AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF THE SERIES E PREFERRED STOCK
OF
CEL-SCI CORPORATION
I, Patricia B. Prichep, the Senior Vice President of Operations of CEL-SCI
Corporation, a corporation organized and existing under the laws of Colorado, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation of this Corporation, the Board of Directors on August
16, 2001, adopted a resolution amending this Corporation's Series E Preferred
Shares, $0.01 par value per share.
The relative rights and preferences of the Series E Preferred Shares, as
amended, are as follows:
Section 1. Designation, Amount and Par Value. The series of preferred stock
shall be designated as the Company's 6% Series E Convertible Preferred Stock
(the "Preferred Stock") and the number of shares so designated shall be 6,288.
Each share of Preferred Stock shall have a par value of $0.01 per share and a
stated value of $1,000 (the "Stated Value"). Each holder of Preferred Stock is
referred to herein as a "Holder" and more than one such Holder is referred to as
"Holders".
Section 2. Dividends.
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(a) Holders shall be entitled to receive, out of funds legally available
therefore, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) of 6% per annum, payable in cash
on each successive third month anniversary of the Original Issue Date for so
long as such share shall be outstanding, commencing on the third month
anniversary of the Original Issue Date (each such third month anniversary of the
Original Issue Date is referred to herein as a "Dividend Payment Date").
Dividends on the Preferred Stock shall be calculated on the basis of a 360- day
year, shall accrue daily commencing on the Original Issue Date (as defined in
Section 8), and shall be deemed to accrue from such date whether or not earned
or declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. Except as otherwise
provided herein, if at any time the Company pays less than the total amount of
dividends then accrued on account of the Preferred Stock, such payment shall be
distributed ratably among the Holders based upon the number of shares of
Preferred Stock held by each Holder. Any dividend that are not paid within three
Business Days (as defined in Section 8) following its Dividend Payment Date
shall continue to accrue and shall entail a late fee of 18% per annum or the
lesser rate permitted by applicable law (such fees to accrue daily, from the
date such dividend is due hereunder through and including the date of payment).
(b) So long as any Preferred Stock shall remain outstanding, neither the Company
nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly
or indirectly any of its securities other than as permitted or required under
Section 6, nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preferred stock of the Company at such times when the Company is in compliance
with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any securities of the Company other than the
Preferred Stock, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any securities
of the Company other than the Preferred Stock.
Section 3. Voting Rights. Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights. However, so
long as any shares of Preferred Stock are outstanding, the Company shall not,
without the affirmative vote of the Holders of a majority of the shares of the
Preferred Stock then outstanding, alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation, authorize or create any class of stock ranking as to
dividends or distribution of assets upon a Liquidation (as defined in Section 4)
senior to or otherwise pari passu with the Preferred Stock, amend its
certificate or articles of incorporation or other charter documents so as to
affect adversely any rights of the Holders, increase the authorized number of
shares of Preferred Stock, or (e) enter into any agreement with respect to the
foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall
be entitled to receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred Stock an amount equal to the
Stated Value per share before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Company shall be
insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be distributed among the Holders ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of the assets of the Company or the effectuation by the Company of a Change of
Control Transaction (as defined in Section 7) that are covered by a specific
paragraph of Section 5 shall not be treated as a Liquidation, but instead shall
be subject to the provisions of Section 5. The Company shall mail written notice
of any such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record Holder.
Section 5. Conversion.
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(a)(i) Conversions of Preferred Stock Each share of Preferred Stock shall be
convertible into shares of Common Stock (subject to the limitations set forth in
Section 5(a)(iv)) at the Conversion Ratio (as defined in Section 7), at the
option of the Holder, at any time and from time to time from and after the
Original Issue Date; provided, that the total number of shares of Common Stock
issuable upon conversion in full of a share of Preferred Stock (and all such
shares in the aggregate) will not exceed the number of shares specified in
Section 5(a)(ii). Holders shall effect conversions by providing the Company with
the form of conversion notice attached hereto as Exhibit A (a "Conversion
Notice"). Each Conversion Notice shall specify the number of shares of Preferred
Stock to be converted, the number of shares of Preferred Stock owned prior to
the conversion at issue, number of shares of Preferred Stock owned giving effect
to such conversion sequent to the conversion and the date on which such
conversion is to be effected, which date may not be prior to the date the Holder
delivers such Conversion Notice by facsimile (the "Conversion Date"). The number
of shares of Preferred Stock shown as owned by the Holder prior to and giving
effect to a conversion shall control absent manifest or mathematical error. If
no Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that such Conversion Notice is deemed delivered hereunder. To
effect conversions of Preferred Stock, a Holder shall not be required to
surrender the certificate(s) representing such shares of Preferred Stock to the
Company unless all of the shares of Preferred Stock represented thereby are so
converted, in which event the Holder shall promptly following the Conversion
Date deliver such certificate of Preferred Stock to or as directed by the
Company for cancellation.
(ii) Number of Shares Issuable Upon Conversion.
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(A) Subject to the provisions of Section 5(a)(ii)(B), Section
5(a)(iii) and Sections 5(c)(ii), (iii) and (v) the total number of shares of
Common Stock issuable upon conversion in full of each share of Preferred Stock
shall not exceed 923 shares and the total number of shares of Common Stock
issuable upon conversion in full of all of the shares of Preferred Stock shall
not exceed 5,801,481 shares, in either case unless agreed in writing by the
Company and the Holders. Notwithstanding the foregoing, the limitations and caps
set forth in the immediately preceding sentence are subject to automatic
adjustment in accordance with Section 5(a)(ii)(B) and as a result of adjustments
to the Initial Conversion Price under Sections 5(c)(ii), (iii) and (iv).
(B) If at any time during the 90 days following the Original
Issue Date the Company shall issue securities or enter into an arrangement to
issue securities in connection with a Capital Raising Transaction (as defined in
Section 7) or to any Person participating directly or indirectly in such Capital
Raising Transaction during such period, then the number of shares of Common
Stock issuable upon conversion in full of all shares of Preferred Stock in
accordance with Section 5(a)(ii)(A) shall be increased automatically to a number
of shares equal to the quotient obtained by dividing the original total Stated
Value for all shares of Preferred Stock then outstanding by the price per share
or the average weighted price per share of Common Stock, as applicable, offered,
issued or sold in such Capital Raising Transaction. If the Company receives less
than an aggregate of $2 million in a Capital Raising Transaction or series of
Capital Raising Transactions then the reset contemplated in this paragraph shall
be effected on the 90th day after the Original Issue Date. If, however, at any
time during the 90 days following the Original Issue Date, the Company receives
an aggregate of $2 million in a Capital Raising Transaction or series of Capital
Raising Transactions, then the reset contemplated in this paragraph shall be
effected at such time (during the 90 days following the Original Issue Date)
that an aggregate of $2 million is raised. If the Capital Raising Transaction
involves the issuance of any convertible or exchangeable securities, warrants,
options, rights or other securities that entitle the holder thereof at any time
during the life of such security to receive shares of Common Stock (including as
a result of repricing, resetting or other adjustment features contained
therein), the price per share of Common Stock shall equal the lowest price at
which Common Stock may ever be issued under such transaction or security. Any
adjustment to the total number of shares of Common Stock issuable upon
conversion in full of the Preferred Stock shall also automatically adjust the
number of shares of Common Stock issuable upon conversion in full of each share
of Preferred Stock.
(iii) Automatic Conversion.
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(A) Subject to the provisions of this paragraph, all
outstanding shares of Preferred Stock for which Conversion Notices have not
previously been received or for which redemption has not been made hereunder
shall be automatically converted on the second anniversary of the Original Issue
Date, subject to extension as may be required under the provisions of this
Section 5(a)(iii) (such date, as may be extended, the "Automatic Conversion
Date") into a number of shares of Common Stock equal to 200% of the quotient
obtained by dividing (x) the Stated Value of all outstanding shares of Preferred
Stock as of the Automatic Conversion Date by (y) the Conversion Price in effect
on the Automatic Conversion Date (the "Automatic Conversion Shares"). In
addition, on the second anniversary of the Original Issue Date (whether or not
such date is also the Automatic Conversion Date), the Company will issue to each
Holder a Common Stock purchase warrant in the form of the attached Exhibit C,
entitling such Holder to acquire an aggregate number of additional shares of
Common Stock equal to 33% of the Automatic Conversion Shares (this calculation
will assume that the second anniversary of the Original Issue Date is the same
date as the Automatic Conversion Date, whether or not actually the case) at an
exercise price per share equal to 110% of the VWAP (as defined in Section 7) of
the Common Stock for the five days preceding the second anniversary of the
Original Issue Date. The Automatic Conversion Date, but not the obligation to
issue the warrant described in the immediately preceding sentence, shall be
extended while and shall not occur without the consent of the Holder at such
time as (a) there are not sufficient shares of Common Stock authorized and
reserved for issuance upon such conversion; or (b) the Company shall have
defaulted in any material respect on its covenants and obligations hereunder. In
addition, (A) the Automatic Conversion Date, but not the obligation to issue the
warrant described in this paragraph shall be extended (on a day-for-day basis)
for any Trading Day(s) following the 30th day after the Original Issue Date that
a Holder is not permitted to resell Underlying Shares under a Registration
Statement due to (a) the Common Stock not being listed or quoted for trading on
the AMEX (as defined in Section 7), or (b) the suspension of the Holder's right
to resell Underlying Shares thereunder; and (B) automatic conversion, whether or
not on the Automatic Conversion Date shall be suspended as to a Holder to the
extent that the provisions of Section 5(a)(iv) would preclude such Holder from
receiving all of the Automatic Conversion Shares by reason of the limitations
set forth in Section 5(a)(iv) or if, as a result of such automatic conversion,
such Holder would otherwise become the beneficial owner (as determined in
accordance with Section 13(d) under the Exchange Act) of in excess of 9.99% of
the outstanding shares of Common Stock giving effect to such conversion. In the
event that automatic conversion is suspended as a result of the provisions of
clause (B) of the immediately preceding sentence, the Conversion Price hereunder
shall automatically be fixed (subject only to the anti-dilution provisions
herein) to the Conversion Price determined on the Automatic Conversion Date and
the shares of Preferred Stock not converted on such Automatic Conversion Date as
a result of the 9.99% limitation shall be convertible into shares of Common
Stock at such fixed Conversion price. Upon the occurrence of any of the events
described in this paragraph that causes an extension of the Automatic Conversion
Date (other than the operation of the 9.99% limitation), the Company shall
immediately notify the Holders and the dividends payable to the Holders as set
forth in Section 2 shall be immediately increased to 20% per annum for the
duration of the extension of the Automatic Conversion Date and such dividend
payment shall be subject to the terms of Section 2.
(iv) Certain Conversion Restrictions. Notwithstanding anything
to the contrary contained herein, the number of shares of Common Stock that may
be acquired by a Holder upon any conversion of shares of Preferred Stock is
hereby limited to the extent necessary to insure that, following such
conversion, the total number of shares of Common Stock beneficially owned by
such Holder and its affiliates giving effect to such conversion does not exceed
9.999% of the total number of issued and outstanding shares of Common Stock. For
such purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of a Conversion Notice hereunder will constitute a
representation by a Holder that it has evaluated the limitation set forth in
this paragraph and determined that issuance of the full number of Underlying
Shares requested in such Conversion Notice is permitted under this paragraph.
The limitations set forth in this Section will not apply in determining the
number of shares of Common Stock or other securities issuable to a Holder as a
result of a merger, acquisition or consolidation of or by the Company that
results in an issuance of Common Stock or other securities to all shareholders
or to an issuance of securities as a result of a reclassification of the Common
Stock. A Holder may waive the provisions of this Section as to itself and no
other Holder upon 61 days prior notice to the Company.
(b)(i) Not later than four Trading Days after each Conversion Date,
the Company will deliver to the Holder, to an address in the United States, a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those specifically required by the Exchange
Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of shares of Preferred Stock. The Company shall, upon request of
the Holder, if available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the applicable Holder by the fourth Trading Day after the Conversion
Date, the Holder shall be entitled to elect by written notice to the Company at
any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return any certificates representing the shares of Preferred Stock
tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), by the fourth Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
fourth Trading Day until such certificates are delivered. Nothing herein shall
limit a Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon conversion within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), by the fourth Trading Day after the Conversion
Date, and if after such fourth Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to
receive upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Preferred Stock with respect to which the
market price of the Underlying Shares on the date of conversion totaled $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Nothing herein shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common
Stock upon conversion of the shares of Preferred Stock as required pursuant to
the terms hereof.
(c)(i) The conversion price for each share of Preferred Stock in
effect on any Conversion Date (the "Conversion Price") equals the lesser of (i)
$5.00 (the "Initial Conversion Price") and (ii) 93% of the Per Share Market
Values for the five Trading Days immediately preceding a Conversion Date
provided, that (1) such five Trading Day period shall be extended for the number
of Trading Days during such period in which (A) trading in the Common Stock is
suspended by AMEX or a Subsequent Market on which the Common Stock is then
listed, or (B) after the date declared effective by the Commission, a
Registration Statement is either not effective or the Prospectus included in the
Registration Statement may not be used by the Holder for the resale of
Underlying Shares, except that, if a Holder is eligible to resell Underlying
Shares under Rule 144 then the five Trading Day period shall not be extended in
the event a Registration Statement is either not effective or the Prospectus
included in the Registration Statement may not be used by the Holder for resale
of Underlying Shares and (2) the Conversion Price is subject to adjustment in
accordance with the provisions of Section 5(c).
(ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall (a) pay a stock dividend or otherwise make a distribution
or distributions on any of its securities other than the Preferred Stock that is
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification and
exchange of the Common Stock any shares of capital stock of the Company, then
the Initial Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights, warrants or options to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Per Share Market Value at the record date
mentioned below, then the Initial Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, warrants or
options, plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right, warrant or option to purchase shares of Common Stock
the issuance of which resulted in an adjustment in the Conversion Price pursuant
to this Section 5(c)(iii), if any such right, warrant or option shall expire and
shall not have been exercised, the Conversion Price shall immediately upon such
expiration shall be recomputed and effective immediately upon such expiration
shall be increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the adjustment
of the Conversion Price made upon the issuance of such rights, warrants, or
options been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights, warrants or options actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii) and (iii) above), then in each such case the Initial Conversion Price
at which each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(vi) Whenever the Initial Conversion Price or the Conversion Price
is adjusted pursuant to Section 5(c)(ii)- (iv) the Company shall promptly mail
to each Holder, a notice setting forth the Initial Conversion Price or
Conversion Price (as applicable) applicable after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such shares only
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such reclassification
or share exchange, and the Holders of the Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as a holder of
the number of shares of Common Stock of the Company into which such shares of
Preferred Stock could have been converted immediately prior to such
reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
(viii) In case of any merger or consolidation of the Company with or
into another Person, or sale by the Company of more than one-half of the assets
of the Company (on an as valued basis) in one or a series of related
transactions, a Holder shall have the right thereafter to (A) convert its shares
of Preferred Stock into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
shares of Preferred Stock could have been converted immediately prior to such
merger, consolidation or sales would have been entitled or (B) in the case of a
merger or consolidation, (x) require the surviving entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the Stated Value of
the shares of Preferred Stock then held by such Holder, plus all accrued and
unpaid dividends and other amounts owing thereon, which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to conversion) to the terms of the Preferred Stock (except, in the case of
debentures, as may be required to reflect the differences between debt and
equity) and shall be entitled to all of the rights and privileges of a Holder of
Preferred Stock set forth herein and the agreements pursuant to which the
Preferred Stock was issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale. In the
case of clause (B), the conversion price applicable for the newly issued shares
of convertible preferred stock or convertible debentures shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction, the Conversion Ratio immediately prior to the
effectiveness or closing date for such transaction and the Conversion Price
stated herein. The terms of any such merger, sale or consolidation shall include
such terms so as continue to give the Holders the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events. A Holder may only exercise the rights set forth in this
Section 5(c)(ix) with respect to a single event giving rise to such rights.
(x) If (a) the Company shall declare a dividend (or any other
distribution) on the Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (c) the
Company shall authorize the granting to all holders of Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights, (d) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
of exchange whereby the Common Stock is converted into other securities, cash or
property, or (e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then the
Company shall notify the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange. Holders are entitled to convert shares of
Preferred Stock during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable (taking into account the provisions of Section
5(a) and Section 5(c)) upon the conversion of all outstanding shares of
Preferred Stock. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized and
issued and fully paid and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the closing sales price of the Common Stock on such date. If
any fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon a conversion hereunder, the Company shall pay an
amount in cash equal to the Conversion Ratio multiplied by such fraction.
(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or
redeemed in accordance with the terms hereof shall be canceled and may not be
reissued as shares of Series E Preferred Stock but shall return to the status of
authorized but unissued shares of preferred stock.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company
addressed to 8229 Boone Boulevard, Suite 802, Vienna, VA 22182, Facsimile No.:
(703) 506-9471, or to such other address or facsimile number as shall be
specified in writing by the Company for such purpose. Any and all notices or
other communications or deliveries to be provided by the Company hereunder shall
be in writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5.00 p.m. (New York City time)(with confirmation of transmission), (ii) the date
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later than
5:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date (with confirmation of transmission), (iii) upon receipt,
if sent by a nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
Section 6. Redemption.
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(1) Optional Redemption.
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(a) Subject to the provisions of this Section 6, from and after the
Original Issue Date until the second anniversary of the Original Issue Date, the
Company shall have the right, upon a minimum of 30 calendar days' and a maximum
of 40 calendar days' prior notice to the Holders (an "Optional Redemption
Notice") to redeem all or any portion of the shares of Preferred Stock which
have not previously been redeemed or for which redemption is not due or
Conversion Notices shall not have been delivered or the Automatic Conversion
Date shall not have occurred, at a price equal to the Optional Redemption Price
(as defined in Section 7). The Company shall state in the Optional Redemption
Notice, the date on which it intends to redeem any applicable shares of
Preferred Stock and such specified date shall be (the "Optional Redemption
Date").
(b) The Company may only deliver an Optional Redemption Notice if:
(i) the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is sufficient to satisfy the Company's conversion
obligations of all shares of Preferred Stock then outstanding, (ii) the
Underlying Shares then outstanding are registered for resale pursuant to an
effective Registration Statement pursuant to which the Holders are permitted to
sell Underlying Shares or the Underlying Shares may be resold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, and
(iii) the Common Stock is listed for trading on the AMEX or on a Subsequent
Market. A Holder may convert (and the Company shall honor such conversions in
accordance with the terms hereof) any or all of the shares of Preferred Stock
subject to an Optional Redemption Notice delivered for conversion at any time on
or prior to the Optional Redemption Date.
(c) The entire Optional Redemption Price shall be paid in cash by
the 3rd Trading Day following the Optional Redemption Date. Failure by the
Company to pay any portion of the Optional Redemption Price when due shall, at
the option of the Holder subject thereto, result in the invalidation ab initio
of the unpaid portion of such optional redemption, and, notwithstanding anything
herein to the contrary, the Company shall thereafter have no further rights to
optionally redeem any shares of Preferred Stock. In such event, the Company
shall, at the option of the Holder, either, (i) not later than three Trading
Days from receipt of Holder's request for such election, return to the Holder
all of the shares of Preferred Stock for which such Optional Redemption Price
has not been paid in full (the "Unpaid Redemption Shares") or (ii) convert all
or any portion of the Unpaid Redemption Shares in which event the Per Share
Market Value for such shares shall be the lower of the Per Share Market Value
calculated on the date the Optional Redemption Price was originally due and the
Per Share Market Value as of the Holder's written demand for conversion. If the
Holder elects option (ii) above, the Company shall within three Trading Days of
its receipt of such election deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such Holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto.
(2) Redemption Upon Triggering Event
If the Company shall fail for any reason to file with the Commission, a
new Registration Statement as may be required under Section 4.1(c) of the
Exchange Agreement by the fiftieth day (50th) day after the receipt of an SEC
Notice ("Triggering Event") (SEC Notice is defined in the Exchange Agreement),
then each Holder (in addition to all other rights it may have hereunder or under
applicable law) shall have the right exercisable at the sole option of such
Holder, to require the Company to redeem all or a portion of the Preferred Stock
and Underlying Shares then held by such Holder for a redemption price, in cash,
equal to the sum of (i) the Mandatory Redemption Amount plus (ii) the product of
(A) the number of Underlying Shares issued in respect of conversions hereunder
and then held by the Holder and (B) the Per Share Market Value on the date such
redemption is demanded or the date the redemption price hereunder is paid in
full, whichever is greater (such sum, the "Redemption Price"). The Redemption
Price shall be due and payable within five Trading Days of the date on which the
notice for the payment therefor is provided by a Holder. If the Company fails to
pay the Redemption Price hereunder in full pursuant to this Section on the date
such amount is due in accordance with this Section, the Company will pay
interest thereon at a rate of 18% per annum (or the lesser amount permitted by
applicable law), accruing daily from such date until the Redemption Price, plus
all such interest thereon, is paid in full. For purposes of this Section, a
share of Preferred Stock is outstanding until such date as the Holder shall have
received Underlying Shares upon a conversion (or attempted conversion) thereof
that meets the requirements hereof.
Section 7. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"AMEX" shall mean the American Stock Exchange.
"Business Day" means any day except Saturday, Sunday, the day following
Thanksgiving and any day which shall be a federal legal holiday or a day on
which banks in the State of New York or the State of Colorado are authorized or
required by law or other governmental actions to close.
"Capital Raising Transaction" shall mean the first transaction or
series of transactions wherein, in the aggregate,: (i) the Company receives up
to $2,000,000 in connection with the Company's issuance of its Common Stock or
Common Stock Equivalents or agreement to so issue and (ii) the Company is
required in connection with such transaction or series of transactions, to
register for resale any such securities.
"Change of Control Transaction" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the Company's common stock, par value $0.01 per
share, and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Common Stock Equivalents" shall mean any share of Common Stock or
rights, warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is Stated Value (or Excess Stated Value, as the case may be) and the
denominator of which is the Conversion Price at such time.
"Effective Date" means the date that the Registration Statement is
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agreement" means the Securities Exchange Agreement, dated
as of the Original Issue Date, to which the Company and the original Holders are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
"Mandatory Redemption Amount" for each share of Preferred Stock
means the sum of (i) the greater of (A) 120% of the Stated Value or (B) the
product of (a) the Per Share Market Value on the Trading Day immediately
preceding (x) the date of the Triggering Event, or (y) the date of payment in
full by the Company of the applicable redemption price, whichever is greater,
and (b) the Conversion Ratio calculated on the date of the Triggering Event and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such share of Preferred Stock.
"Optional Redemption Price" means the sum of (a) all accrued and
unpaid dividends and liquidated damages on or in respect of the shares of
Preferred Stock (or portion thereof to be redeemed) plus (b) (i) if the Optional
Redemption Date for such redemption occurs prior to the 30th calendar day
preceding the second anniversary of the Original Issue Date, 120% of the Stated
Value of Preferred Stock to be redeemed and (ii) if the Optional Redemption Date
for such redemption occurs on or after the 30th calendar day preceding the
second anniversary of the Original Issue Date, 100% of the Stated Value of
Preferred Stock to be redeemed.
"Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the AMEX or on such
Subsequent Market on which the shares of Common Stock are then listed or quoted,
or if there is no such price on such date, then the closing bid price on the
AMEX or on such Subsequent Market on the date nearest preceding such date, or
(b) if the shares of Common Stock are not then listed or quoted on the AMEX or a
Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common Stock
are not then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
of the shares of the Preferred Stock.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Registration Rights Agreement" shall have the meaning set forth in
the Exchange Agreement.
"Registration Statement" means the Registration Statements (as
defined in the Exchange Agreement), the Amendment (as defined in the Exchange
Agreement) or any additional registration statement that meets the requirements
of the Registration Rights Agreements and registers the resale of all Underlying
Shares by the Holders as named "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Market" shall mean any of the Nasdaq National Market,
New York Stock Exchange or Nasdaq SmallCap Market.
"Trading Day" means (a) a day on which the shares of Common Stock
are traded on the AMEX or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted, or (b) if the shares of Common Stock are
not listed on the AMEX or a Subsequent Market, a day on which the shares of
Common Stock are traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC
Bulletin Board, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to close.
"Underlying Shares" means, collectively, the shares of Common Stock
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof.
"VWAP" means the daily volume weighted average price (as reported by
Bloomberg Financial L.P. using the "HP" function for the date in question (it
being understood that the average of the VWAP's for a certain number of Trading
Days shall be obtained by using the "HP" function)) of the Common Stock on the
date in question, or if there is no such price on such date, then the daily
volume weighted average price on the date nearest preceding such date.
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned Holder of 6% Series E Convertible Preferred Stock of Cel-Sci
Corporation (the "Company") hereby elects to convert the number of such
preferred shares indicated below, into shares of common stock, par value $0.01
per share (the "Common Stock"), of the Company as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations: Date to Effect Conversion
Stated Value of shares of Preferred Stock to be
Converted
Number of shares of Preferred Stock remaining
after Conversion
Number of shares of Common Stock to be Issued
-----------------
Number of shares of Common Stock to Which Remain
Issuable following this Conversion
------------------
Applicable Conversion Price
------------------------
Signature
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Name
------------------------
Address
IN WITNESS WHEREOF, I have executed this Amended Certificate of
Designation, Preferences and Rights this 16th day of August, 2001.
--------------------------
Patricia B. Prichep,
Senior Vice President of Operations