COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of September 16, 2003 by and between CEL-SCI Corporation, a Colorado corporation
(the "Company"), and Rubicon Group Ltd. (the "Purchaser"). Capitalized terms
used in this Agreement and not otherwise defined shall have the meanings
ascribed to them in Article 9 hereof.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall have the right to issue and sell
to Purchaser from time to time as provided herein, and Purchaser shall be
obligated to purchase up to $10,000,000 of Common Stock subject to the terms and
conditions set forth herein; 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 contained herein, 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 Draw Down Shares. 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 (the "Commitment Amount") and the
Warrant.
Section 1.2. Purchase Price and Initial Closing. 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
Feldman Weinstein LLP (i) within five (5) 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 60,753,294 shares are issued
and outstanding and 200,000 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, 2002. 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, 2002, 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.
"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
Notice, 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 shall not make a Draw Down to the extent that such Draw Down
exceeds 4.999% of the then outstanding shares of Common Stock.
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 and the Warrant
to the Purchaser.
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 and
Warrants.
Section 3.4. Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with Feldman Weinstein LLP (the "Escrow Agent") in
the form of Exhibit B hereto respecting payment against delivery of the Draw
Down 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 (without indicating the nature of such event) 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. Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide the Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto the Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that the Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
Section 3.13. 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 3.14. Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
Section 3.15. Securities Laws Disclosure; Publicity. The Company shall,
within 1 Trading Day of the Initial Closing Date, issue a press release or file
a Current Report on Form 8-K, in each case reasonably acceptable to each
Purchaser disclosing the transactions contemplated hereby and make such other
filings and notices in the manner and time required by the Commission. The
Company and each Purchaser shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby, and neither the
Company nor any Purchaser shall issue any such press release or otherwise make
any such public statement without the prior consent of the Company, with respect
to any press release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld, except if such disclosure is required by law, in
which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (a) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement and
(b) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchaser with prior
notice of such disclosure permitted under subclause (a) or (b).
The Purchaser covenants with the Company as follows:
Section 3.16. Prospectus Delivery Requirements. The Purchaser agrees that
it will, whenever required by federal securities laws, deliver the Prospectus
included in the Registration Statement to any purchaser of Draw Down Shares from
the Purchaser in such manner as is required under the federal securities laws.
Section 3.17. Limitations on Short Sales. The Purchaser agrees that it will
not enter into any Short Sales (as hereinafter defined) during the Commitment
Period. For purposes of this Section 3.17, a "Short Sale" by the Purchaser shall
mean a sale of Common Stock by the Purchaser that is marked as a short sale and
that is made at a time when there is no equivalent offsetting long position in
Common Stock held by the Purchaser. For purposes of determining whether there is
an equivalent offsetting long position in Common Stock held by the Purchaser,
Draw Down Shares that will be issued pursuant to a Draw Down Notice but that
have not yet been delivered to the Purchaser and Warrant Shares that have not
yet been issued upon exercise of the Warrants shall be deemed to be held long by
the Purchaser, and the amount of shares of Common Stock held in a long position
shall be the number of Draw Down Shares issuable pursuant to a Draw Down Notice
assuming all Draw Down Shares are purchased at the Threshold Price (or, if there
is no Threshold Price, the lowest VWAP after the date of the Draw Down Notice)
and with respect to Warrant Shares, the number of Warrant Shares issuable upon
exercise of the Warrants assuming the holder exercised all of the Warrants on
such date. Article 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. Conditions Precedent to the Obligation of the Company to Sell
the Draw Down 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,
which shall be true and correct in all material respects as of such
dates).
(b) Performance by the Purchaser. The Purchaser shall have materially
performed, satisfied and complied in all material respects with all
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. Except as set
forth on the Disclosure Schedules, the disclosure schedules attached to the
applicable Draw Down Notice or as disclosed in the SEC Documents, 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 and as of each Settlement Date as though made at that time (except
for representations and warranties that speak as of a particular date,
which shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all material 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 5 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 4.2 hereof
(b) Effective Registration Statement. The Registration Statement registering
the Draw Down Shares to be delivered in connection with the applicable
Draw Down shall have been declared effective by the SEC and shall remain
effective during the applicable Draw Down Pricing Period and on the
applicable Settlement Date.
(c) No Suspension. Trading in the 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 against the Commitment Amount (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 the 13th 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 aggregate 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, then the
Company shall be precluded from exercising 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 such Trading Day shall be withdrawn from the Draw Down Pricing
Period and the portion of the Investment Amount to be paid on the
immediately pending Settlement Date shall be reduced by an amount
equal to 1/22nd of the aggregate Investment Amount for the applicable
Draw Down Pricing Period;
(ii) if during any Trading Day during a Settlement Period trading of the
Common Stock on the Principal Market is suspended for more than three
(3) hours, in the aggregate, then such Trading Day shall be withdrawn
from such Settlement Period and the portion of the Investment Amount
to be paid on the immediately pending Settlement Date shall be reduced
by an amount equal to 1/22nd of the aggregate Investment Amount for
the applicable Draw Down Pricing Period; and
(iii) if during any Trading Day during a Settlement Period sales of Draw
Down Shares made under the Registration Statement are 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, then such Trading Day shall be withdrawn from such Settlement
Period and the portion of the Investment Amount to be paid on the
immediately pending Settlement Date shall be reduced by an amount
equal to 1/22nd of the aggregate Investment Amount for the applicable
Draw Down Pricing 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 8.4 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. ET, 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 designee's DTC account via DWAC after 1:00 p.m. ET, 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.
(h) The Company understands that a delay in the delivery of the Draw Down
Shares into the Purchaser's DTC account beyond 5 Trading Days after the
dates set forth herein or in the Escrow Agreement, as may be applicable,
could result in economic loss to the Purchaser. Notwithstanding anything
herein to the contrary, as compensation to the Purchaser for such loss, the
Company agrees to pay late payments to the Purchaser for late delivery
after 5 Trading Days from such dates in accordance with the following
schedule (where "No. Trading Days Late" is defined as the number of Trading
Days beyond 5 Trading Days from the dates set forth herein or in the Escrow
Agreement, as applicable, on which such Draw Down Shares are to be
delivered into the Purchaser's DTC account via the DWAC system):
- -------------------------------------------------------------------------------
No. Trading Days Late Late Payment for Each
$5,000 of Draw Down Shares
- --------------------------------------------------------------------------------
1 $50
- --------------------------------------------------------------------------------
2 $100
- --------------------------------------------------------------------------------
3 $150
- --------------------------------------------------------------------------------
4 $200
- --------------------------------------------------------------------------------
5 $250
- --------------------------------------------------------------------------------
6 $300
- --------------------------------------------------------------------------------
7 $350
- --------------------------------------------------------------------------------
8 $400
- --------------------------------------------------------------------------------
9 $450
- --------------------------------------------------------------------------------
10 $500
- --------------------------------------------------------------------------------
More than 10 $500 +$100 for each Trading
Day Late beyond 10 Trading
Days
- --------------------------------------------------------------------------------
The Company shall pay any payments incurred under this Section 5.1(h) in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver the Draw Down Shares to the Company.
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 of this
Agreement pursuant to Section 6.2 herein, 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 one 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 $10,000 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. 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
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: as set forth on the signature pages hereto.
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
Purchaser may not assign this Agreement or any rights or obligations hereunder.
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, except as set forth in Section 7.
Section 8.9. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
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. Severability. The provisions of this Agreement are severable
and, in the event that 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 8.12. 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 8.13. 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) "Commencement Date" shall have the meaning assigned to such term in
Section 5.1(f) hereof.
(b) "Commitment Amount" shall have the meaning assigned to such term in
Section 1.1 hereof.
(c) "Commitment Period" shall mean the period of 24 consecutive months
commencing immediately after the Effective Date.
(d) "Common Stock" shall mean the Company's common stock, $0.01 par value per
share, and any securities into which such common stock may hereafter be
reclassified into.
(e) "Draw Down" shall have the meaning assigned to such term in Section 5.1(a)
hereof.
(f) "Draw Down Notice" shall have the meaning assigned to such term in Section
5.1(f) hereof.
(g) "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.
(h) "Draw Down Shares" shall mean the shares of Common Stock issuable pursuant
to a Draw Down.
(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 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, the
OTC Bulletin Board 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" shall mean the Securities and Exchange Commission.
(t) "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.
(u) "Settlement" shall mean the delivery of the Draw Down Shares into the
Purchaser's DTC account in exchange for payment therefor.
(v) "Settlement Date" shall have the meaning assigned to such term in Section
5.1(b).
(w) "Settlement Period" shall have the meaning assigned to such term in
Section 5.1(b).
(x) "Shares" shall mean, collectively, the Draw Down Shares and the shares of
Common Stock issuable upon exercise of the Warrant (the "Warrant Shares").
(y) "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.
(z) "Trading Day" shall mean any day on which the Principal Market is open for
business.
(aa) "Transaction Documents" shall mean this Agreement, the Registration Rights
Agreement and the Escrow Agreement.
(bb) "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.
(cc) "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 16th day of
September, 2003.
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
--------------------------------------
Geert R. Kersten, Chief Executive
Officer
RUBICON GROUP LTD.
By: /s/
--------------------------------------
CEL-SCI CORPORATION
Schedule 2.1(c):
Common Stock
Number of Shares
Shares of common stock outstanding as of
September 16, 2003 60,753,294
The following lists additional shares of CEL-SCI's common stock which may be
issued:
Number of Note
Shares Reference
Shares issuable upon exercise of warrants issued
in connection with prior equity line 200,800 A
Shares issuable upon exercise of Series E, F and G 1,709,109 B
Warrants
Shares issuable upon exercise of options granted 200,000 C
to investor relations consultants
Shares issuable upon conversion of Series H Notes Unknown D
Shares issuable upon exercise of Series H 550,000 D
Warrants
Shares issuable upon exercise of Series I 1,100,000 E
Warrants
Shares issuable upon exercise of options and 10,698,640 F
warrants granted to CEL-SCI's officers,
directors, employees, consultants, and third parties
Shares issuable to Cambrex Bio Sciences, Inc. Unknown G
A. Under a prior equity line of credit agreement, Paul Revere Capital
Partners received 200,800 warrants to purchase CEL-SCI's common stock at a price
of $1.64 per share at any time prior to April 11, 2004.
B. The Series E warrants collectively allow the holders to purchase 815,351
shares of CEL-SCI's common stock at a price of $1.19 per share at any time prior
to August 16, 2004 and 23,758 shares at a price of $0.77 per share at any time
prior to August 17, 2006.
The Series F warrants allow the holders to purchase 420,000 shares of
CEL-SCI's common stock at a price of $0.153 per share at any time prior to
December 31, 2008.
The Series G warrants allow the holders to purchase 450,000 shares of
CEL-SCI's common stock at a price of $0.145 per share at any time prior to July
12, 2009.
The warrant exercise price, and the number of shares issuable upon the
exercise of the Series F and Series G warrants are subject to adjustment as
explained in the SEC Documents.
C. Options are exercisable at prices ranging between $1.63 and $ 2.50 per
share and expire between February 2004 and June 2006.
D. At the holder's option the Series H notes are convertible into shares of
CEL-SCI's common stock equal in number to the amount determined by dividing each
$1,000 of note principal to be converted by the Conversion Price. If the closing
price of CEL-SCI's common stock is less than $0.50 on any conversion date, the
Conversion Price will be 76% of the average of the three lowest daily trading
prices of CEL-SCI's common stock on the American Stock Exchange during the 15
trading days immediately prior to the conversion date. If the closing price of
CEL-SCI's common stock is $0.50 or greater on any conversion date, the
Conversion Price will be 70% of the average of the three lowest daily trading
prices of CEL-SCI's common stock on the American Stock Exchange during the 15
trading days immediately prior to the conversion date. The Conversion Price may
not be less than $0.16. However, if CEL-SCI's common stock trades for less than
$0.21 per share for a period of 20 consecutive trading days, the $0.16 minimum
price will no longer be applicable.
As of September 15, 2003 Series H notes in the principal amount of
$300,000 were outstanding. The actual number of additional shares issuable upon
the conversion of the Series H notes will vary depending upon a number of
factors, including the price of CEL-SCI's common stock at certain dates.
Accordingly, the number of shares which may be issued upon the conversion of the
Series H notes cannot be determined at this time.
The Series H warrants allow the holders to purchase up to 550,000 shares
of CEL-SCI's common stock at a price of $0.25 per share at any time prior to
January 7, 2010.
The warrant exercise price, and the number of shares issuable upon the
exercise of the Series H warrants are subject to adjustment as explained in the
SEC Documents.
E. Warrants are exercisable at a price of $0.47 per share at any time prior
to May 30, 2006.
F. Options are exercisable at prices ranging from $0.16 to $11.00 per
share.
G. Cambrex Biosciences, Inc. holds a note from CEL-SCI, which as of August
25, 2003 had an unpaid balance of $735,834. Cambrex, at its option, may convert
all or part of the amount due Cambrex into shares of CEL-SCI's common stock. The
number of shares to be issued to Cambrex upon any conversion of the note will be
determined by dividing that portion of the note to be converted by the
Conversion Price. The "Conversion Price" is an amount equal to 90% of the
average of the closing prices of CEL-SCI's common stock for the three trading
days immediately prior to the conversion date. The Conversion Price may not be
less than $0.22. The actual number of shares issuable upon the conversion of the
Cambrex note will vary depending upon a number of factors, including the price
of CEL-SCI's common stock at certain dates. Accordingly, the number of shares
which may be issued upon the conversion of the Cambrex note cannot be determined
at this time.
With the exception of the shares referred to in Note G, CEL-SCI has
registered, or has agreed to register, the shares referred to in this schedule.
Schedule 2.1(e) Not applicable
Schedule 2.1(f): Not applicable
Schedule 2.1(g): Subsidiaries: Viral Technologies
Schedule 2.1(h): Not applicable
Schedule 2.1(i): Not applicable
Schedule 2.1(k): Not applicable
Schedule 2.1 (l): Not applicable
Schedule 2.1(m): Not applicable
Schedule 2.1(p): Refer to Purchaser
Schedule 2.1(r): Not applicable
Schedule 2.1(s): Not applicable
Schedule 2.1(u): Not applicable
Schedule 2.1(v): Not applicable
Schedule 2.1(x): Not applicable
Schedule 2.1(y): Since June 30, 2003 the Company issued 2,307,499
shares of common stock for the following reasons:
1,517,366 conversion of Series H notes 550,000 conversion of
Series H warrants 120,608 shares issued in lieu of salaries
and wages 71,994 conversion of Series E Preferred Stock
47,531 shares issued in payment on dividends on Series E
Preferred Stock
Schedule 2.1(z): Not applicable
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 16, 2003 between
Rubicon Group 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
(capitalized 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
and Warrant 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 and Warrant Shares; provided, however, that any
shares of Common Stock which are Registrable Securities shall cease to be
Registrable Securities when (i) sold pursuant to 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 and Warrant Shares as provided herein, the
Shares and Warrant Shares are "restricted securities" as defined in Rule 144.
The Purchaser understands that no disposition or transfer of the Shares and
Warrant 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 Securities and Exchange Commission ("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 and Warrant
Shares.
(a) The Company agrees that it will prepare and file with the
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 and Warrant 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
Commission 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 and
Warrant Shares have been disposed of pursuant to the Registration Statement,
(ii) the date that all of the Shares and Warrant Shares have been sold pursuant
to the Registration Statement, (iii) the date all Shares and Warrant 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 and Warrant Shares
not bearing a restrictive legend, or (iv) the date all Shares and Warrant 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 and Warrant 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 or Warrant 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 and Warrant 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 Warrant Shares or engage in any
other transaction involving or relating to Shares or Warrant 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 or Warrant 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 or 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 and Warrant
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 Principal 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 possible and 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.
(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. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date set forth above.
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
--------------------------------------
Geert R. Kersten, Chief Executive
Officer
RUBICON GROUP LTD.
By: /s/
--------------------------------------
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of September 16,
2003, by and among CEL-SCI Corporation, a corporation incorporated under the
laws of Colorado (the "Company"), Rubicon Group Ltd. ("Purchaser") and Feldman
Weinstein LLP, with an address at 420 Lexington Avenue, New York, New York
10170-0002 (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 $10,000, 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 $10,000 per the instructions of the Purchaser
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:
[TO BE PROVIDED TO COMPANY]
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 of 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 the date set forth above.
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
--------------------------
Geert R. Kersten,
Chief Executive Officer
RUBICON GROUP LTD.
By:/s/
----------------------------
ESCROW AGENT:
FELDMAN WEINSTEIN LLP
By: /s/
----------------------------
Name: Robert Charron
Title: Partner
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 September __, 2003
(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
_____________, 20___.
CEL-SCI CORPORATION
By:
-------------------------------
Name:
Title:
EXHIBIT E
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE LAWS.
STOCK PURCHASE WARRANT
To Purchase 395,726 Shares of Common Stock of
CEL-SCI CORPORATION
THIS CERTIFIES that, for value received, Rubicon Group Ltd. (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after
September 16, 2003 (the "Initial Exercise Date") and on or prior to the close of
business on September 16, 2008 (the "Termination Date") but not thereafter, to
subscribe for and purchase from CEL-SCI Corporation, a corporation incorporated
in the State of Colorado (the "Company"), up to 395,726 shares (the "Warrant
Shares") of Common Stock, $0.01 par value per share, of the Company (the "Common
Stock"). The purchase price of one share of Common Stock (the "Exercise Price")
under this Warrant shall be $0.83, subject to adjustment herein. The Exercise
Price and the number of Warrant Shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. In the event of any conflict
between the terms of this Warrant and the Common Stock Purchase Agreement dated
as of September 16, 2003 pursuant to which this Warrant has been issued (the
"Purchase Agreement"), the Purchase Agreement shall control. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth for such
terms in the Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
by the surrender of this Warrant and the Notice of Exercise Form
annexed hereto duly executed, at the office of the Company (or such
other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder
appearing on the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or cashier's
check drawn on a United States bank or by means of a cashless exercise,
the Holder shall be entitled to receive a certificate for the number of
Warrant Shares so purchased. Certificates for shares purchased
hereunder shall be delivered to the Holder at an address in the United
States specified in writing by the Holder within three (3) Trading Days
after the date on which this Warrant shall have been exercised as
aforesaid; provided, however, if a registration registering the sale of
the Warrant Shares is then effective or the shares may be issue
pursuant to Rule 144 without a legend (and the customary documentation
has been provided for such sale), the Warrant Shares shall be delivered
directly to the Holder's or its designee's DTC account via the DWAC
system. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be
deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to
the Company of the Exercise Price and all taxes required to be paid by
the Holder, if any, pursuant to Section 5 prior to the issuance of such
shares, have been paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to
this Section 3(a) by the third Trading Day after the date of exercise,
then the Holder will have the right to rescind such exercise. In
addition to any other rights available to the Holder, if the Company
fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the third
Trading Day after the date of exercise, and if after such third Trading
Day the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a "Buy-In"), then the
------
Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order giving
rise to such purchase obligation was executed, and (2) at the option of
the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company.
Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.
(b) If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant.
(c) If no registration statement is effective permitting the resale of the
Warrant Shares at any time commencing one year after the issuance date
hereof, this Warrant shall also be exercisable by means of a "cashless
exercise" in which the Holder shall be entitled to receive a certificate
for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share
of Common Stock on the Trading Day preceding the date of such
election on the Nasdaq Stock Market, or if the Common Stock is
not traded on the Nasdaq Stock Market, then the Principal
Market in terms of volume;
(B) = the Exercise Price of this Warrant; and
(X) = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant and
the Notice of Exercise.
(d) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the
extent that (i) the number of shares of Common Stock owned by such
Holder (other than Warrant Shares issuable upon exercise of this
Warrant) plus (ii) the number of Warrant Shares issuable upon exercise
of this Warrant, would be equal to or exceed 4.9% of the number of
shares of Common Stock then issued and outstanding, including shares
issuable upon exercise of this Warrant held by such Holder after
application of this Section 3(d). As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this Section 3(d)
applies, the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder) and of which a
portion of this Warrant is exercisable shall be in the sole discretion
of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and
of which portion of this Warrant is exercisable, in each case subject
to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
Nothing contained herein shall be deemed to restrict the right of a
Holder to exercise this Warrant into Warrant Shares at such time as
such exercise will not violate the provisions of this Section 3(d).
The provisions of this Section 3(d) may be waived by the Holder upon,
at the election of the Holder, with not less than 61 days' prior notice
to the Company, and the provisions of this Section 3(d) shall continue
to apply until such 61st day (or such later date as may be specified in
such notice of waiver). No exercise of this Warrant in violation of
this Section 3(d) but otherwise in accordance with this Warrant shall
affect the status of the Warrant Shares as validly issued, fully-paid
and nonassessable.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to
any fraction of a share which Holder would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; provided, however, that in
the event certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed
by the Holder; and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
6. Closing of Books. Unless required by law, the Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. In the event that the Holder
wishes to transfer a portion of this Warrant, the Holder shall transfer
at least 100,000 shares underlying this Warrant to any such
transferee. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 7(a), as to any transfer
which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such
notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price or by means of a cashless
exercise, the Warrant Shares so purchased shall be and be deemed to be
issued to such Holder as the record owner of such shares as of the close
of business on the later of the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which
shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not
a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock
Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following.
In case the Company shall (i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, or
(iv) issue any shares of its capital stock in a reclassification of the
Common Stock, then the number of Warrant Shares purchasable upon exercise
of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been
entitled to receive had such Warrant been exercised in advance thereof.
Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the
Holder shall thereafter be entitled to purchase the number of Warrant
Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other
securities of the Company resulting from such adjustment. An adjustment
made pursuant to this paragraph shall become effective immediately after
the effective date of such event retroactive to the record date, if any,
for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation
(where the Company is not the surviving corporation or where there is a
change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially
all its property, assets or business to another corporation and, pursuant
to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation ("Other Property"), are to
be received by or distributed to the holders of Common Stock of the
Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such event. In
case of any such reorganization, reclassification, merger, consolidation
or disposition of assets, the successor or acquiring corporation (if other
than the Company) shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Warrant
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant
Shares for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section
12. For purposes of this Section 12, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any
class which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to redemption
and shall also include any evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt
requested, to the Holder notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of
such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such notice, in the absence of manifest error, shall be conclusive
evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property,
assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Principal Market upon which the Common
Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
New York, without regard to its conflict of law, principles or rules.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies, notwithstanding all rights hereunder terminate on the
Termination Date. If the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise
to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: September 16, 2003
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
--------------------------------------------
Geert R. Kersten, Chief Executive Officer
NOTICE OF EXERCISE
To: Cel-SCI Corporation
(1) The undersigned hereby elects to purchase ________ Warrant Shares (the
"Common Stock"), of Cel-SCI Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is
specified below:
-------------------------------
The Warrant Shares shall be delivered to the following:
-------------------------------
-------------------------------
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Rubicon Group Ltd.
By: ______________________________
Name:
Title:
Dated: ________________________
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO CASHLESS EXERCISE PROVISIONS
To: Cel-SCI Corporation
Aggregate Price of Warrant Before Exercise: $ ________
Aggregate Price Being Exercised: $______
Exercise Price: $______ per share
Number of Shares of Common Stock to be Issued Under this Notice: _______
Remaining Aggregate Price (if any) After Issuance: $_______
Gentlemen:
The undersigned, registered Holder of the Warrant delivered herewith,
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of Cel-SCI Corporation, a Colorado corporation, as provided
below. Capitalized terms used herein, unless otherwise defined herein, shall
have the meanings given in the Warrant. The portion of the Exercise Price (as
defined in the Warrant) to be applied toward the purchase of Common Stock
pursuant to this Notice of Exercise is $_______, thereby leaving a remaining
Exercise Price (if any) equal to $________. Such exercise shall be pursuant to
the cashless exercise provisions of Section 3 of the Warrant; therefore, Holder
makes no payment with this Notice of Exercise. The number of shares to be issued
pursuant to this exercise shall be determined by reference to the formula in
Section 3 of the Warrant which, by reference to Section 3, requires the use of
the high and low trading price of the Company's Common Stock on the Trading Day
preceding the date of such election. The high and low trading price of the
Company's Common Stock has been determined by Holder to be $______ and
$_________, respectively, which figure is acceptable to Holder for calculations
of the number of shares of Common Stock issuable pursuant to this Notice of
Exercise. Holder requests that the certificates for the purchased shares of
Common Stock be issued in the name of _______________________ and delivered to
________________________________________. To the extent the foregoing exercise
is for less than the full Aggregate Price of the Warrant, a replacement Warrant
representing the remainder of the Aggregate Price (and otherwise of like form,
tenor and effect) shall be delivered to Holder along with the share certificate
evidencing the Common Stock issued in response to this Notice of Exercise.
RUBICON GROUP LTD.
By:
----------------------------------
Name:
Title:
Date:
NOTE
The execution to the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant
ASSIGNMENT FORM
(To assign the foregoing warrant, executed
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address is
_______________________________________________
_______________________________________________.
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.