COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of April 11, 2001 by and between CEL-SCI Corporation, a Colorado corporation
(the "Company"), and Paul Revere Capital Partners, Ltd. (the "Purchaser"), a
British Virgin Islands corporation.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $10,000,000
of Common Stock and the Warrant; and
WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
Article 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, the Company may sell and issue to the Purchaser and the
Purchaser shall be obligated to purchase from the Company, up to an aggregate
of, $10,000,000 of the Common Stock and the Warrant, based on up to 24 Draw
Downs of up to $2,000,000 each, subject to the terms herein.
Section 1.2. Purchase Price and Initial Closing. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down. The delivery of executed documents under this
Agreement and the other agreements referred to herein and the payment of the
fees set forth in Article I of the Escrow Agreement, attached as Exhibit B
hereto, (the "Initial Closing") shall take place at the offices of Epstein
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177 (i) within
fifteen (15) days from the date hereof, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
Article 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated validly existing and in good standing under the laws of the
State of Colorado and has all requisite corporate authority to own, lease
and operate its properties and assets and to carry on its business as now
being conducted. The Company does not have any subsidiaries and does not
own more than fifty percent (50%) of or control any other business entity
except as set forth in the SEC Documents. The Company is duly qualified to
do business and is in good standing as a foreign corporation in every
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which
the failure so to qualify would not have a Material Adverse Effect.
(b) Authorization, Enforcement. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations
under the Transaction Documents and to issue the Draw Down Shares pursuant
to their respective terms, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of
the Company or its Board of Directors or stockholders is required, and
(iii) the Transaction Documents have been duly executed and delivered by
the Company and at the Initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the issuance of the Draw Down Shares.
(c) Capitalization. The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock of which 21,116,543 shares are issued
and outstanding and no shares of preferred stock of which none are issued
and outstanding. All of the outstanding shares of the Company's Common
Stock have been duly and validly authorized and are fully paid and
non-assessable, except as set forth in the SEC Documents. Except as set
forth in this Agreement and the Registration Rights Agreement and as set
forth in the SEC Documents, or on Schedule 2.1(c) hereto, no shares of
Common Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and as set forth in the
SEC Documents or on Schedule 2.1(c), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound
to issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the
Company. Except as set forth on Schedule 2.1(c), the Company is not a party
to any agreement granting registration rights to any person with respect to
any of its equity or debt securities. Except as set forth on Schedule
2.1(c), the Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital
stock of the Company. Except as set forth in the SEC Documents or on
Schedule 2.1(c) hereto, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued
prior to the Initial Closing complied with all applicable federal and state
securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect. The
Company has made available to the Purchaser true and correct copies of the
Company's articles or certificate of incorporation as in effect on the date
hereof (the "Charter"), and the Company's bylaws as in effect on the date
hereof (the "Bylaws"). The Company has not received any notice from the
Principal Market questioning or threatening the continued inclusion of the
Common Stock on such market.
(d) Issuance of Shares. The Warrant Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid
for and issued in accordance with the terms hereof and the Warrant, the
Warrant Shares shall be validly issued and outstanding, fully paid and
non-assessable, and the Purchaser shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. Except as set forth on Schedule 2.1(e), the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated herein do not
and will not (i) violate any provision of the Company's Charter or Bylaws,
(ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the
Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any
federal, state, local or other foreign statute, rule, regulation, order,
judgment or decree (including any federal or state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries are
bound or affected, except, in all cases, for such conflicts, defaults,
termination, amendments, accelerations, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in
the aggregate do not and will not have a Material Adverse Effect. The
Company is not required under any federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for
it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than any filings which may be required to be made by the Company
with the SEC or state securities administrators subsequent to the Initial
Closing and any registration statement which may be filed pursuant hereto);
provided, however, that for purpose of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act, and, except as
disclosed in the SEC Documents or on Schedule 2.1(f) hereto, the Company
has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"SEC Documents"). The Company has delivered or made available to the
Purchaser, through the EDGAR system or otherwise, true and complete copies
of the SEC Documents filed with the SEC since December 31, 1998. The
Company has not provided to the Purchaser any information which, according
to applicable law, rule or regulation, should have been disclosed publicly
by the Company but which has not been so disclosed, other than with respect
to the transactions contemplated by this Agreement. As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable, and
the rules and regulations of the SEC promulgated thereunder applicable to
such documents, and, as of their respective filing dates, none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements under GAAP and the published rules
and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements),
and fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents or Schedule 2.1(g) hereto sets forth each
subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of the Company's ownership of the
outstanding stock or other interests of such subsidiary. For the purposes
of this Agreement, "subsidiary" shall mean any corporation or other entity
of which at least a majority of the securities or other ownership interests
having ordinary voting power (absolutely or contingently) for the election
of directors or other persons performing similar functions are at the time
owned directly or indirectly by the Company and/or any of its other
subsidiaries. All of the issued and outstanding shares of capital stock of
each subsidiary have been duly authorized and validly issued, and are fully
paid and non-assessable. There are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued by or
binding upon any subsidiary for the purchase or acquisition of any shares
of capital stock of any subsidiary or any other securities convertible
into, exchangeable for or evidencing the rights to subscribe for any shares
of such capital stock. Neither the Company nor any subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any subsidiary or any
convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a
party to, nor has any knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of any subsidiary.
(h) No Material Adverse Effect. Since the date of the financial statement
contained in the most recently filed Form 10-Q (or 10-QSB) or Form 10-K
(or 10-KSB), whichever is most current, no Material Adverse Effect has
occurred or exists with respect to the Company, except as disclosed in the
SEC Documents or on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents or on
Schedule 2.1(i) hereto, neither the Company nor any of its subsidiaries has
any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or
otherwise) that would be required to be disclosed on a balance sheet of the
Company or any subsidiary (including the notes thereto) in conformity with
GAAP which are not disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since such date and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the
Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since the date of the financial
statement contained in the most recently filed Form 10- Q (or 10-QSB) or
Form 10-K (or 10-KSB), whichever is most current, no event or circumstance
has occurred or exists with respect to the Company or its businesses,
properties, prospects, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been
so publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents or Schedule 2.1(k) hereto sets forth as of
the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean
(A) any liabilities for borrowed money or amounts owed in excess of
$250,000 (other than trade accounts payable incurred in the ordinary course
of business), (B) all guaranties, endorsements and contingent obligations
in respect of Indebtedness of others, whether or not the same are or should
be reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(C) the present value of any lease payments in excess of $250,000 due under
leases required to be capitalized in accordance with GAAP. Neither the
Company nor any subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the
SEC Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC
Documents or on Schedule 2.1(1) hereto or such that do not cause a
Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any subsidiary which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the SEC
Documents or on Schedule 2.1(m) hereto, there is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of
their respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary.
(n) Compliance with Law. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of their
respective businesses as now being conducted by them unless the failure to
possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(o) Taxes. The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true
and accurate and have been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it or any subsidiary
(whether or not such Taxes are required to be shown on a Tax Return) and
has withheld and paid over to the appropriate taxing authorities all Taxes
which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since December
31, 1999, the charges, accruals and reserves for Taxes with respect to the
Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any
subsidiary is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company or any subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and,
except as disclosed above, no written notice indicating an intent to open
an audit or other review has been received by the Company or any
subsidiary from any foreign, federal, state or local taxing authority.
There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into
a closing agreement pursuant to ss. 7121 of the Internal Revenue Code or
any predecessor provision thereof or any similar provision of state, local
or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or
has any knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not
been a United States real property holding corporation within the meaning
of ss. 897(c)(2) of the Internal Revenue Code during the applicable period
specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. ss.
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as
a transferee or successor, (C) by contract or indemnity or (D) otherwise.
The Company is not a party to any tax sharing agreement. The Company has
not made any payments, is not obligated to make payments nor is it a party
to an agreement that could obligate it to make any payments that would not
be deductible under ss. 280G of the Internal Revenue Code.
For purposes of this Section 2.1(o):
"IRS" means the United States Internal Revenue Service.
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"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or
use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and
other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, no brokers,
finders or financial advisory fees or commissions will be payable by the
Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this Agreement
or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or
any subsidiary in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were
made herein or therein, not misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents or on
Schedule 2.1(r) hereto, and all rights with respect to the foregoing,
which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others.
(s) Insurance. Except as disclosed in the SEC Documents or on Schedule 2.1(s)
hereto, the Company carries or will have the benefit of insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for companies
engaging in similar businesses and similar industries.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location
and collection of their assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company or any
subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or on
Schedule 2.1(u) hereto, neither the Company nor any subsidiary is a party
to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be
filed with the SEC as an exhibit to a registration statement on Form S-1 or
other applicable form (collectively, "Material Agreements") if the Company
or any subsidiary were registering securities under the Securities Act.
Except as set forth on Schedule 2.1(u), the Company and each of its
subsidiaries has in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements,
have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect,
the result of which could cause a Material Adverse Effect. Except as set
forth in the SEC Documents, no written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or of
any subsidiary limits or shall limit the payment of dividends on the
Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the SEC Documents or
on Schedule 2.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or
other continuing transactions exceeding $100,000 between (A) the Company,
any subsidiary or any of their respective customers or suppliers on the one
hand, and (B) on the other hand, any officer, employee, consultant or
director of the Company, or any of its subsidiaries, or any person owning
5% or more of the capital stock of the Company or any subsidiary or any
member of the immediate family of such officer, employee, consultant,
director or stockholder or any corporation or other entity controlled by
such officer, employee, consultant, director or stockholder, or a member of
the immediate family of such officer, employee, consultant, director or
stockholder.
(w) Securities Laws. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy the Shares or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than
the Purchaser), so as to bring the issuance and sale of the Shares under
the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of the
Shares.
(x) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Except
as set forth in the SEC Documents or on Schedule 2.1(x) hereto, neither the
Company nor any subsidiary is in breach of any employment contract,
agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
subsidiary. Since the date of the December 31, 1999 Form 10-K (or 10-KSB),
no officer, consultant or key employee of the Company or any subsidiary
whose termination, either individually or in the aggregate, could have a
Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.
(y) Absence of Certain Developments. Except as disclosed in SEC Documents or
on Schedule 2.1(y) hereto, since the date of the financial statement
contained in the most recently filed Form 10-Q (or 10-QSB) or Form 10-K
(or 10KSB), whichever is most current, neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and
amount to the current liabilities incurred in the ordinary course of
business during the comparable portion of its prior fiscal year, as
adjusted to reflect the current nature and volume of the Company's
or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any
shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the
ordinary course of business or to the Purchaser or its
representatives;
(vii) suffered any material losses (except for anticipated losses
consistent with prior quarters) or waived any rights of material
value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in excess
of $500,000;
(x) entered into any other material transaction, whether or not in the ordinary
course of business;
(xi) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;
(xii)experienced any material problems with labor or management in connection
with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries.
(z) Governmental Approvals. Except as set forth in the SEC Documents or on
Schedule 2.1(z) hereto, and except for the filing of any notice prior or
subsequent to any Settlement Date that may be required under applicable
federal or state securities laws (which if required, shall be filed on a
timely basis), including the filing of a registration statement or
post-effective amendment pursuant to this Agreement, no authorization,
consent, approval, license, exemption of, filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the delivery of the Shares, or for the performance by the
Company of its obligations under this Agreement.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares.
Company acknowledges and agrees that Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that
the Purchaser is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereunder. The Company further represents to
the Purchaser that the Company's decision to enter into this Agreement has
been based solely on (a) the Purchaser's representations and warranties in
Section 3.2, and (b) the independent evaluation by the Company and its own
representatives and counsel.
Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of
the British Virgin Islands.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to
purchase the Shares being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by
all necessary corporate action and at the Initial Closing shall constitute
valid and binding obligations of the Purchaser enforceable against the
Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws
relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application
(c) No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by the Purchaser of the transactions contemplated hereby
or relating hereto do not and will not (i) result in a violation of the
Purchaser's charter documents or bylaws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Purchaser is a party, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser). The Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or to purchase the Shares in
accordance with the terms hereof.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it has
been given full access to such records of the Company and the subsidiaries
and to the officers of the Company and the subsidiaries as it has deemed
necessary or appropriate to conduct its due diligence investigation. The
Purchaser is capable of evaluating the risks and merits of an investment in
the Shares by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Purchaser is capable of bearing the entire loss of its investment in the
Shares.
(e) Accredited Investor. The Purchaser is an "accredited investor" as defined
in Regulation D promulgated under the Securities Act.
(f) General. The Purchaser understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in
order to determine the suitability of the Purchaser to acquire the Shares.
Article 3
COVENANTS
The Company covenants with the Purchaser as follows:
Section 3.1. The Shares. As of the date of each applicable Draw Down, the
Company will have authorized and reserved, free of preemptive rights and other
similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock to cover the Draw Down Shares
to be issued in connection with such Draw Down requested under this Agreement.
The Draw Down Shares to be issued under this Agreement, when paid for and issued
in accordance with the terms hereof, shall be duly and validly issued and
outstanding, fully paid and non-assessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock. Anything in this Agreement
to the contrary notwithstanding, (i) at no time will the Company request a Draw
Down which would result in the issuance of an aggregate number of shares of
Common Stock pursuant to this Agreement which exceeds 19.9% of the number of
shares of Common Stock issued and outstanding on the Initial Closing Date
without obtaining stockholder approval of such excess issuance, or such other
amount as would require stockholder approval under rules of the Principal Market
or otherwise without obtaining stockholder approval of such excess issuance, and
(ii) the Company may not make a Draw Down to the extent that, after such
purchase by the Purchaser, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates would result in
beneficial ownership by the Purchaser and its affiliates of more than 9.9% of
the then outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act.
Section 3.2. Securities Compliance. If applicable, the Company shall notify
the Principal Market, in accordance with its rules and regulations, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares to the Purchaser
or subsequent holders.
Section 3.3. Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the Exchange Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
on the Principal Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market and shall provide the Purchaser with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) Trading Days of the Company's
receipt thereof, until the Purchaser has disposed of all of the Shares.
Section 3.4. Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 3.5. Registration Rights Agreement. The Company and the Purchaser
shall enter into the Registration Rights Agreement in the Form of Exhibit A
hereto. Before the Purchaser shall be obligated to accept a Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common Stock to be registered to cover the Shares to be issued in connection
with such Draw Down.
Section 3.6. Accuracy of Registration Statement. On each Settlement Date,
the Registration Statement and the prospectus therein shall not contain any
untrue statement of a material fact or omit to state any material fact to be
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date or date of filing of the Registration Statement and
the prospectus therein will not include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, the Company makes no representations or
warranties as to the information contained in or omitted from the Registration
Statement and the prospectus therein in reliance upon and in conformity with the
information furnished in writing to the Company by the Purchaser specifically
for inclusion in the Registration Statement and the prospectus therein.
Section 3.7. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
Section 3.8. Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.9. Other Agreements. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company to perform its obligations under this Agreement.
Section 3.10. Notice of Certain Events Affecting Registration; Suspension
of Right to Request a Draw Down. The Company will promptly notify the Purchaser
in writing and obtain an acknowledgment from Purchaser upon the occurrence of
any of the following events in respect of the Registration Statement or related
prospectus in respect of the Shares: (i) receipt of any request for additional
information from the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement the response to
which would require any amendments or supplements to the Registration Statement
or related prospectus; (ii) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate. The Company shall
not deliver to the Purchaser any Draw Down Notice during the continuation of any
of the foregoing events. The Company shall promptly make available to the
Purchaser any such supplements or amendments to the related prospectus, at which
time, provided that the registration statement and any supplements and
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.
Section 3.11. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 3.12. Limitation on Future Financing. The Company agrees that it
will not enter into any other equity line of credit arrangement until the
earlier of (i) 24 months from the Effective Date, or (ii) sixty (60) days after
the entire Commitment Amount has been purchased by the Purchaser.
Section 3.13. Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
The Purchaser covenants with the Company as follows:
Section 3.14. Compliance with Law. The Purchaser agrees that its trading
activities with respect to shares of the Company's Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
Section 3.15. No Short Sales. The Purchaser and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the term of this Agreement. Article 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company to proceed to close this
Agreement and to issue and sell the Shares to the Purchaser is subject to the
satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct
in all material respects as of the date when made and as of the Initial
Closing and as of each Settlement Date as though made at that time, except
for representations and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all material
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to the
Initial Closing and as of each Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
Section 4.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Initial
Closing as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened,
against the Purchaser or the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary seeking
to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated as of the Initial
Closing Date, in the form of Exhibit C hereto.
(f) Warrant. On the Initial Closing Date, the Company shall issue to the
Purchaser a warrant certificate to purchase up to a number of shares of
Common Stock equal to $300,000 divided by the average of the VWAPs during
the five (5) Trading Days immediately prior to the Initial Closing Date
(the "Warrant Base Price"). The Warrant shall have a term from its initial
date of exercise of 3 years. The exercise price of the Warrant shall be
110% of the Warrant Base Price. The Common Stock underlying the Warrant
will be registered in the Registration Statement referred to in Section 4.3
hereof. The Warrant shall be in the form of Exhibit E hereto.
Section 4.3. Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company shall have
satisfied, or the Purchaser shall have waived at the Initial Closing, the
conditions set forth in Section 5.2 hereof
(b) Effective Registration Statement. The Registration Statement registering
the Shares shall have been declared effective by the SEC and shall remain
effective on each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have been
suspended by the SEC or the Principal Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension
shall be terminated prior to the delivery of each Draw Down Notice), and,
at any time prior to such Draw Down Notice, trading in securities generally
as reported on the Principal Market shall not have been suspended or
limited, or minimum prices shall not have been established on securities
whose trades are reported on the Principal Market unless the general
suspension or limitation shall have been terminated prior to the delivery
of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and no Consolidation
Event where the successor entity has not agreed to perform the Company's
obligations shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received (i) a "down-to-date"
letter from the Company's counsel, confirming that there is no change from
the counsel's previously delivered opinion, or else specifying with
particularity the reason for any change and an opinion as to the
additional items specified in Exhibit C hereto, and (ii) any other items
set forth in the Escrow Agreement.
Article 5
DRAW DOWN TERMS
Section 5.1. Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise up to 24 draw
downs (each a "Draw Down") during the Commitment Period, which Draw Downs
the Purchaser shall be obligated to accept, subject to the terms and
conditions herein.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period. The
number of shares of Common Stock purchased by the Purchaser with respect
to each Draw Down shall be determined as set forth in Section 5.1(e)
herein and settled on:
(i) as to the 1st through the 11th Trading Days after a Draw Down
Pricing Period commences on the13th Trading Day after such Draw Down
Pricing Period commences; and
(ii) as to the 12th through the 22nd Trading Days after a Draw Down
Pricing Period commences, the 24th Trading Day after such Draw Down
Pricing Period commences. (such settlement periods and such
settlement dates in subsection (i) and this subsection (ii) each
referred to as a "Settlement Period" and a "Settlement Date",
respectively).
(c) In connection with each Draw Down Pricing Period, the Company may set the
Threshold Price in the Draw Down Notice.
(d) The minimum Investment Amount for any Draw Down shall be $100,000 and the
maximum Investment Amount as to each Draw Down shall be the lesser of (i)
$2,000,000, and (ii) 4.5% of the average of the EQY weighted average price
field (as reported on Bloomberg Financial L.P. using the BLPH function) for
the Common Stock for the ninety (90) calendar days immediately prior to the
applicable Commencement Date (defined below) multiplied by the total
trading volume in respect of the Common Stock for such period.
Notwithstanding anything herein to the contrary, in the event the minimum
Investment Amount is greater than the maximum Investment Amount, as to such
Draw Down only, the minimum Investment Amount shall equal the maximum
Investment Amount, but in no event shall the minimum Investment Amount be
less than $50,000, such that if the maximum Investment Amount is less than
$50,000, the Company shall be precluded from making a Draw Down at such
time.
(e) The number of Shares of Common Stock to be issued on each Settlement Date
shall be a number of shares equal to the sum of the quotients (for each
trading day within the Settlement Period) of (x) 1/22nd of the Investment
Amount, and (y) the Purchase Price on each Trading Day within the
Settlement Period, subject to the following adjustments:
(i) if the VWAP on a given Trading Day is less than the Threshold Price,
then the Investment Amount will be reduced by 1/22nd and that day
shall be withdrawn from the Settlement Period;
(ii) if trading of the Common Stock on the Principal Market is suspended
for more than three (3) hours, in the aggregate, on any Trading Day
during the Settlement Period, the Investment Amount shall be reduced
by 1/22nd and that day shall be withdrawn from the applicable
Settlement Period; and
(iii) if sales made under the Registration Statement is suspended in
accordance with Sections 3(j) and 5(e) of the Registration Rights
Agreement for more than three (3) hours, in the aggregate, on any
Trading Day or any Trading Day is shortened because of an official
holiday, during the applicable Settlement Period, the Investment
Amount shall be reduced by 1/22nd and that day shall be withdrawn
from such Settlement Period.
(f) The Company must inform the Purchaser by delivering a draw down notice, in
the form of Exhibit D hereto (the "Draw Down Notice"), via facsimile
transmission in accordance with Section 9.4 as to the amount of the Draw
Down (the "Investment Amount") the Company wishes to exercise, before the
first day of the Draw Down Pricing Period (the "Commencement Date"). If the
Commencement Date is to be the date of the Draw Down Notice, the Draw Down
Notice must be delivered to and receipt confirmed by the Purchaser at least
one hour before trading commences on such date. At no time shall the
Purchaser be required to purchase more than the maximum Investment Amount
for a given Draw Down Pricing Period so that if the Company chooses not to
exercise the maximum Investment Amount in a given Draw Down Pricing Period
the Purchaser is not obligated to and shall not purchase more than the
scheduled maximum Investment Amount in a subsequent Draw Down Pricing
Period.
(g) On each Settlement Date, the Shares purchased by the Purchaser shall be
delivered to The Depository Trust Company ("DTC") on the Purchaser's
behalf. Upon the Company electronically delivering whole shares of Common
Stock to the Purchaser or its designees via DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system by 1:00 p.m. EST, the Purchaser
shall wire transfer immediately available funds to the Company's designated
account on such day, less any fees as set forth in the Escrow Agreement,
which fees shall be wired as directed in the Escrow Agreement. Upon the
Company electronically delivering whole shares of Common Stock to the
Purchaser or its designees DTC account via DWAC after 1:00 p.m. EST, the
Purchaser shall wire transfer next day available funds to the Company's
designated account on such day, less any fees as set forth in the Escrow
Agreement, which fees shall be wired as directed in the Escrow Agreement.
In the event that either party elects to use the Escrow Agent, the Shares
shall be credited by the Company to the DTC account designated by the
Purchaser via DWAC upon receipt by the Escrow Agent of payment for the Draw
Down Shares into the Escrow Agent's master escrow account and notice
thereof to the Company, all as further set forth in the Escrow Agreement.
The Escrow Agent shall be directed to pay the purchase price to the
Company, net of one thousand dollars ($1,000) per Settlement as escrow
expenses to the Escrow Agent and any additional fees as set forth in the
Escrow Agreement.
Article 6
TERMINATION
Section 6.1. Term. The term of this Agreement shall begin on the date
hereof and shall end 24 months from the Effective Date or as otherwise set forth
in Section 6.2. Notwithstanding anything to the contrary herein, in the event
that a Draw Down Notice is exercised such that the Draw Down Pricing Period
extends beyond the second anniversary of the Effective Date, such Draw Down
Period shall end at least five (5) Trading Days prior to the second anniversary
of the Effective Date and all Draw Down Shares purchased shall be settled within
two (2) Trading Days of such date, otherwise in accordance with Section 5.1(g)
herein.
Section 6.2. Other Termination.
(a) This Agreement shall terminate upon one (1) Trading Day's notice if (i) an
event resulting in a Material Adverse Effect has occurred and has not been
cured for a period of thirty (30) days after giving notice thereof, (ii)
the Common Stock is de-listed from the Principal Market unless such
de-listing is in connection with the Company's subsequent listing of the
Common Stock on the Nasdaq National Market, Nasdaq SmallCap Market, the
American Stock Exchange or the New York Stock Exchange, or (iii) the
Company files for protection from creditors under any applicable law.
(b) The Company may terminate this Agreement upon one (1) Trading Day's notice
if the Purchaser shall fail to fund more than one properly noticed Draw
Down within five (5) Trading Days of the end of the applicable Settlement
Period.
Section 6.3. Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1, 8.2 and 8.9,
and Article 7 herein. Nothing in this Section 6.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company or the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
Article 7
INDEMNIFICATION
Section 7.1. General Indemnity.
(a) The Company agrees to indemnify and hold harmless the Purchaser (and its
directors, officers, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees,
charges and disbursements) incurred by the Purchaser as a result of any
inaccuracy in or breach of the representations, warranties or covenants
made by the Company herein.
(b) The Purchaser agrees to indemnify and hold harmless the Company and its
directors, officers, affiliates, agents, successors and assigns from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees,
charges and disbursements) incurred by the Company as result of any
material inaccuracy in or breach of the representations, warranties or
covenants made by the Purchaser herein. Notwithstanding anything to the
contrary herein, the Purchaser shall be liable under this Section 7.1(b)
for only that amount as does not exceed the net proceeds to the Purchaser
as a result of the sale of the Shares.
Section 7.2. Indemnification Procedure. Any party entitled to
indemnification under this Article 7 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article 7 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the indemnifying party in
connection with any settlement negotiations or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 7 to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnification required by this Article 7 shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the Indemnified Party irrevocably agrees to refund
such moneys, with interest, if it is ultimately determined by a court of
competent jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar rights of the Indemnified Party against the indemnifying party
or others, and (b) any liabilities to which the indemnifying party may be
subject.
Article 8
MISCELLANEOUS
Section 8.1. Fees and Expenses. Each of the parties to this Agreement shall
pay its own fees and expenses related to the transactions contemplated by this
Agreement; except that, the Company shall pay, at the Initial Closing, a
non-accountable expense allowance of $35,000 for the Purchaser's legal,
administrative and due diligence costs and expenses and any other additional
fees as set forth in the Escrow Agreement. In addition, the Company shall pay
all reasonable fees and expenses incurred by the Purchaser in connection with
any subsequent amendments, modifications or waivers of this Agreement, the
Escrow Agreement or the Registration Rights Agreement or incurred in connection
with the enforcement of this Agreement, the Escrow Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys' fees and expenses if such subsequent amendment, modification or
waiver is at the request of the Company. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 8.2. Specific Enforcement. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 8.3. Entire Agreement; Amendment. The Transaction Documents contain
the entire understanding of the parties with respect to the matters covered in
the Transaction Documents. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
Section 8.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: 8229 Boone Boulevard
Suite 802
Vienna, Virginia 22182
Attn: Geert Kersten
Tel: (703) 506-9460
Fax: (703) 506-9471
With copies to: Hart and Trinen L.L.P.
(which shall not constitute 1624 Washington Street
notice) Denver, CO 80203
Attn: William Hart, Esq.
Tel: (303) 839-0061
Fax: (303) 839-5414
If to Purchaser: c/o Beacon Corporate Services, Ltd.
P.O. Box 972
Road Town, Tortola
British Virgin Islands
Attn: David Sims
Fax: (284) 494-4090
with copies to: Epstein Becker & Green P.C.
(which shall not constitute 250 Park Avenue
notice) New York, NY 10177-1211
Tel: (212) 351-3771
Fax: (212) 661-0989
Attn: Robert F. Charron
Any party hereto may from time to time change its address for
notices by giving written notice of such changed address to the other party
hereto in accordance herewith.
Section 8.5. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.6. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Initial Closing, the assignment by a party
to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
Section 8.8. No Third Party Beneficiaries.This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 8.9. Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. The Company and the
Purchaser agree to submit themselves to the in personam jurisdiction of the
state and federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating to this
Agreement. Any dispute under this Agreement or any Exhibit attached hereto shall
be submitted to arbitration under the American Arbitration Association (the
"AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding within thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be awarded its costs,
including attorneys' fees, from the non-prevailing party as part of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent jurisdiction in any case where such relief is available.
The prevailing party in such injunctive action shall be awarded its costs,
including reasonable attorneys' fees, from the non-prevailing party.
Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
Section 8.11. Publicity. Neither the Company nor the Purchaser shall issue
any press release or otherwise make any public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement, without the prior written consent of the other
party. After the Initial Closing, the Company may issue a press release or
otherwise make a public statement or announcement with respect to this Agreement
or the transactions contemplated hereby or the existence of this Agreement;
provided, however, that prior to issuing any such press release, making any such
public statement or announcement, the Company obtains the prior consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.
Section 8.12. Severability. The provisions of this Agreement are severable
and, in the event that The Board of Arbitration or any court or officials of any
regulatory agency of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions contained in this Agreement shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement and this Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that such
provisions would be valid, legal and enforceable to the maximum extent possible,
so long as such construction does not materially adversely effect the economic
rights of either party hereto.
Section 8.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
Section 8.14. Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
Article 9
DEFINITIONS
Section 9.1. Certain Definitions.
(a) "Adjustment Price" shall mean the price which is determined from
time-to-time by the terms of the of the Series D Warrants to calculate the
number of additional shares of Common Stock to be issued to the holders of
such warrants, which term is more fully described in the Company's
registration statement on Form S-3 (SEC File # 333-34604).
(b) "Commencement Date" shall have the meaning assigned to such term in Section
5.1(f) hereof.
(c) "Commitment Amount" shall have the meaning assigned to such term in Section
1.1 hereof.
(d) "Commitment Period" shall mean the period of 24 consecutive months
commencing immediately after the Effective Date.
(e) "Common Stock" shall mean the Company's common stock, $0.01 par value per
share.
(f) "Draw Down" shall have the meaning assigned to such term in Section 5.1(a)
hereof.
(g) "Draw Down Notice" shall have the meaning assigned to such term in Section
5.1(f) hereof.
(h) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days beginning on the date specified in the Draw Down
Notice (as defined in Section 5.1(f) herein); provided, however, the Draw
Down Pricing Period shall not begin before the day on which receipt of
such notice is confirmed by the Purchaser.
(i) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared
effective by the Securities and Exchange Commission (the "SEC").
(j) "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
(k) "GAAP" shall mean the United States Generally Accepted Accounting
Principles as those conventions, rules and procedures are determined by
the Financial Accounting Standards Board and its predecessor agencies.
(l) "Initial Closing" shall have the meaning assigned to such term in Section
1.2 hereof.
(m) "Initial Closing Date" shall have the meaning assigned to such term in
Section 1.2 hereof.
(n) "Investment Amount" shall have the meaning assigned to such term in
Section 5.1(f) hereof.
(o) "Material Adverse Effect" shall mean any adverse effect on the business,
operations, properties, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole and/or any condition, circumstance, or situation that
would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or
the Registration Rights Agreement or to perform its obligations under any
other Material Agreement (as defined in Section 2.1(u)).
(p) "Principal Market" shall mean initially the American Stock Exchange and
shall include the Nasdaq National Market, the Nasdaq Small-Cap Market and
the New York Stock Exchange if the Company becomes listed and trades on
such market or exchange after the date hereof.
(q) "Purchase Price" shall mean, with respect to Draw Down Shares purchased
during each applicable Settlement Period, 89% of the VWAP on the date in
question.
(r) "Registration Statement" shall mean the registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), to be filed
with the Securities and Exchange Commission for the registration of the
Shares pursuant to the Registration Rights Agreement attached hereto as
Exhibit A (the "Registration Rights Agreement).
(s) "SEC Documents" shall mean the Company's latest Form 10-K or Form 10-KSB
as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as
set forth in the Registration Rights Agreement.
(t) "Settlement" shall mean the delivery of the Draw Down Shares into the
Purchaser's DTC account in exchange for payment therefor.
(u) "Settlement Date" shall have the meaning assigned to such term in Section
5.1(b).
(v) "Settlement Period" shall have the meaning assigned to such term in Section
5.1(b).
(w) "Shares" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder (the "Draw Down Shares") and the
shares of Common Stock issuable upon exercise of the Warrant (the "Warrant
Shares").
(x) "Threshold Price" shall mean the price per Share designated by the Company
as the lowest VWAP during any Draw Down Pricing Period at which the
Company will sell its Common Stock in accordance with this Agreement.
(y) "Trading Day" shall mean any day on which the Principal Market is open for
business.
(z) "Transaction Documents" shall mean this Agreement, the Registration Rights
Agreement and the Escrow Agreement.
(aa) "VWAP" shall mean the daily volume weighted average price of the Company's
Common Stock on the Principal Market as reported by Bloomberg Financial
L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m.
Eastern Time) using the VAP function on the date in question.
(bb) "Warrant" shall mean the warrant issued to the Purchaser pursuant to
Section 4.2(f) hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorize officer as of this __ day of
April, 2001.
CEL-SCI CORPORATION
By:
Geert Kersten, Chief Executive Officer
PAUL REVERE CAPITAL
PARTNERS, LTD.
By:
David Sims, Authorized Signatory
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 11, 2001
between Paul Revere Capital Partners, Ltd. ("Purchaser") and CEL-SCI Corporation
(the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the parties shall enter into the Common Stock Purchase Agreement,
dated as of the date hereof, (the "Purchase Agreement") pursuant to which the
Purchaser has committed to purchase up to $10,000,000 of the Company's Common
Stock (terms not defined herein shall have the meanings ascribed to them in the
Purchase Agreement) and the Warrant; and
WHEREAS, the execution and delivery of this Agreement and granting
to the Purchaser of the registration rights set forth herein with respect to the
Shares is a component part of the transaction contemplated under the Purchase
Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means all Shares that have not been (i) sold under the Registration
Statement, (ii) sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) otherwise transferred to persons who
may trade such Shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
Shares not bearing a restrictive legend or (iv) sold without any time, volume or
manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act. In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be deemed to be made in the definition
of "Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. The Purchaser acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Shares as provided herein, the Shares are
"restricted securities" as defined in Rule 144. The Purchaser understands that
no disposition or transfer of the Shares may be made by Purchaser in the absence
of (i) an opinion of counsel to the Purchaser, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.
With a view to making available to the Purchaser the benefits of
Rule 144, the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to
file such reports but in the past had been required to or did file such
reports, it will, upon the request of the Purchaser, make available other
information as required by, and so long as necessary to permit sales of,
its Registrable Securities pursuant to Rule 144.
Section 3. Registration Rights With Respect to the Shares.
- ----------------------------------------------------------
(a) The Company agrees that it will prepare and file with the Securities and
Exchange Commission ("Commission"), within forty-five (45) days after the
date hereof, a registration statement (on Form S-3 and/or S-1, or other
appropriate form of registration statement) under the Securities Act (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), so as to permit a public offering and
resale of the Shares under the Securities Act by Purchaser.
(b) The Company shall cause the Registration Statement to become effective
within the earlier of (i) ninety (90) days of the date of filing the
Registration Statement, or (ii) five (5) days after receiving written
notice of SEC clearance and will within said five (5) days request
acceleration of effectiveness. The Company will notify Purchaser of the
effectiveness of the Registration Statement within one Trading Day of such
event.
(c) The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 3 hereof effective under the Securities
Act until the earliest of (i) the date that all the Shares have been
disposed of pursuant to the Registration Statement, (ii) the date that all
of the Shares have been sold pursuant to the Registration Statement, (iii)
all Shares have been otherwise transferred to persons who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such Shares
not bearing a restrictive legend, or (iv) all Shares may be sold without
any time, volume or manner limitations pursuant to Rule 144(k) or any
similar provision then in effect under the Securities Act in the opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Purchaser (the "Effectiveness Period").
(d) All fees, disbursements and out-of-pocket expenses and costs incurred by
the Company in connection with the preparation and filing of the
Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation,
all attorneys' fees of the Company) shall be borne by the Company. The
Purchaser shall bear the cost of underwriting and/or brokerage discounts,
fees and commissions, if any, applicable to the Shares being registered
and the fees and expenses of its counsel.
(e) The Purchaser and its counsel shall have a reasonable period, not to
exceed five (5) Trading Days, to review the proposed Registration
Statement or any amendment thereto, prior to filing with the Commission,
and the Company shall provide the Purchaser with copies of any comment
letters received from the Commission with respect thereto within two (2)
Trading Days of receipt thereof.
(f) The Company shall make reasonably available for inspection by Purchaser,
any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent
retained by the Purchaser or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the Company's officers, directors
and employees to supply all information reasonably requested by the
Purchaser or any such underwriter, attorney, accountant or agent in
connection with the Registration Statement, in each case, as is customary
for due diligence examinations; provided, however, all records, information
and documents that are designated in writing by the Company, in good faith,
as confidential, proprietary or containing any material non-public
information shall be kept confidential by the Purchaser and any such
underwriter, attorney, accountant or agent, unless such disclosure is made
pursuant to judicial process in a court proceeding (after first giving the
Company an opportunity promptly to seek a protective order or otherwise
limit the scope of the information sought to be disclosed) or is required
by law, or such records, information or documents become available to the
public generally or through a third party not in violation of an
accompanying obligation of confidentiality. If the foregoing inspection and
information gathering would otherwise disrupt the Company's conduct of its
business, such inspection and information gathering shall, to the maximum
extent possible, be coordinated on behalf of the Purchaser and the other
parties entitled thereto by one firm of counsel designed by and on behalf
of the majority in interest of Purchaser and other parties.
(g) The Company shall qualify any of the Shares for sale in such states as the
Purchaser reasonably designates and shall furnish indemnification in the
manner provided in Section 6 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers, or which will
require the Company to qualify to do business in such state or require the
Company to file therein any general consent to service of process.
(h) The Company at its expense will supply the Purchaser with copies of the
Registration Statement and the final prospectus included therein (the
"Prospectus") and other related documents in such quantities as may be
reasonably requested by the Purchaser.
(i) The Company shall not be required by this Section 3 to include a
Purchaser's Shares in any Registration Statement which is to be filed if,
in the opinion of counsel for both the Purchaser and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Purchaser and the
Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state
securities laws and would result in all purchasers or transferees obtaining
securities which are not "restricted securities", as defined in Rule 144
under the Securities Act.
(j) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Purchaser in writing of
the existence of a Potential Material Event (as defined in Section 3(k)
below), the Purchaser shall not offer or sell any Shares or engage in any
other transaction involving or relating to Shares, from the time of the
giving of notice with respect to a Potential Material Event until the
Purchaser receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer
constitutes a Potential Material Event (the "Suspension Period").
Notwithstanding anything herein to the contrary, if a Suspension Period
occurs at any time during any period commencing on a Trading Day a Draw
Down Notice is deemed delivered and ending ten (10) Trading Days following
the end of the corresponding Draw Down Pricing Period, then the Company
must compensate the Purchaser for any net decline in the market value of
any Shares purchased by the Purchaser pursuant to such recent Draw Down
Pricing Period through the end of such Suspension Period. Net decline shall
be calculated as the difference between the highest VWAP during the
applicable Suspension Period and the VWAP on the Trading Day immediately
following a properly delivered notice to the Purchaser that such Suspension
Period has ended. If a Potential Material Event shall occur prior to the
date the Registration Statement is filed, then the Company's obligation to
file the Registration Statement shall be delayed without penalty for not
more than thirty (30) calendar days. The Company must give Purchaser notice
in writing of the existence of a Potential Material Event promptly upon
knowledge that such an event exists and, where possible, at least two (2)
days prior to the first day of a Suspension Period, if lawful to do so.
(k) "Potential Material Event" means any of the following: (i) the possession
by the Company of material information that is not ripe for disclosure in a
registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company or that disclosure of such
information in the Registration Statement would be detrimental to the
business and affairs of the Company; (ii) any material engagement or
activity by the Company which would, in the good faith determination of the
Chief Executive Officer or the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by
the Chief Executive Officer or the Board of Directors of the Company that
the Registration Statement would be materially misleading absent the
inclusion of such information, or (iii) pursuant to applicable law, the
Company is required to file a post-effective amendment to the Registration
Statement because the Company experiences a fundamental change, must change
the plan of distribution to the Prospectus, or must update the information
included in the Prospectus pursuant to Section 10(a)(3) of the Securities
Act.
Section 4. Cooperation with Company. The Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Purchaser and proposed manner of sale of
the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. The
Purchaser shall consent to be named as an underwriter in the Registration
Statement. Purchaser acknowledges that in accordance with current Commission
policy, the Purchaser will be named as the underwriter of the Shares in the
Registration Statement.
Section 5. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any of
the Registrable Securities under the Securities Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible, subject
to the Purchaser's assistance and cooperation as reasonably required:
(a) prepare and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement whenever the Purchaser of
such Registrable Securities shall desire to sell or otherwise dispose of
the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Securities Act) and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and (B) the Prospectus, and any amendment or supplement thereto,
does not at any time during the Effectiveness Period include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(b) prior to the filing with the Commission of any Registration Statement
(including any amendments thereto) and the distribution or delivery of the
Prospectus (including any supplements thereto), provide draft copies
thereof to the Purchaser and reflect in such documents all such comments as
the Purchaser (and its counsel) reasonably may propose and (ii) furnish to
the Purchaser such numbers of copies of the Prospectus including a
preliminary prospectus or any amendment or supplement to the Prospectus, as
applicable, in conformity with the requirements of the Securities Act, and
such other documents, as the Purchaser may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities;
(c) comply with the New York blue sky laws with respect to the Registrable
Securities (subject to the limitations set forth in Section 3(g) above),
and do any and all other acts and things which may be reasonably necessary
or advisable to enable the Purchaser to consummate the public sale or
other disposition in such jurisdiction of the Registrable Securities;
(d) list such Registrable Securities on the Principal Market, and any other
exchange on which the Common Stock of the Company is then listed, if the
listing of such Registrable Securities is then permitted under the rules
of such exchange or the Nasdaq Stock Market;
(e) notify the Purchaser at any time when the Prospectus is required to be
delivered under the Securities Act, of the happening of any event of which
it has knowledge as a result of which the Prospectus, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company shall prepare and file a curative amendment under
Section 5(a) as quickly as commercially possibleand such period during
which the Purchaser is precluded from making sales under the Prospectus
shall be a Suspension Period and the Company shall compensate the Purchaser
as set forth in Section 3(j) herein;
(f) as promptly as practicable after becoming aware of such event, notify the
Purchaser (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the Commission or any state authority of
any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful
action to effect the withdrawal, rescission or removal of such stop order
or other suspension;
(g) cooperate with the Purchaser to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts, as the
case may be, as the Purchaser reasonably may request and registered in
such names as the Purchaser may request, pursuant to the Purchase
Agreement.
(h) take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Purchaser of its Registrable Securities
in accordance with the intended methods therefor provided in the
Prospectus which are customary for issuers to perform under the
circumstances;
(i) in the event of an underwritten offering, promptly include or incorporate
in a prospectus supplement or post-effective amendment to the Registration
Statement such information as the managing underwriters reasonably agree
should be included therein and to which the Company does not reasonably
object and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after it is notified of
the matters to be included or incorporated in such prospectus supplement
or post-effective amendment; and
(j) maintain a transfer agent for its Common Stock.
Section 6. Indemnification.
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(a) The Company agrees to indemnify and hold harmless the Purchaser and each
person, if any, who controls the Purchaser within the meaning of the
Securities Act ("Distributing Purchaser") against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which the
Distributing Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, or any related preliminary prospectus, the
Prospectus or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, preliminary prospectus, the Prospectus or amendment or
supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by the Distributing Purchaser
specifically for use in the preparation thereof. This Section 6(a) shall
not inure to the benefit of any Distributing Purchaser with respect to any
person asserting such loss, claim, damage or liability who purchased the
Registrable Securities which are the subject thereof if the Distributing
Purchaser failed to send or give (in violation of the Securities Act or the
rules and regulations promulgated thereunder) a copy of the Prospectus to
such person at or prior to the written confirmation to such person of the
sale of such Registrable Securities, where the Distributing Purchaser was
obligated to do so under the Securities Act or the rules and regulations
promulgated thereunder. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Distributing Purchaser agrees that it will indemnify and hold harmless
the Company, and each officer, director of the Company or person, if any,
who controls the Company within the meaning of the Securities Act, against
any losses, claims, damages or liabilities (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees) to which the
Company or any such officer, director or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, or any related
preliminary prospectus, the Prospectus or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the
extent that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, preliminary
prospectus, the Prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company
by such Distributing Purchaser specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability
which the Distributing Purchaser may otherwise have. Notwithstanding
anything to the contrary herein, the Distributing Purchaser shall not be
liable under this Section 6(b) for any amount in excess of the net proceeds
to such Distributing Purchaser as a result of the sale of Registrable
Securities pursuant to the Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified
party except to the extent of actual prejudice demonstrated by the
indemnifying party. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject
to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying party
shall not pursue the action to its final conclusion. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that if the
indemnified party is the Distributing Purchaser, the fees and expenses of
such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by
the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Purchaser
and the indemnifying party and the Distributing Purchaser shall have been
advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any
legal defenses which may be available to the Distributing Purchaser (in
which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the Distributing Purchaser, it being
understood, however, that the indemnifying party shall, in connection with
any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for all Distributing Purchasers,
which firm shall be designated in writing by the Distributing Purchaser and
be approved by the indemnifying party). No settlement of any action against
an indemnified party shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld.
All fees and expenses of the indemnified party (including
reasonable costs of defense and investigation in a manner not inconsistent
with this Section and all reasonable attorneys' fees and expenses) shall
be paid to the indemnified party, as incurred, within ten (10) Trading
Days of written notice thereof to the indemnifying party; provided, that
the indemnifying party may require such indemnified party to undertake to
reimburse all such fees and expenses to the extent it is finally
judicially determined that such indemnified party is not entitled to
indemnification hereunder.
Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event
shall any (i) Purchaser be required to undertake liability to any person under
this Section 7 for any amounts in excess of the dollar amount of the net
proceeds to be received by the Purchaser from the sale of the Purchaser's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are or were to be registered under the Securities Act and
(ii) underwriter be required to undertake liability to any person hereunder for
any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it and distributed pursuant to the Registration
Statement.
Section 8. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be delivered as set forth in the
Purchase Agreement.
Section 9. Assignment. Neither this Agreement nor any rights of the
Purchaser or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased by the Purchaser pursuant to the Purchase Agreement
other than through open-market sales, and (b) upon the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed in the
case of an assignment to an affiliate of the Purchaser, the Purchaser's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Purchaser) who agrees to be
bound hereby.
Section 10. Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
Section 11. Remedies and Severability. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best 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 those that may be hereafter declared
invalid, illegal, void or unenforceable.
Section 12. Conflicting Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the purchasers of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.
Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any action may be brought as set
forth in the Purchase Agreement. The Company and the Purchaser agree to submit
themselves to the in personam jurisdiction of the state and federal courts
situated within the Southern District of the State of New York with regard to
any controversy arising out of or relating to this Agreement. Any party shall
have the right to seek injunctive relief from any court of competent
jurisdiction in any case where such relief is available. Any dispute under this
Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on this __ day of April, 2001
CEL-SCI CORPORATION
By: -------------------------------
Geert Kersten, Chief Executive Officer
PAUL REVERE CAPITAL
PARTNERS, LTD.
By:
-------------------------------
David Sims, Authorized Signatory
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of April 11,
2001, by and among CEL-SCI Corporation, a corporation incorporated under the
laws of Colorado (the "Company"), Paul Revere Capital Partners, Ltd.
("Purchaser"), and Epstein Becker & Green, P.C., having an address at 250 Park
Avenue, New York, NY 10177 (the "Escrow Agent"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Common Stock Purchase
Agreement referred to in the first recital.
WHEREAS, the Purchaser will from time to time as requested by the
Company, purchase shares of the Company's Common Stock from the Company as set
forth in that certain Common Stock Purchase Agreement (the "Purchase Agreement")
dated the date hereof between the Purchaser and the Company, which shares shall
be issued pursuant to the terms and conditions contained herein and in the
Purchase Agreement; and
WHEREAS, the Company and the Purchaser have requested that the
Escrow Agent hold in escrow and then distribute the initial documents and
certain funds which are conditions precedent to the effectiveness of the
Purchase Agreement, and have further requested that upon each exercise of a Draw
Down, the Escrow Agent hold the relevant documents and the applicable purchase
price pending receipt by Purchaser of the securities issuable upon such Draw
Down;
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
Article I
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
1.1. The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and documents which
are referenced in Section 4.2 of the Purchase Agreement.
1.2. At the Initial Closing, the Company shall deliver to the Escrow Agent:
(i) the original executed Registration Rights Agreement in the form of Exhibit
A to the Purchase Agreement;
(ii) the original executed opinion of Hart & Trinen in the form of Exhibit C to
the Purchase Agreement;
(iii)the sum of $35,000, for the Purchaser's legal and administrative costs and
expenses;
(iv) the original executed Company counterpart of this Escrow Agreement;
(v) the original executed Company counterpart of the Purchase Agreement; and
(vi) the original executed Warrant.
1.3. Upon receipt of the foregoing, and receipt of executed counterparts
from Purchaser of the Purchase Agreement, the Registration Rights Agreement and
this Escrow Agreement, the Escrow Agent shall calculate and enter the exercise
price, issuance date and termination date on the face of the Warrant and
immediately transfer the sum of $35,000 to Epstein Becker & Green, P.C., as a
non-accountable expense allowance for the Purchaser's legal, administrative and
due diligence costs and expenses and shall then arrange to have the Purchase
Agreement, this Escrow Agreement, the Registration Rights Agreement, the Warrant
and the opinion of counsel delivered to the appropriate parties.
1.4 Wire transfers to the Escrow Agent (not address for notice or delivery
of documents) shall be made as follows:
Epstein Becker & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1411 Broadway - Fifth Floor
New York, New York 10018
ABA No. 021000021
Account No. 035 1 346036
Attention: L. Borneo
Article II
TERMS OF THE ESCROW FOR EACH DRAW DOWN
2.1. Each time the Company shall send a Draw Down Notice to the Purchaser
as provided in the Purchase Agreement, it shall send a copy, by facsimile, to
the Escrow Agent.
2.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down,
the Purchaser shall send the applicable Purchase Price of the Draw Down Shares
to the Escrow Agent. Upon receipt of such funds, the Escrow Agent shall advise
the Company that it has received the funds for such Draw Down Shares. The
Company shall promptly, but no later than one (1) Trading Day after receipt of
such funding notice from the Escrow Agent:
(i) cause its transfer agent to issue the Draw Down Shares to the Purchaser via
DTC's DWAC system to the account specified by the Purchaser from time to
time;
(ii) deliver the original executed attorney's opinion in the form of Exhibit C
to the Purchase Agreement to the Purchaser; and
(iii) deliver a Form 424(b) supplemental prospectus to the Purchaser.
2.3. Upon receipt of written confirmation from the transfer agent or from
the Purchaser that such Draw Down Shares have been so deposited and the opinion
and the supplemental prospectus have been so delivered, the Escrow Agent shall,
within one (1) Trading Day, wire the Purchase Price of such Draw Down Shares per
the written instructions of the Company, net of $1,000 as escrow expenses to the
Escrow Agent.
2.4. In the event that such Draw Down Shares are not in the Purchaser's DTC
account and the opinion and supplemental prospectus are not delivered to the
Purchaser within two (2) Trading Days of the date of the Escrow Agent's notice,
then Purchaser shall have the right to demand, by notice, the return of the
Purchase Price, and the applicable Draw Down Notice shall be deemed cancelled.
Article III
MISCELLANEOUS
3.1. No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.
3.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as set forth in the Purchase Agreement.
3.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
3.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by their respective agents duly authorized in writing
or as otherwise expressly permitted herein.
3.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
3.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Except as expressly set forth herein, any action
to enforce, arising out of, or relating in any way to, any provisions of this
Escrow Agreement shall be brought in the Federal or state courts of New York,
New York as is more fully set forth in the Purchase Agreement.
3.7. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, Purchaser and the Escrow
Agent.
3.8. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, excepting only its own gross negligence or willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent's attorneys-at-law (other than Escrow Agent itself)
shall be conclusive evidence of such good faith.
3.9. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
3.10. The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder or hereunder.
3.11. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from time
to time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent in such capacity as legal counsel for the Purchaser
and waives any claim that such representation represents a conflict of interest
on the part of the Escrow Agent. The Company understands that the Purchaser and
the Escrow Agent are relying explicitly on the foregoing provision in entering
into this Escrow Agreement.
3.12. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Purchaser. In the event of any such resignation, the Purchaser and the
Company shall appoint a successor Escrow Agent.
3.13. If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
3.14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment of a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
3.15. The Company and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of
this __ day of April, 2001.
CEL-SCI CORPORATION
By:----------------------------
Geert Kersten,
Chief Executive Officer
PAUL REVERE CAPITAL
PARTNERS, INC.
By: ---------------------------
David Sims, Authorized Signatory
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
By: ------------------------------
Robert F. Charron,
Authorized Signatory
EXHIBIT C
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
Shall include the opinion of Hart & Trinen, L.L.P., attached hereto,
delivered at the Initial Closing and as to the opinion to be delivered at each
Draw Down pursuant to Section 4.3(e) of the Purchase Agreement:
1. The Registration Statement has been declared effective by the SEC and no
stop order is in effect with respect to the Registration Statement. Assuming
compliance by the Purchaser with the "Plan of Distribution" caption of the
Registration Statement and timely compliance by the Purchaser with all
prospectus delivery requirements, the Shares shall be freely transferable by
Purchaser.
2. Nothing has come to our attention that has caused us to believe that the
Registration Statement and the Prospectus at the time the Registration Statement
became effective and as of the date of this opinion contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; however,
we express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data derived
therefrom included in the Registration Statement or the Prospectus.
EXHIBIT D
DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE
CEL-SCI Corporation
The undersigned hereby certifies, with respect to shares of Common
Stock of CEL-SCI Corporation (the "Company") issuable in connection with this
Draw Down Notice and Compliance Certificate dated _____________ (the "Notice"),
delivered pursuant to the Common Stock Purchase Agreement dated as of April 11,
2001 (the "Agreement"), as follows:
1. The undersigned is the duly appointed Chief Executive Officer or Chief
Financial Officer of the Company.
2. Except as set forth on the schedules attached hereto, the
representations and warranties of the Company set forth in the Agreement are
true and correct in all material respects as though made on and as of the date
hereof and all SEC Documents are as represented in Section 2.1(f) of the
Agreement.
3. The Company has performed in all material respects all covenants
and agreements to be performed by the Company under the Agreement on or prior to
the date of this Draw Down Notice and has complied in all material respects with
all of the Company's obligations and conditions contained in the Agreement.
4. The Investment Amount is $___________.
5. The Threshold Price, if any, is $__________.
6. The Draw Down Pricing Period shall commence on ____________.
The undersigned has executed this Certificate this ____ day of
________, _____.
CEL-SCI CORPORATION
By:
-------------------------------
Name:
Title: