hereto as Exhibit I (each, a “Notice of Conversion”),
specifying therein the outstanding principal amount of this Note, plus at the
Holder’s option, any accrued and unpaid interest thereon, to be converted and
the date on which such conversion shall be effected (such date, a “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is deemed
delivered hereunder.

 

3.2       Conversion Price. The conversion price (the “Conversion Price”) per
share of Common Stock in effect on any Conversion Date shall be equal to $____,
subject to adjustment as provided below.

 

(a)       Adjustment Upon Stock Split. If at any time while this Note is
outstanding, the Company: (i) subdivides outstanding shares of Common Stock into
a larger number of shares, (ii) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(iii) issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the Conversion Price shall be
equitably adjusted. Any adjustment made pursuant to this Section 3.2(a) shall
become effective immediately after the effective date of the subdivision,
combination, or re-classification.

 

3.3       Mechanics of Conversion.

 

(a)       Conversion Shares Issuable Upon Conversion. The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of this Note to be
converted, plus at the Holder’s option, any accrued and unpaid interest thereon
to be converted, by (y) the Conversion Price.

 

 2 

 

 

(b)       No Fractional Shares Upon Conversion. No fractional shares shall be
issued upon the conversion of this Note. As to any fraction of a share that the
Holder would otherwise be entitled to upon such conversion, the Company shall at
its election, either pay a cash adjustment in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.

 

(c)       Delivery of Certificate Upon Conversion. On the Conversion Date, or
promptly thereafter, the Company shall issue and deliver or cause to be issued
and delivered a certificate or certificates representing the Conversion Shares.

 

(d)       Surrender of Note Upon Conversion. To effect conversions hereunder,
the Holder shall not be required to physically surrender this Note to the
Company unless the entire outstanding principal amount of this Note, plus all
accrued and unpaid interest thereon, is to be converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Note
and accrued and unpaid interest thereon, in an amount equal to the applicable
conversion, and all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the Conversion
Shares, as provided herein. The Holder and the Company shall maintain records
showing the principal and interest amount(s) converted and the date of such
conversion(s). In the event of any dispute or discrepancy, the records of the
Company shall be controlling and determinative in the absence of manifest error.
The Holder, and any assignee by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note
may be less than the amount stated on the face hereof.

 

(e)       Authorized Shares. The Company shall reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Note. The Company represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable.

 

Article IV. REPAYMENT

 

4.1       Prepayment. Notwithstanding anything to the contrary contained in this
Note, the Company may prepay the amounts outstanding hereunder pursuant to the
following terms and conditions:

 

(a)       At any time while this Note is outstanding, the Company shall have the
right, exercisable on not less than five (5) trading days prior written notice
(a “Prepayment Notice”) to the Holder, to prepay the Note (outstanding principal
and accrued interest), in whole or in part, without penalty.

 

(b)       Notwithstanding the Prepayment Notice, upon receipt of such notice and
prior to the prepayment date (the “Prepayment Date”) specified by the Company in
the Prepayment Notice, the Holder may elect to convert any outstanding portion
of the Note, including any accrued interest, by submitting a Notice of
Conversion to the Company as set forth in this Note.

 

4.2       Repayment Amortization Upon Maturity. If this Note, or any portion
thereof, remains outstanding upon the Maturity Date, then repayment of the
unpaid and unconverted principal amount of this Note, shall be amortized over
the following thirty-three (33) months, with monthly payments (each, an
“Amortization Payment”) to be made on or prior to the 10th calendar day of each
month, beginning on the first such date after the Maturity Date. Until this Note
is repaid or converted in full, the Holder shall continue to have all rights as
a holder of this Note.

 3 

 

 

Article V. CERTAIN COVENANTS

 

5.1       Sale or Disposition of Assets. So long as the Company shall have any
obligation under this Note, the Company shall not, without the Holder’s written
consent, sell, lease, or otherwise dispose of all or substantially all of its
assets outside the ordinary course of business unless the proceeds of any
disposition of its assets shall be used to repay this Note.

 

5.2       Non-Circumvention. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate or Articles of Incorporation
or Bylaws, or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issuance or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Note, and will at all times in good faith carry out
all the provisions of this Note and take all action as may be required to
protect the rights of the Holder.

 

Article VI. EVENTS OF DEFAULT

 

6.1       Events of Default. The occurrence of any of the following events shall
constitute an “Event of Default”:

 

(a)       Failure to Pay Principal or Interest. The Company fails to pay the
principal hereof or interest thereon when due on this Note and such non-payment
continues for a period of fifteen (15) days.

 

(b)       Failure to Deliver Conversion Shares. The Company fails to issue and
deliver or cause to issue and deliver the Conversion Shares to the Holder for a
period of fifteen (15) days from the Conversion Date, provided that, an Event of
Default shall not occur under this Section 6.1(b) if the Company shall have
delivered proper issuance instructions for the Conversion Shares to its stock
transfer agent prior to such date.

 

(c)       Breach of Covenants. The Company breaches any material covenant or
other material term or condition contained in this Note or any other Transaction
Documents and such breach continues for a period of fifteen (15) days.

 

(d)       Breach of Representations or Warranties. Any representation or
warranty of the Company made in this Note or any other Transaction Documents
shall be false or misleading in any material respect when made and the breach of
which has (or with the passage of time will have) a material adverse effect on
the rights of the Holder with respect to this Note or any other Transaction
Documents, and such breach continues for a period of fifteen (15) days.

 

(e)       Bankruptcy. Bankruptcy, insolvency, reorganization, or liquidation
proceedings, or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against the Company or any subsidiary of the Company; or the Company admits
in writing its inability to pay its debts generally as they mature, provided
that, any disclosure of the Company’s ability to continue as a “going concern”
shall not be an admission that the Company cannot pay its debts as they become
due; or the Company or any subsidiary of the Company shall make an assignment
for the benefit of creditors or commence proceedings for its dissolution, or
apply for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business, or such a receiver or trustee
shall otherwise be appointed for the Company or for a substantial part of its
property or business without its consent and shall not be discharged within
sixty (60) days after such appointment; or any dissolution, liquidation, or
winding up of Company or any substantial portion of its business.

 

 4 

 

 

(f)       Change of Control. The occurrence after the date hereof of any of (a)
an acquisition by an individual or legal entity or “group” (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company, by
contract or otherwise) of in excess of 50% of the voting securities of the
Company, other than in connection with an underwritten public offering, (b) the
Company consummates a merger or similar transaction, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the Company or
the successor entity of such transaction, or (c) the Company sells or transfers
all or substantially all of its assets and the stockholders of the Company
immediately prior to such transaction own less than 50% of the aggregate voting
power of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within a two year period of more than half of the
members of the Board of Directors, if not approved by a majority of the Board of
Directors, (e) David G. Watumull and David M. Watumull shall both have been
terminated by the Company as Chief Executive Officer and Chief Operating Officer
other than for cause, or (f) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth in clauses (a) through (e) above

 

(g)       Judgments. Any money judgment, writ, or similar process shall be
entered or filed against the Company or any subsidiary of the Company or any of
its property or other assets for more than $500,000, and shall remain unvacated,
unbonded, or unstayed for a period of one-hundred eighty (180) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld.

 

(h)       Delisting of Common Stock. The Company shall fail to maintain the
listing of the Common Stock on the OTCQB or on the principal securities exchange
or other securities market on which the Common Stock is then being traded, and
such delisting continues for a period of fifteen (15) days.

 

6.2       Remedies Upon Event of Default. Upon an Event of Default, interest on
this Note shall accrue pursuant to Section 2.4, and the outstanding principal
amount of this Note, plus accrued and unpaid interest, shall become, at the
Holder’s election, immediately due and payable in cash. In lieu of cash payment,
the Holder may elect to receive from time to time all or part of the outstanding
principal amount of this Note, plus accrued and unpaid interest, in Conversion
Shares. Such acceleration may be rescinded and annulled by the Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Note until such time, if any, as the Holder receives full payment
pursuant to this Section 6.2. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

 

[signature page follows]

 

 5 

 

  

IN WITNESS WHEREOF, Company has caused this Note to be signed in its name by its
duly authorized officer as of the date first above written.

 

  CARDAX, INC.         By:   Name:           Title:

 

 6 

 

 

EXHIBIT I

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_________________ principal amount of
the Note (defined below) together with $________________ of accrued and unpaid
interest thereto, totaling $_____________ into that number of shares of Common
Stock of Cardax, Inc., a Delaware corporation (the “Company”), to be issued
pursuant to the conversion of the Note as set forth below, according to the
conditions of the convertible promissory note of the Company dated as of July
30, 2020 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any. This Notice of
Conversion is irrevocable unless otherwise agreed by the Company.

 

Delivery instructions:

 

  [  ] The Company shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC
Transfer”), provided that such shares are eligible for deposit.

 

  Name of DTC Prime Broker:     DTC Participant Number:     Account Number:  

 

  [  ]

The undersigned hereby requests that the Company issue the number of shares of
Common Stock set forth below (which numbers are based on the Holder’s
calculation attached hereto) in the name(s) and form specified immediately below
or, if additional space is necessary, on an attachment hereto:

 

  Name:     Address:     Form: [  ] Physical Certificate [  ] Book Entry

 

Date of Conversion:       Applicable Conversion Price: $     Number of Shares of
Common Stock to be Issued       Pursuant to Conversion of the Note:       Amount
of Principal Balance Due Remaining       Under the Note after this Conversion: $
    Accrued and Unpaid Interest Remaining: $                     [Name of
Holder]    

 

By:         Name:     Date   Title:        

 

 

 

 

WARRANT NUMBER

G _______________

 

CARDAX, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

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

 

THIS CERTIFIES THAT, for value received, _______________ (together with its
successors and assigns, the “Holder”), commencing July 30, 2020 (the “Date of
Issue”) is entitled to purchase, subject to the conditions set forth below, at
any time and from time to time, in whole or in part, during the Exercise Period
(as defined in Section 1.3), that number of fully paid and non-assessable shares
(the “Shares”) of common stock, par value $0.001 per share (“Common Stock”), of
Cardax, Inc., a Delaware corporation (the “Company”), that is not more than the
Warrant Share Number (as defined in Section 1.1), subject to the further
provisions of this warrant to purchase newly issued shares of Common Stock (the
“Warrant”), at the Warrant Exercise Price (as defined in Section 1.2), subject
to the further provisions of this Warrant.

 

1.EXERCISE OF WARRANT

 

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

 

1.1.       Warrant.

 

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

 

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.3.       Method of Exercise.

 

(a)       The Holder of this Warrant may exercise, in whole or in part, the
purchase rights evidenced by this Warrant during the period commencing on the
Date of Issue of this Warrant and ending on July 30, 2025, unless extended by
the Company in its sole discretion (the “Exercise Period”). Such exercise shall
be effected by:

 

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

 

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

 

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

 

(b)       Conditions to Exercise of the Warrant.

 

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

 

 2 

 

 

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

 

 3 

 

 

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

 

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

 

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

 

2.TRANSFER RESTRICTIONS

 

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

 

2.2.       Legend.

 

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

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE CORPORATION. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

 4 

 

 

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

 

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

 

3.Fractional Shares

 

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

 

4.ANTIDILUTION PROVISIONS

 

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

 

 5 

 

 

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

 

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

 

 6 

 

 

5.Reservation of Stock Issuable Upon Exercise

 

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

 

6.RIGHTS PRIOR TO EXERCISE OF WARRANT

 

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

 

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

 

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

 

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

 

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

 

 7 

 

 

7.SUCCESSORS AND ASSIGNS

 

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

 

8.LOSS OR MUTILATION

 

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

 

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

 

9.TERMINATION DATE

 

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

 

10.GOVERNING LAW

 

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

 

11.HEADINGS

 

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

 

12.AMENDMENTS

 

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

 

 8 

 

 

13.NOTICES

 

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

 

14.SEVERABILITY

 

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

 

15.WARRANT REGISTER and OWNERSHIP

 

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

 

16.certain other provisions

 

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

 

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

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]

 

 9 

 

 

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

 

  COMPANY       CARDAX, INC.         By:         Name:   Title:

 

 

TRANSFER AGENT AND REGISTRAR         By:       Authorized Signature  

  

   

 

 

NOTICE OF WARRANT EXERCISE

 

To: Cardax, Inc.

2800 Woodlawn Drive, Suite 129

Honolulu, HI 96822

Gentlemen:

 

The undersigned, ________________________________________, hereby elects to
purchase, pursuant to the provisions of the foregoing Warrant held by the
undersigned, ___________shares of the common stock (“Common Stock”) of Cardax,
Inc. Payment of the purchase price of __________ per Share required under such
Warrant accompanies this notice.

 

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

 

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

 

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

 

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

 

DATED: __________,_____.

 

    Signature: ______________________________________       Name:
       ______________________________________      
Title:          ______________________________________      
Address:   ______________________________________    

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [  ] all of or [  ] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

_______________________________________________________________

_______________________________________________________________

 

Dated: ______________, _______

 

Holder’s Signature: _____________________________

 

Holder’s Address: _____________________________

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.