Exhibit
10.3
NEITHER THIS SECURITY NOR THE
SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE 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 COMPANY. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
SERIES 6 COMMON STOCK PURCHASE
WARRANT
Certificate No.: 1
To Purchase 5,500,000
Shares
of Common Stock of
Certified Diabetic Services,
Inc.
THIS SERIES 6 COMMON STOCK PURCHASE
WARRANT (the “ Warrant ”) certifies that, for
value received, Vicis Capital Master Fund (the “
Holder ”), is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set
forth, at any time on or after the date hereof (the “
Initial Exercise Date ”) and on or prior to the close
of business on the fifth (5th) anniversary of the Initial
Exercise Date (the “ Termination Date ”) but not
thereafter, to subscribe for and purchase from Certified Diabetic
Services, Inc., a Delaware corporation (the “ Company
”), up to 5,500,000 shares (the “ Warrant Shares
”) of Common Stock, par value $.001 per share, of the Company
(the “ Common Stock ”). The purchase price of
one share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b) .
Section 1
. Definitions . Capitalized
terms used and not otherwise defined herein shall have the meanings
set forth in that certain Certificate of Amendment to Certificate
of Designations, Preferences and Rights of Series E Convertible
Preferred Stock of the Company dated November 17, 2009 (the
“ Certificate of Designations ”).
Section 2
. Exercise .
a) Exercise of Warrant .
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise form annexed hereto (or such other office or
agency of the Company as it may designate by notice in writing to
the
registered Holder at the address of
such Holder appearing on the books of the Company); and, within
three (3) Trading Days of the date said Notice of Exercise is
delivered to the Company, the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by
wire transfer or cashier’s check drawn on a United States
bank. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in
which case, the Holder shall surrender this Warrant to the Company
for cancellation within three (3) Trading Days of the date the
final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of
the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and
the date of such purchases. The Company shall deliver any objection
to any Notice of Exercise within two (2) Trading Days of
receipt of such notice. THE HOLDER AND ANY ASSIGNEE, BY
ACCEPTANCE OF THIS WARRANT, ACKNOWLEDGE AND AGREE THAT, BY REASON
OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING THE PURCHASE OF A
PORTION OF THE WARRANT SHARES HEREUNDER, THE NUMBER OF WARRANT
SHARES AVAILABLE FOR PURCHASE HEREUNDER AT ANY GIVEN TIME MAY BE
LESS THAN THE AMOUNT STATED ON THE FACE HEREOF .
b) Exercise Price . The
exercise price per share of the Common Stock under this Warrant
shall be $0.15, subject to adjustment hereunder (the “
Exercise Price ”).
c) Exercise Limitations
.
i. Holder’s
Restrictions . The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
such Holder (together with such Holder’s Affiliates, and any
other person or entity acting as a group together with such Holder
or any of such Holder’s Affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such
Holder or any of its Affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Series A
Preferred Stock or Warrants) subject to a limitation on conversion
or exercise
analogous to the limitation
contained herein beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 2(c)(i) , beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by a Holder that the Company is not
representing to such Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and such Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(c)(i) 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. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 2(c) , in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (X) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be, (Y) a more recent public announcement by the Company
or (Z) any other notice by the Company or the Company’s
transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Company shall within two (2) Trading Days confirm orally and
in writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by such Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The “ Beneficial Ownership Limitation
” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The
Beneficial Ownership Limitation provisions of this
Section 2(c)(i) may be waived by such Holder, at the
election of such Holder, upon not less than 61 days’ prior
notice to the Company to change the Beneficial Ownership Limitation
to 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock upon exercise of this Warrant, and the provisions of this
Section 2(c)(i) shall continue to apply. Upon such a
change by a Holder of the Beneficial Ownership Limitation from
such
4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further
waived by such Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(c)(i) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant. Notwithstanding anything
herein to the contrary, this provision shall not apply to any
Holder that has elected to waive this provision on its
signature page to the Securities Purchase Agreement, on or before
the date of closing.
d) Mechanics of Exercise
.
i. Authorization of Warrant
Shares . The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue).
ii. Delivery of Certificates Upon
Exercise . Certificates for Warrant Shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit/Withdrawal at
Custodian (“ DWAC ”) system if the Company is a
participant in such system, and otherwise by delivery to the
address specified by the Holder in the Notice of Exercise, within
five (5) Trading Days from the delivery to the Company of the
Notice of Exercise form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above
(“ Warrant Share Delivery Date ”). This Warrant
shall be deemed to have been exercised on the date the Exercise
Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vii) prior to the issuance of such shares,
have been paid.
iii. Delivery of New Warrants
Upon Exercise . If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of
delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iv. Rescission Rights . If
the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant
Shares pursuant to Section 2(d)(ii) above by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
v. Obligation Absolute;
Damages . The Corporation’s obligations to issue and
deliver the certificates representing the Warrant Shares upon
exercise of the Warrant in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation
of law by the Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Corporation to the Holder in connection with the issuance of
such certificates representing the Warrant Shares. The Corporation
shall issue the certificates representing the Warrant Shares or, if
applicable, cash, upon a properly noticed exercise. If the
Corporation fails to deliver to the Holder such certificate or
certificates pursuant to Section 2(d) within five
(5) Trading Days of the Warrant Share Delivery Date applicable
to such exercise, the Corporation shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, for each $1,000
of VWAP of the Common Stock, $10 per Trading Day (increasing to $20
per Trading Day after ten (20) Trading Days after the Warrant
Share Delivery Date) for each Trading Day after the Warrant Share
Delivery Date until such certificates are delivered.
vi. No Fractional Shares or
Scrip . No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to
purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
vii. Charges, Taxes and
Expenses . Issuance of certificates for Warrant Shares shall be
made without charge to the Holder or other incidental expense in
respect of the issuance of such certificate, and such certificates
shall be issued in the name of the Holder or in such name
or
names as may be directed by the
Holder; provided , however , that in the event
certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; the assignment shall be subject
to Section 4 below, and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
viii. Closing of Books . The
Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
e) Cashless Exercise . If at
any time after one year from the date of issuance of this Warrant
there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares
by the Holder (a “ Cashless Exercise Trigger ”),
then this Warrant may also be exercised at such time by means of a
“cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
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(A)
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=
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the
VWAP on the Trading Day immediately preceding the date of such
election;
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(B)
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=
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the
Exercise Price of this Warrant, as adjusted; and
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(X)
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=
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the
number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.
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Section 3
. Certain Adjustments
.
a) Stock Dividends and Splits
. If the Company, at any time while this Warrant is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
provided that this clause (i) shall not apply to shares of
Common Stock issued solely in connection with dividends required to
be paid under the terms and conditions of the Series D Convertible
Preferred Stock, and/ or other securities issued and outstanding on
the date of this Warrant, provided that such stock dividend or
distribution shall be issued pursuant to the terms of such other
securities as of the date of this Warrant, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the
number of shares of Common Stock
(excluding tre