NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS WARRANT
NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
MDWERKS,
INC.
SERIES J WARRANT TO PURCHASE
COMMON STOCK
Warrant No.:
W-J-1
Number of
Shares of Common Stock: 9,339,816
Date of
Issuance: November 14, 2008 (“ISSUANCE
DATE”)
MDWERKS, INC., a Delaware corporation (the
“COMPANY”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, DEBT OPPORTUNITY FUND, LLLP (the
“LENDER”), the registered holder hereof or its
permitted assigns (the “HOLDER”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of
this Warrant to Purchase Common Stock (including any warrants to
purchase Common Stock issued in exchange, transfer or replacement
hereof, the “WARRANT”), at any time or times on or
after the date hereof, but not after 11:59 p.m., New York Time, on
the Expiration Date (as defined below), Nine Million Three Hundred
Thirty Nine Thousand Eight Hundred Sixteen (9,339,816) fully paid
nonassessable shares of Common Stock (as defined below) (the
“WARRANT SHARES”). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth
in Section 15 hereof or the Securities Purchase Agreement (as
defined below). This Warrant is the Warrant to purchase Common
Stock issued pursuant to the Loan and Securities Purchase Agreement
dated November 14, 2008 (the “SUBSCRIPTION DATE”),
between the Company, Xeni Financial Services, Corp., a Florida
corporation, and the Lender (the “SECURITIES PURCHASE
AGREEMENT”).
(a) Mechanics of Exercise . Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in
Section 1(f)), this Warrant may be exercised by the Holder on
any day on or after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto
as Exhibit A (the “EXERCISE NOTICE”), of the
Holder’s election to exercise this Warrant and
(ii) (A) payment to the Company of an amount equal to the
applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the
“AGGREGATE EXERCISE PRICE”) in cash or by wire transfer
of immediately available funds or (B) by notifying the Company
that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original Warrant in order to affect an
exercise hereunder. Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the
same effect as cancellation of the original Warrant and issuance of
a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first (1st) Business Day
following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a
Cashless Exercise) (the “EXERCISE DELIVERY DOCUMENTS”),
the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Company’s transfer agent (the “TRANSFER
AGENT”). On or before the third (3rd) Business Day following
the date on which the Company has received all of the Exercise
Delivery Documents (the “SHARE DELIVERY DATE”), the
Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate
number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate,
registered in the Company’s share register in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise. Upon
delivery of the Exercise Delivery Documents, the Holder shall be
deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are
credited to the Holder’s DTC account or the date of delivery
of the certificates evidencing such Warrant Shares as the case may
be. If this Warrant is submitted in connection with any exercise
pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than
the number of Warrant Shares being acquired upon an exercise, then
the Company shall as soon as practicable and in no event later than
three (3) Business Days after any exercise and at its own expense,
issue, a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the
nearest whole number. The Company shall pay stamp and similar taxes
which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant. The Company shall not
be required, however, to pay any transfer tax or similar charge
imposed in connection with the issuance and delivery of Warrant
shares in any name other than that of the Holder.
(b) Exercise Price . For purposes of this Warrant, “EXERCISE
PRICE” means $1.00 subject to adjustment as provided
herein.
(c) Company’s Failure to Timely Deliver
Securities .
(i) The Company understands that a delay in the
delivery of the shares of Common Stock upon exercise of this
Warrant beyond the Share Delivery Date could result in economic
loss to the Holder. If the Company fails to deliver to the Holder
such shares via DWAC or a certificate or certificates pursuant to
this Section by the Share Delivery Date, the Company shall pay to
the Holder, in cash, as partial liquidated damages and not as a
penalty, for each $500 of Warrant Shares (based on the closing
price of the Common Stock reported by the principal Trading Market
on the date such securities are submitted to the Company’s
transfer agent), $10 per Trading Day (increasing to $15 per Trading
Day five (5) Trading Days after such damages have begun to accrue
and increasing to $20 per Trading Day ten (10) Trading Days after
such damages have begun to accrue) for each Trading Day after the
Share Delivery Date until such Common Stock certificate is
delivered. Nothing herein shall limit a Holder’s right to
pursue actual damages for the Company’s failure to deliver
certificates, and the Holder shall have the right to pursue all
remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. Notwithstanding anything to the contrary contained herein,
the Holder shall be entitled to withdraw an Exercise Notice, and
upon such withdrawal the Company shall only be obligated to pay the
liquidated damages accrued in accordance with this Section through
the date the Exercise Notice is withdrawn. Notwithstanding the
foregoing, the Holder shall not be entitled to the damages set
forth herein for the delay in the delivery of the shares of Common
Stock upon exercise of this Warrant, if such delay is due to causes
which are beyond the reasonable control of the Company, including,
but not limited to, acts of God, acts of civil or military
authority, fire, flood, earthquake, hurricane, riot, war,
terrorism, sabotage and/or governmental action, provided that the
Company: (i) gives the Holder prompt notice of each such cause; and
(ii) uses reasonable efforts to correct such failure or delay in
its performance.
(ii) In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing
the shares of Common Stock issuable upon exercise of the Warrant on
or before the Share Delivery Date, and if after such date the
Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the shares of Common Stock
issuable upon exercise of the Warrant which the Holder anticipated
receiving upon such exercise (a “BUY-IN”), then the
Company shall (1) pay in cash to the Holder the amount by which (x)
the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of
shares of Common Stock issuable upon exercise of the Warrant that
the Company was required to deliver to the Holder in connection
with the conversion at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2)
at the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of shares of Common Stock for which
such conversion was not honored or deliver to the Holder the number
of shares of Common Stock that would have been issued had the
Company timely complied with its conversion and delivery
obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of shares of Common Stock
with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of
the Warrant as required pursuant to the terms hereof.
(d) Cashless Exercise . Notwithstanding anything contained herein to
the contrary, commencing on May 14, 2009, if, at the time of
exercise of this Warrant, a Registration Statement (as defined in
the Registration Rights Agreement) covering the Warrant Shares that
are the subject of the Exercise Notice (the “UNAVAILABLE
WARRANT SHARES”) is not available for the resale of such
Unavailable Warrant Shares, the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the
following formula (a “CASHLESS EXERCISE”):
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Net Number =
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(A x B) - (A x C)
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B
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For purposes of the foregoing
formula:
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A
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=
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the total
number of shares with respect to which this Warrant is then being
exercised.
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B
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=
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the Closing
Sale Price of the shares of Common Stock (as reported by Bloomberg)
on the date immediately preceding the date of the Exercise
Notice.
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C
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=
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the Exercise
Price then in effect for the applicable Warrant Shares at the time
of such exercise.
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(e) Disputes . In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation
of the Warrant Shares, the Company shall promptly issue to the
Holder the number of Warrant Shares that are not disputed and
resolve such dispute in accordance with Section 12.
(f) Limitations on Exercises .
(i) Notwithstanding anything to the contrary set
forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant to the extent that after giving effect to
such exercise, the Holder (together with the Holder’s
affiliates) would beneficially own (as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder) in excess of 4.99% of the number
of shares of Common Stock outstanding immediately after giving
effect to such exercise; provided, however, that upon a Holder of
this Warrant providing the Company with sixty-one (61) days notice
(the “WAIVER NOTICE”) that such Holder would like to
waive this Section with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section will be of no
force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice.
(ii) Notwithstanding anything to the contrary set
forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant to the extent that after giving effect to
such exercise, the Holder (together with the Holder’s
affiliates) would beneficially own (as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder) in excess of 9.99% of the number
of shares of Common Stock outstanding immediately after giving
effect to such exercise; provided, however, that upon a Holder of
this Warrant providing the Company with a Waiver Notice that such
Holder would like to waive this Section with regard to any or all
shares of Common Stock issuable upon exercise of the Warrant, this
Section shall be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice.
(iii) Notwithstanding anything to the contrary set
forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant to the extent that the issuance of shares of
Common Stock upon such exercise would exceed the aggregate number
of shares of Common Stock which the Company may issue upon exercise
of this Warrant without breaching the Company’s obligations
under the rules or regulation of the principal exchange upon which
shares of the Company’s Common Stock are traded. In such an
event, the Company covenants to promptly as possible seek to obtain
the necessary shareholder or other approvals necessary to issue the
shares of Common Stock upon the exercise of this
Warrant.
(g) Insufficient Authorized Shares
. If at any time while any of the
Warrants remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock (an
“AUTHORIZED SHARE FAILURE”) to satisfy its obligation
to reserve for issuance upon exercise of the Warrants at least a
number of shares of Common Stock equal to 100% of the number of
shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of the Warrants then outstanding (the
“REQUIRED RESERVE AMOUNT”), then the Company shall
immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve
Amount for the Warrants then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in
no event later than ninety (90) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its
stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement
and shall use its reasonable best efforts to solicit its
stockholders’ approval of such increase in authorized shares
of Common Stock and to cause its board of directors to recommend to
the stockholders that they approve such proposal.
(h) Redemption . Except as otherwise explicitly provided for
herein, this Warrant is not redeemable or callable by the Company
at any time.
2.
ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.
The Exercise
Price and the number of Warrant Shares shall be adjusted from time
to time as follows:
(a) Adjustment upon Issuance of shares of Common
Stock . If and whenever
on or after the Subscription Date the Company issues or sells, or
in accordance with this Section 2 is deemed to have issued or
sold, any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the
Company, but excluding shares of Common Stock which are Excluded
Securities or are deemed to have been issued by the Company in
connection with any Excluded Securities) for a consideration per
share (the “NEW ISSUANCE PRICE”) less than a price (the
“APPLICABLE PRICE”) equal to the Exercise Price in
effect immediately prior to such issue or sale or deemed issuance
or sale (the foregoing a “DILUTIVE ISSUANCE”), then
immediately after such Dilutive Issuance, the Exercise Price then
in effect shall be reduced to an amount equal to the New Issuance
Price. Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares shall be adjusted to the number of
shares of Common Stock determined by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of
Warrant Shares acquirable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of
determining the adjusted Exercise Price under this
Section 2(a), the following shall be applicable:
(i) Issuance of Options . If the Company in any manner grants any
Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such shares of Common Stock (underlying such
Option shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the granting or sale of such
Option for such price per share. For purposes of this
Section 2(a)(i), the “lowest price per share for which
one share of Common Stock is issuable upon exercise of such Options
or upon conversion, exercise or exchange of such Convertible
Securities” shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the
actual issuance of such shares of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon
the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities
. If the Company in any manner
issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the
Applicable Price, then such shares of Common Stock issuable upon
conversion of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for
such price per share. For the purposes of this
Section 2(a)(ii), the “lowest price per share for which
one share of Common Stock is issuable upon the conversion, exercise
or exchange” shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company
with respect to one share of Common Stock upon the issuance or sale
of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the
actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of this Warrant has
been or is to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue or
sale. A change that permits the holder of an Option or Convertible
Security to utilize a cashless exercise feature shall not be deemed
to decrease the consideration payable by the holder solely by
reason of the fact that the cashless exercise feature would result
in a reduction in cash consideration receivable by the
Company.
(iii) Change in Option Price or Rate of
Conversion . If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time, the Exercise Price and the number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted
to th
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