CEL-SCI CORPORATION
FORM 8-K
EXHIBIT 10
CEL-SCI CORPORATION
Schedule Required by Instruction 2 to Item 601
of Regulation S-K
Number of Number of
Name and Address Amount Shares Warrants
Of Purchaser Invested Purchased Purchased
Cher Ami Holding, Inc. $1,250,000 1,470,588 441,176
Attn: Dr. Vincent Fischer-Zernin
Weiss, Walter, Fishcer-Zernin
20354 Hamburg
Neuer Wall 7I
Germany
Longview International Equity Fund, L.P. $200,000 235,294 70,588
c/o: Redwood Grove Capital Management, LLC
25 Longview Court
Hillsborough, CA 94010
Attn: S. Michael Rudolph, CFO
Longview Equity Fund, L.P. $300,000 352,941 105,882
C/O: Redwood Grove Capital Management, LLC
25 Longview Court
Hillsborough, CA 94010
Attn: S. Michael Rudolph, CFO
Longview Fund, L.P. $200,000 235,294 70,588
1325 Howard Ave., #422
Burlingame, CA 94010
Enable Growth Partners $100,000 117,647 35,294
One Sansome St., Suite 2900
San Francisco, CA 94104
Capital Ventures International $499,970 588,200 176,460
-------- ------- -------
c/o Heights Capital Management
425 California St., Suite 1100 $2,549,970 2,999,964 899,988
========== ========= =======
San Francisco, CA 94104
Original issue date of warrants: December 1, 2003
Exercise price of warrants: $1.32
Expiration date of warrants: December 1, 2006
CEL-SCI CORPORATION
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
ARTICLE I Purchase and Sale of Common Stock and Warrants................3
Section 1.1 Purchase and Sale of Common Stock and Warrants.............3
Section 1.2 Purchase Price and Closing.................................3
Section 1.3 Warrants...................................................3
ARTICLE II Representations and Warranties................................4
Section 2.1 Representations and Warranties of the Company..............4
Section 2.2 Representations and Warranties of the Purchasers..........15
ARTICLE III Covenants....................................................17
Section 3.1 Securities Compliance.....................................17
Section 3.2 Registration and Listing..................................18
Section 3.3 Inspection Rights.........................................18
Section 3.4 Compliance with Laws......................................18
Section 3.5 Keeping of Records and Books of Account...................18
Section 3.6 Amendments................................................18
Section 3.7 Other Agreements..........................................18
Section 3.8 Transfer Agent Instructions...............................19
Section 3.9 S-3 Eligibility...........................................19
ARTICLE IV Conditions...................................................19
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Notes and Warrants..................19
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Notes and Warrants..............20
ARTICLE V Certificate Legend...........................................22
Section 5.1 Legend....................................................22
ARTICLE VI Termination..................................................23
Section 6.1 Termination by Mutual Consent.............................23
Section 6.2 Effect of Termination.....................................23
ARTICLE VII Indemnification..............................................24
Section 7.1 General Indemnity.........................................24
Section 7.2 Indemnification Procedure.................................24
ARTICLE VIII Miscellaneous................................................25
Section 8.1 Fees and Expenses.........................................25
Section 8.2 Specific Enforcement; Consent to Jurisdiction.............25
Section 8.3 Entire Agreement; Amendment...............................26
Section 8.4 Notices...................................................26
Section 8.5 Waivers...................................................27
Section 8.6 Headings..................................................27
Section 8.7 Successors and Assigns....................................27
Section 8.8 No Third Party Beneficiaries..............................27
Section 8.9 Governing Law.............................................27
Section 8.10 Survival.................................................27
Section 8.11 Counterparts.............................................28
Section 8.12 Publicity................................................28
Section 8.13 Severability.............................................28
Section 8.14 Further Assurances.......................................28
EXHIBITS:
A.....Name of each Purchaser and number of Units acquired.
B.....Form of Warrant
C.....Transfer Agent Instructions
D.....Opinion of Counsel
E.....Registration Rights Agreement.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of December
1, 2003 (this "Agreement") by and between Cel-Sci Corporation, a Colorado
corporation (the "Company"), and the persons who have signed this Agreement
(each a "Purchaser" or, if one or more, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock and Warrants
Section 1.1 Purchase and Sale of Common Stock and Warrants. Upon the
following terms and conditions, the Company shall sell up to $4,000,000 of
Units. Each Unit consists of one hundred shares of the Company's common stock
(the "Common Stock") and thirty Warrants. The Units, as well as any shares of
Common Stock issuable upon the exercise of the Warrants, are sometimes
collectively referred to herein as the "Securities". The Company and the
Purchasers are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded by Section
4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
Section 1.2 Purchase Price and Closing. The name and address of each
Purchaser and the number of Units to be acquired by each Purchaser are shown on
Exhibit A. The price of each Unit will be $85.
The Closing Date will be the earlier of:
1. The date the Company has received subscriptions of $1,250,000 for the
Units.
2. December 1, 2003
It is understood that prior to December 4, 2003 Units, in addition to
those sold by virtue of this Agreement, may be sold by the Company to other
persons, provided however that the total Units sold will not be in excess of
that shown in Section 1.1 of this Agreement and provided further that any such
sales will be made in accordance with the same terms as are provided by this
Agreement.
Section 1.3 Warrants. The Warrants to purchase shares of Common
Stock will be, in substantially the form attached hereto as Exhibit B (the
"Warrants"). Each Warrant entitles the holder to purchase one share of the
Company's common stock at a price equal to 110% of the price at which the
Company's common stock closes on the Closing Date. The Warrants may be exercised
at any time prior to December 1, 2006. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a number of its authorized but
unissued shares of its Common Stock equal to the number of shares of Common
Stock to effect the exercise of the Warrants. Any shares of Common Stock
issuable upon the exercise of the Warrants (and such shares when issued) are
herein referred to as the "Warrant Shares."
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. In order
to induce the Purchasers to enter into this Agreement and to purchase the
Securities, the Company hereby makes the following representations and
warranties to the Purchasers:
(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 the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth in the Commission Documents (as defined in Section 2.1(f)) or on Schedule
2.1(g) hereto. The Company and each such Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect"
means any adverse effect on the business, operations, properties, prospects or
financial condition of the Company or its Subsidiaries and which is material to
such entity or other entities controlling or controlled by such entity or which
is likely to materially hinder the performance by the Company of its obligations
hereunder and under the other Transaction Documents (as defined in Section
2.1(b) hereof).
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement (collectively, the "Transaction Documents") and to
issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its 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, creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof currently issued and outstanding as of November 18, 2003 are
set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and any other security of the Company have been duly and
validly authorized. Except as set forth in this Agreement and as set forth in
the Commission Documents or on Schedule 2.1(c) hereto, no shares of Common Stock
or any other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call 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 on
in the Commission Documents or on Schedule 2.1(c) hereto, 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 for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or
as provided in the Commission Documents or on Schedule 2.1(c) hereto, the
Company is not a party to or bound by any agreement or understanding granting
registration or anti-dilution 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 or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth 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 Closing complied with all applicable federal and
state securities laws, and no holder of such securities has a right of
rescission or claim for damages with respect thereto which could have a Material
Adverse Effect. The Company has furnished or made available to the Purchasers
true and correct copies of the Company's Articles of Incorporation as in effect
on the date hereof (the "Articles"), and the Company's Bylaws as in effect on
the date hereof (the "Bylaws").
(d) Issuance of Securities. The Securities to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Warrant Shares are issued and paid for
in accordance with the terms of this Agreement and as set forth in the Warrants,
such shares will be duly authorized by all necessary corporate action and
validly issued and outstanding, fully paid and nonassessable, free and clear of
all liens, encumbrances and rights of refusal of any kind and the holders shall
be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Articles or Bylaws or any Subsidiary's comparable
charter documents, (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 or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, (iii) create or impose
a lien, mortgage, security interest, charge or encumbrance of any nature on any
property or asset of the Company or any of its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, or (iv) result in a violation
of any federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and 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 other than violations pursuant to clauses (i) or (iv) above, for
such conflicts, defaults, terminations, amendments, acceleration, 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. Neither the
Company nor any of its Subsidiaries is required under federal, state, foreign 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 the
Transaction Documents or issue and sell the Shares, the Warrants, and the
Warrant Shares in accordance with the terms hereof or thereof (other than any
filings which may be required to be made by the Company with the Commission, the
American Stock Exchange prior to or subsequent to the Closing, or state
securities administrators subsequent to the Closing, or any registration
statement which may be filed pursuant hereto).
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
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
Commission 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 "Commission Documents"). The Company has delivered or made
available to the Purchasers true and complete copies of the Commission Documents
filed with the Commission since June 30, 2003. The Company has not provided to
the Purchasers any material non-public information or other 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. At the time of its
filing, the Form 10-Q for the fiscal quarter ended June 30, 2003 (the "Form
10-Q") complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
documents, and Form 10-Q did not contain 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. As of their respective dates, the
financial statements of the Company included in the Commission Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission or other applicable rules
and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles ("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 Commission Documents or Schedule 2.1(g) hereto
set forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person'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
interest 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 outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, and are fully paid and
nonassessable. 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 except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is 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 Change. Since June 30, 2003, the Company has
not experienced or suffered any Material Adverse Effect, except as disclosed in
the Commission Documents or on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed in the
Commission 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) other than those incurred in the ordinary course of the Company's
or its Subsidiaries respective businesses since June 30, 2003 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 June 30, 2003,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The Commission Documents or Schedule 2.1(k) hereto
set 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
$25,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other 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 $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as disclosed on Schedule 2.1(k),
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, free and
clear of any mortgages, pledges, charges, liens, security interests or other
encumbrances of any nature whatsoever, except for those indicated in the
Commission Documents or on Schedule 2.1(l) hereto or such that, individually or
in the aggregate, do not have 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,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other 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, which individually or in the aggregate, would
have a Material Adverse Effect. 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 or any officers or
directors of the Company or Subsidiary in their capacities as such, which
individually or in the aggregate, would have a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(n) hereto or such that, individually or in the aggregate, the noncompliance
therewith would not have a Material Adverse Effect. 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 its business as now being conducted by it 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. Except as set forth on Schedule 2.1(o) hereto, the
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(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 Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit 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, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations, including, but not
limited to, those listed in the Commission 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) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. Schedule 2.1(s)
hereto sets forth all material permits, licenses and other authorizations issued
under any Environmental Laws to the Company or its Subsidiaries. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries. The Company and each of its
Subsidiaries are also in compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including, without
limitation, underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance.
"Environmental Liabilities" means all liabilities of a person (whether such
liabilities are owed by such person to governmental authorities, third parties
or otherwise) whether currently in existence or arising hereafter which arise
under or relate to any Environmental Law.
(t) Books and Records; Internal Accounting Controls. 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. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(u) Material Agreements. Except for the Transaction Documents and as
set forth in the Commission 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 Commission (collectively, "Material
Agreements") if the Company or any Subsidiary were registering securities under
the Securities Act. 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. 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 interest on the Notes, or dividends on its Common Stock.
(v) Transactions with Affiliates. Except as set forth in the
Commission 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 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 any 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 Act of 1933. 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, the Warrants, and the Warrant 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 any of the
Securities, or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities 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 any of the Securities.
(x) Governmental Approvals. Except as set forth in the Commission
Documents or on Schedule 2.1(x) hereto, and except for the filing of any notice
prior or subsequent to the Closing that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely
basis), 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 execution or delivery of the Notes and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
(y) 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 Commission Documents or on Schedule 2.1(y) hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
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
June 30, 2003, 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.
(z) Absence of Certain Developments. Except as set forth in the
Commission Documents or on Schedule 2.1(z) hereto, since June 30, 2003, 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 in the ordinary course of business or to the
Purchasers or its representatives;
(vii) suffered any substantial losses 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 $25,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would cause a Material Adverse Effect; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) Use of Proceeds. The proceeds from the sale of the Common Stock
and the Warrant Shares will be used by the Company for working capital purposes
and shall not be used to repay any outstanding Indebtedness or any loans to
officer, director, affiliate or insider of the Company.
(bb) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would cause a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Common Stock and
the Warrant Shares will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as
amended, provided that, if any Purchaser, or any person or entity that owns a
beneficial interest in any Purchaser, is an "employee pension benefit plan"
(within the meaning of Section 3(2) of ERISA) with respect to which the Company
is a "party in interest" (within the meaning of Section 3(14) of ERISA), the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met.
As used in this Section 2.1(cc), the term "Plan" shall mean an "employee pension
benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
(dd) Bankruptcy. The Company has no knowledge of or reason to
believe that it will file for bankruptcy within one year of the Initial Closing
Date.
Section 2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers hereby makes the following representations and warranties to
the Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Common Stock and Warrants being sold to it hereunder. The
execution, delivery and performance of the Transaction Documents by each
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action, and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. This Agreement has
been duly authorized, executed and delivered by each Purchaser. The other
Transaction Documents constitute, or shall constitute when executed and
delivered, a valid and binding obligations of each Purchaser enforceable against
such 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, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of the
Transaction Documents by each Purchaser and the consummation by each Purchaser
of the transactions contemplated hereby and thereby do not and will not (i)
violate any provision of such Purchaser's Articles 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 such Purchaser is a party or by which such Purchaser's properties or
assets are bound, (iii) create or impose a lien, mortgage, security interest,
charge or encumbrance of any nature on any property or asset of such Purchaser
under any agreement or any commitment to which such Purchaser is a party or by
which such Purchaser is bound or by which any of its properties or assets are
bound, or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to such Purchaser or by which
any property or asset of such Purchaser are bound or affected, except, in all
cases other than violations pursuant to clauses (i) or (iv) above, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a material and
adverse effect on the operations of the Purchasers. The business of each
Purchaser 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 and adverse
effect on the operations of the Purchasers. Each Purchaser is not required under
federal, state, foreign 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 the Transaction Documents or to purchase the Common Stock, the
Warrants, and the Warrant Shares in accordance with the terms hereof or thereof.
(d) Acquisition for Investment. Each Purchaser is purchasing the
Common Stock and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell any of the Securities,
nor a present arrangement (whether or not legally binding) or intention to
effect any distribution of any of the Securities to or through any person or
entity; provided, however, that by making the representations herein and subject
to Section 2.2(f) below, each Purchaser does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of any of the Securities at any time in accordance with federal and
state securities laws applicable to such disposition. Each Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company and is (ii) able to bear the
financial risks associated with an investment in the Securities and (iii) 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.
(e) Rule 144. Each Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities. Each Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
(g) Opportunities for Additional Information. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of such Purchaser's
personal knowledge of the Company's affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.
(h) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications.
(i) Accredited Investor. Each Purchaser is an accredited investor
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Each Purchaser acknowledges that
an investment in the Securities is speculative and involves a high degree of
risk.
ARTICLE III
Covenants
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with their rules and regulations, of the transactions
contemplated by any of the Transaction Documents 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 Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2 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 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 shall
take all action necessary to continue the listing or trading of its Common Stock
on the American Stock Exchange or any successor market. The Company will
promptly file the "Listing Application" for, or in connection with, the issuance
and delivery of the Common Stock and the Warrant Shares.
Section 3.3 Inspection Rights. The Company shall permit, during
normal business hours and upon reasonable request and reasonable notice, a
Purchaser or any employees, agents or representatives thereof, so long as a
Purchaser shall own the Shares, which represent more than two percent (2%) of
the total combined voting power of all voting securities then outstanding, to
examine and make reasonable copies of and extracts from the records and books of
account of, the properties of the Company.
Section 3.4 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 3.5 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 3.6 Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company in any way that would
adversely affect the exercise rights, voting rights, prepayment rights or
redemption rights of the holder of the Notes or the Warrants.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.
Section 3.8 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of the Purchasers or their
respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by the Purchasers to the Company upon exercise of the Warrants, in
the form of Exhibit C attached hereto (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Warrant Shares under the Securities
Act, all such certificates shall bear the restrictive legend specified in
Section 5.1 of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
3.12 will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement. Nothing in this Section 3.12
shall affect in any way the Purchasers' obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements, if
any, upon the resale of the Conversion Shares and the Warrant Shares. If a
Purchaser provides the Company with an opinion of counsel, in a generally
acceptable form, substance and scope, to the effect that a public sale,
assignment or transfer of the Securities may be made without registration under
the Securities Act or the Purchasers provide the Company with reasonable
assurances that the Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the
case of the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by the
Purchasers and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3.12 will cause irreparable
harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.12 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 3.12, that the Purchasers shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Section 3.9 S-3 Eligibility. The Company meets the requirements for
the use of Form S-3 under the Securities Act to register for re-sale the shares
of Common Stock and the Warrant Shares pursuant to the Registration Rights
Agreement.
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Common Stock and Warrants. The obligation hereunder of the
Company to close and issue and sell the Common Stock and the Warrants to the
Purchasers at the Closing Date is subject to the satisfaction or waiver, at or
before the Closing 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 Purchasers' Representations and Warranties. The
representations and warranties of each the Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser 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 Purchasers at or prior to the Closing 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.
(d) Delivery of Purchase Price. The Purchase Price for the Common
Stock and Warrants has been delivered to the Company at the applicable Closing
Date.
(e) Delivery of Transaction Documents. The Transaction Documents
have been duly executed and delivered by the Purchasers to the Company at the
Closing Date.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Common Stock and Warrants. The obligation hereunder
of the Purchasers to purchase the Common Stock and Warrants and consummate the
transactions contemplated by this Agreement is subject to the satisfaction or
waiver, at or before the Closing Date, of each of the conditions set forth
below. These conditions are for the Purchasers' sole benefit and may be waived
by the Purchasers at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the Closing Date, 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 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 Closing Date.
(c) No Suspension, Etc. From the date hereof to each Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to each Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets ("Bloomberg") shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by Bloomberg, or on the New York Stock
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any national
or international calamity or crisis of such magnitude in its effect on any
financial market which, in each case, in the reasonable judgment of the
Purchasers, makes it impracticable or inadvisable to purchase the Common Stock
and Warrants.
(d) 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.
(e) 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 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.
(f) Opinion of Counsel, Etc. The Purchasers shall have received an
opinion of counsel to the Company, dated the date of such Closing, in the form
of Exhibit D hereto and such other certificates and documents as the Purchasers
or their counsel shall reasonably require incident to such Closing.
(g) Warrants. At the Closing, the Company shall have delivered the
originally executed Warrants (in such denominations as each Purchaser may
request).
(h) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").
(i) Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, a number of shares of Common
Stock equal to the number of Warrant Shares issuable upon exercise of the
Warrants.
(j) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to the Company's transfer agent.
(k) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of each Closing Date, as to (i)
the Resolutions, (ii) the Articles, (iii) the Bylaws, each as in effect at the
Closing, and (iv) the authority and incumbency of the officers of the Company
executing the Transaction Documents and any other documents required to be
executed or delivered in connection therewith.
(l) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate of an executive officer of the
Company, dated as of each Closing Date, confirming the accuracy of the Company's
representations, warranties and covenants as of each Closing Date and confirming
the compliance by the Company with the conditions precedent set forth in this
Section 4.2 as of each Closing Date.
(m) Registration Rights Agreement. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement in the Form of
Exhibit E attached hereto.
(n) Material Adverse Effect. No Material Adverse Effect shall have
occurred.
ARTICLE V
Certificate Legend
Section 5.1 Legend. Each certificate representing the Common Stock,
the Warrants and the Warrant Shares shall be stamped or otherwise imprinted with
a legend substantially in the following form (in addition to any legend required
by applicable state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR CEL-SCI CORPORATION SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the
Securities, without the legend set forth above if at such time, prior to making
any transfer of any such Securities, such holder thereof shall give written
notice to the Company describing the manner and terms of such transfer and
removal as the Company may reasonably request. Such proposed transfer will not
be effected until: (a) the Company has notified such holder that either (i) in
the opinion of Company counsel, the registration of the Common Stock, Warrants
or Warrant Shares under the Securities Act is not required in connection with
such proposed transfer; or (ii) a registration statement under the Securities
Act covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act; and (b) the
Company has notified such holder that either: (i) in the opinion of Company
counsel, the registration or qualification under the securities or "blue sky"
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or "blue sky" laws has been
effected. The Company will use its best efforts to respond to any such notice
from a holder within five (5) days. In the case of any proposed transfer under
this Section 5, the Company will use reasonable efforts to comply with any such
applicable state securities or "blue sky" laws, but shall in no event be
required, in connection therewith, to qualify to do business in any state where
it is not then qualified or to take any action that would subject it to tax or
to the general service of process in any state where it is not then subject. The
restrictions on transfer contained in Section 5.1 shall be in addition to, and
not by way of limitation of, any other restrictions on transfer contained in any
other section of this Agreement.
ARTICLE VI
Termination
Section 6.1 Termination by Mutual Consent. If the Company has not
received at least $1,250,000, before payment of any commissions, from the sale
of the Units by December 1, 2003, this Agreement shall automatically terminate
unless extended by the mutual written consent of the Company and the Purchasers.
Section 6.2 Effect of Termination. In the event of termination by
the Company or the Purchasers, 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 herein, this Agreement shall become void
and of no further force and effect, except for Sections 8.1 and 8.2, and Article
VII herein. Nothing in this Section 6.2 shall be deemed to release the Company
or any Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and such Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VII
Indemnification
Section 7.1 General Indemnity. The Company agrees to indemnify and
hold harmless each Purchaser (and its respective 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
each Purchaser as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. The
Purchasers severally but not jointly agree 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 inaccuracy in or
breach of the representations, warranties or covenants made by the Purchasers
herein.
Section 7.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (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 VII 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 the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to 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 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
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VII 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 VII 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, so long as the
indemnified party irrevocably agrees to refund such moneys 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 the
indemnifying party may be subject to pursuant to the law.
ARTICLE VIII
Miscellaneous
Section 8.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
Section 8.2 Specific Enforcement; Consent to Jurisdiction.
---------------------------------------------
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents 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 or the other Transaction
Documents 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.
(b) The Company and each Purchaser (i) hereby irrevocably submit to
the exclusive jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waive, and agree
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and each Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof 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 in this Section 8.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Common Stock, this
Agreement, the Registration Rights Agreement or the Warrants, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
(c) Entire Agreement; Amendment. This Agreement and the Transaction
Documents contain the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein or in the other Transaction Documents, neither the Company nor any
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and one or more Purchasers who agree to be
bound by such amendment, and no provision hereof may be waived other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
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 by telecopy 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: Cel-Sci Corporation
8229 Boone Boulevard
Suite 802
Vienna, Virginia 22182
Attention: Geert Kersten
Telephone: (703) 506-9460
Fax: (703) 506-9471
with copies (which copies
shall not constitute notice
to the Company) to:
William T. Hart, Esq.
Hart & Trinen L.L.P.
1624 Washington Street
Denver, Colorado 80203
Telecopier: (303) 839-5414
Telephone: (303) 839-0061
If to any Purchaser: At the address of such Purchaser set
forth on Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.
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
provision, 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.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
The Purchasers may assign the Common Stock, the Warrants and its rights under
this Agreement and the other Transaction Documents and any other rights hereto
and thereto without the consent of the Company.
Section 8.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Virginia, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 8.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Article II shall survive the execution
and delivery hereof and the Closing until the date two (2) years from the
Closing Date, and the other agreements and covenants set forth elsewhere in this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 8.11 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.
Section 8.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the names of the
Purchasers without the consent of the Purchasers in accordance with Section 8.4,
which consent shall not be unreasonably withheld or delayed, or unless and until
such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement.
Section 8.13 Severability. The provisions of this Agreement are
severable and, in the event that any court 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.
Section 8.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each 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, the Warrants,
and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
---------------------------
Name: Geert R. Kersten
Title: Chief Executive Officer
CHER AMI HOLDING, INC.
By: /s/
----------------------------
Authorized Officer
LONGVIEW INTERNATIONAL EQUITY FUND, L.P.
By: /s/
----------------------------
Authorized Officer
LONGVIEW EQUITY FUND, L.P.
By: /s/
----------------------------
Authorized Officer
LONGVIEW FUND, L.P.
By: /s/
----------------------------
Authorized Officer
ENABLE GROWTH PARTNERS
By: /s/
----------------------------
Authorized Officer
CAPITAL VENTURES INTERNATIONAL
By: /s/
----------------------------
Authorized Officer
CEL-SCI CORPORATION
Schedule 2.1(c):
Common Stock
Number of
Shares
Shares of common stock outstanding as of
December 1, 2003 62,121,420
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 2,895,185 A
held by private investors
Shares issuable upon conversion of Cambrex note Unknown B
Shares issuable pursuant to equity line of credit Unknown C
Shares issuable upon exercise of equity line warrants 395,726 C
Shares issuable upon exercise of options and 10,600,181 D
warrants granted to CEL-SCI's officers,
directors, employees, consultants, and third
parties
Shares issuable upon exercise of options 200,000 E
granted to investor relations consultants
A. In 2001, CEL-SCI entered into an equity line of credit agreement with Paul
Revere Capital Partners. During the term the equity line of credit, which
expired in June 2003, CEL-SCI received net proceeds of $2,074,692 from the sale
of 5,430,960 shares of common stock pursuant to the terms of the equity line. As
consideration for extending the equity line of credit, CEL-SCI granted Paul
Revere Capital Partners warrants to purchase 200,800 shares of common stock at a
price of $1.64 per share at any time prior to April 11, 2004.
In August 2001 three private investors exchanged their warrants for
CEL-SCI's Series E warrants. As of November 21, 2003 the Series E warrants
allowed the holders to purchase up to 570,627 shares of CEL-SCI's common stock
at a price of $1.19 per share at any time prior to August 16, 2004. In August
2003, in accordance with the terms of the Series E preferred stock, the Company
issued warrants which permits the holders to purchase an additional 23,758
shares of CEL-SCI's common stock at a price of $0.77 per share at any time prior
to August 17, 2006.
In July and September 2002, CEL-SCI sold Series G convertible notes, plus
Series G warrants, to a group of private investors for $1,300,000. As of June
30, 2003 all of the Series G notes had been converted into 8,390,746 shares of
CEL-SCI's common stock. As of November 21, 2003 the Series G warrants allowed
the holders to purchase up to 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. Every three months
after September 9, 2003, the exercise price of the Series G warrants will be
adjusted to an amount equal to 84% of the average of the 3 lowest daily trading
prices of CEL-SCI's common stock on the American Stock Exchange during the 20
trading days immediately prior to the three month adjustment date, provided that
the adjusted price is lower than the warrant exercise price on that date.
In January and July 2003, CEL-SCI sold Series H convertible notes, plus
Series H warrants, to a group of private investors for $1,350,000. As of October
2, 2003 all of the Series H notes had been converted into 3,233,229 shares of
CEL-SCI's common stock. As of November 21, 2003 the Series H warrants allowed
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. Every three
months after September 26, 2003 the exercise price of the Series H warrants will
be adjusted to an amount equal to 84% of the average of the 3 lowest daily
trading prices of CEL-SCI's common stock on the American Stock Exchange during
the 15 trading days immediately prior to the three month adjustment date,
provided that the adjusted price is lower than the warrant exercise price on
that date.
In May 2003 CEL-SCI sold shares of its common stock plus Series I warrants
to a strategic partner, at prices equal to or above the then current price of
CEL-SCI's common stock. The Series I warrants allow the holder to purchase
1,100,000 shares of CEL-SCI's common stock at a price of $0.47 per share at any
time prior to May 30, 2008.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable exercise
price of the Series G or H warrants, the warrant exercise price will be lowered
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be. If the warrant exercise price is
adjusted, the number of shares of common stock issuable upon the exercise of the
warrant will be increased by the product of the number of shares of common stock
issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage by which the warrant exercise price is reduced.
If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock at a price below the market price of
CEL-SCI's common stock, the exercise price of the Series G or H warrants will be
lowered by a percentage equal to the price at which the shares were sold or the
lowest price at which the securities are convertible, as the case may be,
divided by the then prevailing market price of CEL-SCI's common stock. If the
warrant exercise price is adjusted, the number of shares of common stock
issuable upon the exercise of the warrant will be increased by the product of
the number of shares of common stock issuable upon the exercise of the warrant
immediately prior to the sale multiplied by the percentage determined by
dividing the price at which the shares were sold by the market price of
CEL-SCI's common stock on the date of sale.
However, neither the exercise price of the Series G or H warrants nor the
shares issuable upon the exercise of the Series G or H warrants will be adjusted
as the result of shares issued in connection with a Permitted Financing. A
Permitted Financing involves shares of common stock issued or sold:
o in connection with a merger or acquisition or a strategic partnership;
o upon the exercise of options or the issuance of common stock to CEL-SCI's
employees, officers, directors, consultants and vendors in accordance with
CEL-SCI's equity incentive policies;
o pursuant to the conversion or exercise of securities which were outstanding
prior to July 12, 2002 in the case of the Series G warrants and January 7,
2003 in the case of the Series H warrants;
o to key officers of CEL-SCI in lieu of their respective salaries.
B. In November 2001 CEL-SCI gave a promissory note in the principal amount of
$1,172,517 to Cambrex Bio Sciences, Inc. The note represented the cost of
CEL-SCI's use of the Cambrex manufacturing facility for the three months ended
January 10, 2002 to produce MULTIKINE for CEL-SCI's clinical trials. The amount
due Cambrex bears interest at the prime interest rate, plus 3%, which is
adjusted monthly. The note is due in full, including accrued interest, on
January 2, 2004. As of November 21, 2003 CEL-SCI had made $485,525 in principal
payments on the note. 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. As of
December 1, 2003 Cambrex had not converted any part of the note into shares of
CEL-SCI's common stock. The actual number of additional 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.
C. In order to provide a possible source of funding for CEL-SCI's current
activities and for the development of its current and planned products, CEL-SCI
entered into an equity line of credit agreement with Rubicon Group Ltd. in
September 2003. An unknown number of shares of common stock are issuable under
the equity line of credit agreement between CEL-SCI and Rubicon Group, Ltd. As
consideration for extending the equity line of credit, CEL-SCI granted Rubicon
Group warrants to purchase 395,726 shares of common stock at a price of $0.83
per share at any time prior to September 16, 2008.
Under the equity line of credit agreement, Rubicon Group has agreed to
provide CEL-SCI with up to $10,000,000 of funding during a two year period
beginning on the date that the registration statement filed by CEL-SCI to
register the shares to be sold to Rubicon Group is declared effective by the
Securities and Exchange Commission. During this period, CEL-SCI may request a
drawdown under the equity line of credit by selling shares of its common stock
to Rubicon Group and Rubicon Group will be obligated to purchase the shares.
CEL-SCI may request a drawdown once every 22 trading days, although CEL-SCI is
under no obligation to request any drawdowns under the equity line of credit.
During the 22 trading days following a drawdown request, CEL-SCI will
calculate the amount of shares it will sell to Rubicon Group and the purchase
price per share. The purchase price per share of common stock will be based on
the daily volume weighted average price of CEL-SCI's common stock during each of
the 22 trading days immediately following the drawdown date, less a discount of
11%.
CEL-SCI may request a drawdown by faxing a drawdown notice to Rubicon
Group, stating the amount of the drawdown and the lowest daily volume weighted
average price, if any, at which CEL-SCI is willing to sell the shares. The
lowest volume weighted average price will be set by CEL-SCI's Chief Executive
Officer in his sole and absolute discretion.
If CEL-SCI sets a minimum price which is too high and CEL-SCI's stock price
does not consistently meet that level during the 22 trading days after its
drawdown request, the amount CEL-SCI can draw and the number of shares CEL-SCI
will sell to Rubicon Group will be reduced. On the other hand, if CEL-SCI sets a
minimum price which is too low and its stock price falls significantly but stays
above the minimum price, CEL-SCI will have to issue a greater number of shares
to Rubicon Group based on the reduced market price.
As of December 1, 2003 CEL-SCI had not requested any drawdowns under the
equity line of credit.
The exercise price of the Series G or H warrants and the number of shares
issuable upon the exercise of the Series G or H warrants will not be adjusted as
the result of shares issued in connection with any drawdowns under the equity
line of credit.
D. The options are exercisable at prices ranging from $0.16 to $11.00 per share.
CEL-SCI may also grant options to purchase additional shares under its Incentive
Stock Option and Non-Qualified Stock Option Plans.
E. CEL-SCI has granted options for the purchase of 200,000 shares of common
stock to certain investor relations consultants in consideration for services
provided to CEL-SCI. The options are exercisable at prices ranging between $1.63
and $2.50 per share and expire between February 2004 and June 2006.
The shares referred to in Notes A, C and D are being, or will be, offered
for sale by means of registration statements which have been filed with the
Securities and Exchange Commission.
Other Registration Rights
The Company has filed a registration statement with the Securities and
Exchange Commission on Form S-3 to permit the resale of 1,247,831 shares of
common stock in the public market which are owned by Eastern Biotech and Mooring
Capital Fund LLC, as well as the 1,100,000 shares which are issuable upon the
exercise of the Series I warrants.
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 (j): Not applicable
Schedule 2.1(k): Not applicable
Schedule 2.1 (l): Not applicable
Schedule 2.1(m): Not applicable
Schedule 2.1(n): Not applicable
Schedule 2.1(o): Not applicable
Schedule 2.1(p): CEL-SCI will pay a commission to Reedland Partners for
the participation of certain funds in this financing. The
commission is as follows:
a. Cash Commission. Upon each closing of the purchase of the
Securities (each, a "Closing Date"), CEL-SCI agrees to pay Reedland Capital
Partners ("Reedland") a cash commission (payable by wire transfer) equal to five
percent (5%) of the aggregate gross proceeds received by CEL-SCI from those
Purchasers introduced to CEL-SCI by Reedland (the "Investors"); and
b. Reedland Warrants. Upon each Closing Date, CEL-SCI agrees
to issue to Reedland, or its designees, 3-year warrants (the "Reedland
Warrants") to purchase a number of common shares with a Black Scholes valuation
equal to five percent (5.0%) of the aggregate gross proceeds received by CEL-SCI
from the Investors (in accordance with GAAP and based upon an implied volatility
reasonably acceptable to Reedland). The Reedland Warrants will be exerciseable
at an exercise price per share equal to the lesser of (i) the exercise price of
the Warrants (if any) issued to the Investors on such date, and (ii) 120% of the
average of the closing sale prices of the Common Stock over the five (5)
consecutive trading days immediately preceding the applicable Closing Date. The
Reedland Warrants will be non-callable, and will contain customary and
appropriate anti-dilution protections (in the event of a stock split, stock
dividend, recapitalization or similar circumstance). Additionally, CEL-SCI
hereby agrees to include the common shares underlying the Reedland Warrants in
each Registration Statement filed by CEL-SCI on behalf of the Investors;
provided, that in any event, CEL-SCI shall register for resale the common shares
underlying the Reedland Warrants pursuant to an effective registration statement
not later than one (1) year following the first Closing Date. The Reedland
Warrants shall be due and payable by CEL-SCI on each Closing Date and CEL-SCI
shall use its best efforts to deliver the Reedland Warrants to Reedland as soon
as practicable thereafter, in such form and substance as may be reasonably
acceptable to Reedland.
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): Not applicable
Schedule 2.1(z): Since September 30, 2003 the Company issued 955,075
shares of common stock for the following reasons:
244,724 - conversion of Series E warrants
369,796 - conversion of Series F warrants
182,646 - conversion of Series H notes
2,000 - conversion of employee stock options
155,909 - shares issued in lieu of salaries and wages
EXHIBIT A
Number of Number of
Name and Address Amount Shares Warrants
Of Purchaser Invested Purchased Purchased
Cher Ami Holding, Inc. $1,250,000 1,470,588 441,176
Attn: Dr. Vincent Fischer-Zernin
Weiss, Walter, Fishcer-Zernin
20354 Hamburg
Neuer Wall 7I
Germany
Longview International Equity Fund, L.P. $200,000 235,294 70,588
c/o: Redwood Grove Capital Management, LLC
25 Longview Court
Hillsborough, CA 94010
Attn: S. Michael Rudolph, CFO
Longview Equity Fund, L.P. $300,000 352,941 105,882
C/O: Redwood Grove Capital Management, LLC
25 Longview Court
Hillsborough, CA 94010
Attn: S. Michael Rudolph, CFO
Longview Fund, L.P. $200,000 235,294 70,588
1325 Howard Ave., #422
Burlingame, CA 94010
Enable Growth Partners $100,000 117,647 35,294
One Sansome St., Suite 2900
San Francisco, CA 94104
Capital Ventures International $499,970 588,200 176,460
-------- ------- -------
c/o Heights Capital Management
425 California St., Suite 1100 $2,549,970 2,999,964 899,988
========== ========= =======
San Francisco, CA 94104
EXHIBIT B
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR CEL-SCI CORPORATION SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
CEL-SCI CORPORATION
Expires December 1, 2006
No.: W-03-__ Number of Shares: _________
Date of Issuance: December 1, 2003
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Cel-Sci Corporation, a Colorado corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
________________________________ or its registered assigns is entitled to
subscribe for and purchase, during the period specified in this Warrant, up to
____________________________ (__________) shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 9 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on December 1, 2006 (such period being
the "Term").
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank check
or by wire transfer to an account designated by the Issuer.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (e) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment of
any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant or the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or
any shares of Warrant Stock to be issued upon exercise hereof except
pursuant to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state
securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and
all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR CEL-SCI CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall have
been resold pursuant to an effective registration statement under the
Securities Act, (B) upon the Issuer's receipt of an opinion of counsel,
in form and substance reasonably satisfactory to the Issuer, addressed to
the Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or
(C) upon the Issuer's receipt of other evidence reasonably satisfactory
to the Issuer that such registration and qualification under the
Securities Act and state securities laws are not required. Whenever such
restrictions shall cease and terminate as to any such securities, the
Holder thereof shall be entitled to receive from the Issuer (or its
transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of
Warrant Stock, new stock certificates) of like tenor not bearing the
applicable legend required by paragraph (ii) above relating to the
Securities Act and state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the
exercise of this Warrant or otherwise hereunder will, upon issuance,
be duly authorized, validly issued, fully paid and non-assessable and
free from all taxes, liens and charges created by or through Issuer.
The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times
have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental
authority under any federal or state law before such shares may be so
issued, the Issuer will in good faith use its best efforts as
expeditiously as possible at its expense to cause such shares to be
duly registered or qualified. If the Issuer shall list any shares of
Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such
listing, of, all shares of Warrant Stock from time to time issued
upon exercise of this Warrant or as otherwise provided hereunder,
and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any
time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities
exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to
receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities
exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Articles of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other 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 the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting
the generality of the foregoing, the Issuer will (i) not permit the
par value, if any, of its Common Stock to exceed the then effective
Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would
adversely affect in any way the powers, preferences or relative
participating, optional or other special rights of the Common Stock
or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary
in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock, free and clear of any liens,
claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to
obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations
under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security
satisfactory to the Issuer or, in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Issuer will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to
purchase the same number of shares of Common Stock.
(e) Registration Rights. The Warrant Stock of the Issuer is entitled to
the benefits and subject to the terms of the Registration Rights
Agreement dated the date hereof between the Issuer and the Holder.
4. Adjustment of Warrant Price and Warrant Share Number. The number of
shares of Common Stock for which this Warrant is exercisable, and the
price at which such shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set
forth in this Section 4. The Issuer shall give the Holder notice of
any event described below which requires an adjustment pursuant to
this Section 4 in accordance with Section 5.
(a) In case the Issuer 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 Warrant Shares shall
be adjusted so that the Holder shall be entitled to receive the kind
and number of Warrant Shares or other securities of the Issuer which
it would have owned or have been entitled to receive had this Warrant
been exercised in advance thereof. Upon each such adjustment of the
kind and number of Warrant Shares or other securities of the Issuer
which are purchasable hereunder, the Holder shall thereafter be
entitled to purchase Warrant Shares or other securities resulting
from such adjustment at a price obtained by multiplying the Warrant
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 Issuer 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.
(b) In case the Issuer shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation
(where the Issuer is not the surviving corporation or where there is
a change in or distribution with respect to the Common Stock of the
Issuer), 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
Issuer, 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 Issuer, 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 Issuer) 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 Issuer 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 Issuer) 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 4(b).
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes
of this Section 5, each an "adjustment"), the Issuer shall cause its
Chief Financial Officer to prepare and execute a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was
calculated (including a description of the basis on which the Board
made any determination hereunder), and the Warrant Price and Warrant
Share Number after giving effect to such adjustment, and shall cause
copies of such certificate to be delivered to the Holder of this
Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this Warrant with respect to the matters set
forth in such certificate may at the option of the Holder of this
Warrant be submitted to one of the national accounting firms
currently known as the "big five" selected by the Holder, provided
that the Issuer shall have ten (10) days after receipt of notice from
such Holder of its selection of such firm to object thereto, in which
case such Holder shall select another such firm and the Issuer shall
have no such right of objection. The firm selected by the Holder of
this Warrant as provided in the preceding sentence shall be
instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it
of such dispute. Such opinion shall be final and binding on the
parties hereto. The fees and expenses of such accounting firm shall
be paid by the Holder.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such
fractional shares, the Issuer shall make a cash payment therefor
equal in amount to the product of the applicable fraction multiplied
by the Per Share Market Value then in effect.
7. Ownership Cap and Certain Exercise Restrictions.
(a) Notwithstanding anything to the contrary set forth in this Warrant,
at no time may a holder of this Warrant exercise this Warrant if the
number of shares of Common Stock to be issued pursuant to such
exercise would exceed, when aggregated with all other shares of
Common Stock owned by such holder at such time, the number of shares
of Common Stock which would result in such holder owning more than
4.999% of all of the Common Stock outstanding at such time; provided,
however, that upon a holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 13 hereof) (the
"Waiver Notice") that such holder would like to waive this Section
7(a) with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7(a) will be of no force or
effect with regard to all or a portion of the Warrant referenced in
the Waiver Notice; provided, further, that this provision shall be of
no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.
(b) The Holder may not exercise the Warrant hereunder to the extent such
exercise would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon
exercise of the Warrant held by the Holder after application of this
Section.
8. Intentionally Omitted.
9. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Articles of Incorporation" means the Articles of Incorporation of
the Issuer as in effect on the Original Issue Date, and as hereafter from
time to time amended, modified, supplemented or restated in accordance
with the terms hereof and thereof and pursuant to applicable law.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether
general or limited) in any Person which is a partnership, (iii) all
membership interests or limited liability company interests in any limited
liability company, and (iv) all equity or ownership interests in any
Person of any other type.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly engaged
in the business of appraising the Capital Stock or assets of corporations
or other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means Cel-Sci Corporation, a Colorado corporation, and its
successors.
"Original Issue Date" means December 1, 2003.
-------------------
"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Purchase Agreement" means the Common Stock and Warrant Purchase
Agreement dated as of December 1, 2003 among the Issuer and the investors
a party thereto.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or
other right to purchase or acquire any Security. "Security" means one of
the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Warrant Price" means U.S. $1.32, as such price may be adjusted from
time to time as shall result from the adjustments specified in this
Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all prior adjustments and
increases to such number made or required to be made under the terms
hereof.
"Warrant Shares" or "Warrant Stock" means Common Stock issuable upon
exercise of any Warrant or Warrants or otherwise issuable pursuant to any
Warrant or Warrants.
10. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to subscribe
for or purchase any shares of Capital Stock of any
class or of any Common Stock Equivalents or other
rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the
surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least ten (10)
days prior to the action in question and not less than ten (10) days prior to
the record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two (2) Trading Days written notice thereof describing the matters upon which
action is to be taken). The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.
11. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Holder; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 11 without the consent of the Holder of this Warrant.
12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF VIRGINIA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the
date of mailing, if sent by nationally recognized overnight courier service or
(iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to the Holder of
this Warrant or of Warrant Stock issued pursuant hereto, addressed to such
Holder at its last known address or facsimile number appearing on the books of
the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
Cel-Sci Corporation
8229 Boone Boulevard
Suite 802
Vienna, Virginia 22182
Attention: Geert Kersten
Telecopier: (703) 506-9460
Telephone: (703) 506-9471
with copies (which copies shall not constitute notice to the Company) to:
William T. Hart, Esq.
Hart & Trinen L.L.P.
1624 Washington Street
Denver, Colorado 80203
Telecopier: (303) 839-5414
Telephone: (303) 839-0061
Copies of notices to the Holder shall be sent to the address shown on the
signature page to this Warrant. Any party hereto may from time to time change
its address for notices by giving at least ten (10) days written notice of such
changed address to the other party hereto.
14. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, instruct its transfer agent to issue shares of Warrant Stock on
the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof,
exchange this Warrant pursuant to subsection (d) of Section 2 hereof or replace
this Warrant pursuant to subsection (d) of Section 3 hereof, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
15. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
17. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and
year first above written.
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
---------------------------------------
Name: Geert R. Kersten
Title: Chief Executive Officer
EXERCISE FORM
CEL-SCI CORPORATION
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Cel-Sci
Corporation covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT C
CEL-SCI CORPORATION
December 1, 2003
Computershare Trust Company, Inc.
350 Indiana St., Suite 800
Golden, CO 80401
Reference is made to that certain Common Stock and Warrant Purchase
Agreement, dated as of December 1, 2003, by and among Cel-Sci Corporation, a
Colorado corporation (the "Company"), and the purchasers named therein (the
"Purchasers") pursuant to which the Company has sold to the Purchasers shares of
Common Stock ("Common Stock") and warrants (the "Warrants") to purchase
additional shares of Common Stock. This letter shall serve as our irrevocable
authorization and direction to you (provided that you are the transfer agent of
the Company at such time) to:
o remove the restricted legend on the certificates representing shares
of Common Stock sold to the Purchasers, and
o issue shares of Common Stock sold upon exercise of the Warrants (the
"Warrant Shares") upon the order of a Purchaser from time to time upon
(i) surrender to you of a properly completed and duly executed
Exercise Notice, in the form attached hereto as Exhibit I and (ii) a
copy of the Warrant (with the original Warrant delivered to the
Company) being exercised (or, in each case, an indemnification
undertaking with respect to such Warrants in the case of its loss,
theft or destruction).
So long as you have previously received (x) written confirmation from
counsel to the Company that a registration statement covering resales of the
shares of Common Stock or Warrant Shares, as applicable, has been declared
effective by the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and no subsequent notice by
the Company or its counsel of the suspension or termination of its effectiveness
and (y) a copy of such registration statement, and if the Purchasers represent
in writing that the shares of Common Stock or the Warrant Shares, as the case
may be, will be sold pursuant to the Registration Statement, then certificates
representing the shares of Common Stock and the Warrant Shares, as the case may
be, shall not bear any legend restricting transfer of the shares of Common Stock
and the Warrant Shares, as the case may be, and should not be subject to any
stop-transfer restriction. Provided, however, that if you have not previously
received (i) written confirmation from counsel to the Company that a
registration statement covering resales of the shares of Common Stock or Warrant
Shares as applicable, has been declared effective by the SEC under the 1933 Act,
and (ii) copy of such registration statement, then the certificates for the
shares of Common Stock and the Warrant Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDEND ("THE SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT VE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF
APPLICABLE STATE SECURITIES LAWS OR CEL-SCI CORPORATION SHALL HAVE
RECEIVED AN OPINION OF ITS COUSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED."
and, provided further, that the Company may from time to time notify you to
place transfer restrictions on the certificates for the shares of Common Stock
and the Warrant Shares in the event a registration statement covering the shares
of Common Stock and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit II.
Please be advised that each Purchaser is relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these instructions.
Should you have any questions concerning this matter, please contact me at
(703) 506-9460.
Very truly yours,
CEL-SCI CORPORATION
By:________________________________
Name: Geert Kersten
Title: Chief Executive Officer
EXHIBIT I
FORM OF EXERCISE NOTICE
EXERCISE FORM
CEL-SCI CORPORATION
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Cel-Sci
Corporation covered by the within Warrant.
Dated: _________________ Signature ____________________________
Address ____________________________
----------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ____________________________
Address ____________________________
----------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto _______________________ the right to purchase _________ shares of Warrant
Stock evidenced by the within Warrant, together with all rights therein, and
does irrevocably constitute and appoint __________________________, attorney, to
transfer that part of the said Warrant on the books of the within named
corporation.
Dated: _________________ Signature ____________________________
Address ____________________________
----------------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefore in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT II
December __, 2003
Computershare Trust Company, Inc.
350 Indiana St., Suite 800
Golden, CO 80401
Re: Cel-Sci Corporation
We are counsel to Cel-Sci Corporation, a Colorado corporation (the
"Company"), and have represented the Company in connection with that certain
Common Stock and Warrant Purchase Agreement (the "Purchase Agreement"), dated as
of November __, 2003 by and among the Company and the purchasers named therein
(collectively, the "Purchasers") pursuant to which the Company sold to the
Purchasers shares of the Company's common stock, (the "Common Stock") and
warrants (the "Warrants"). Pursuant to the Purchase Agreement, the Company has
also entered into a Registration Rights Agreement with the Purchasers (the
"Registration Rights Agreement"), dated as of December 1, 2003, pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________,
the Company filed a Registration Statement on Form S-3 (File No. 333-_____) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the resale of the Registrable Securities which names the
Purchasers as selling stockholders thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at ______ a.m. on
______________ and we have no knowledge, after telephonic inquiry of a member of
the SEC's staff, that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and accordingly, the Registrable Securities are available
for resale under the 1933 Act pursuant to the Registration Statement.
Very Truly Yours,
HART & TRINEN, L.L.P.
By
William T. Hart
EXHIBIT D
December 1, 2003
RE: Cel-Sci Corporation
This office represents Cel-Sci Corporation (the "Company"). In connection
with the Common Stock and Warrant Purchase Agreement ("the Purchase Agreement")
we have been requested to provide you with an opinion concerning certain
matters. Capitalized terms used and not otherwise defined in this letter which
are defined in the Purchase Agreement shall have the respective meanings set
forth in the Purchase Agreement. Based upon the foregoing we are of the opinion
that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Colorado and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Common Stock, the Warrants and the Warrant Shares. The execution, delivery
and performance of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors is required. Each of the
Transaction Documents have been duly executed and delivered, and the shares of
Common Stock and the Warrants have been duly executed, issued and delivered by
the Company and each of the Transaction Documents constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its respective terms. The shares of Common Stock and the Warrant Shares are
not subject to any preemptive rights under the Articles of Incorporation or the
Bylaws.
3. The Shares of Common Stock have been duly authorized and, when
delivered against payment in full as provided in the Purchase Agreement, will be
validly issued. The Warrant Shares, have been duly authorized and reserved for
issuance, and, when delivered upon exercise or against payment in full as
provided in the Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the shares of Common
Stock, the Warrants and the Warrant Shares do not (a) violate any provision of
the Articles of Incorporation or Bylaws, (b) 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 material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party and which is known to us, (c) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement
or any commitment known to us 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 (d) result in a violation of any Federal, state, local or foreign
statute, rule, regulation, order, judgment, injunction or decree (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the shares of Common Stock, the Warrants or the
Warrant Shares other than filings as may be required by applicable Federal and
state securities laws and regulations and the rules and regulations of the
American Stock Exchange.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Common Stock and Warrant Purchase Agreement or the transactions
contemplated thereby or any action taken or to be taken pursuant thereto. There
is no action, suit, claim, investigation or proceeding pending, or to our
knowledge, threatened, against or involving the Company or any of its properties
or assets and which, if adversely determined, is reasonably likely to result in
a Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such.
7. The offer, issuance and sale of the shares of Common Stock and the
Warrants and the offer, issuance and sale of the Warrant Shares pursuant to the
Purchase Agreement, are exempt from the registration requirements of the
Securities Act of 1933, as amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
Very Truly Yours,
HART & TRINEN, L.L.P.
By
William T. Hart
WTH:ap
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 1, 2003, by and among Cel-Sci Corporation, a
Colorado corporation (the "Company"), and the purchasers listed on Schedule I
hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Common Stock
and Warrant Purchase Agreement, dated as of the date hereof among the Company
and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" means the date of the closing of the purchase and
sale of the Common Stock and Warrant Shares pursuant to the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's Common Stock, par value $0.001
per share.
"Effectiveness Date" means with respect to the Registration
Statement the earlier of the 120th day following the Closing Date or the date
which is within five (5) days of the date on which the Commission informs the
Company that the Commission (i) will not review the Registration Statement or
(ii) that the Company may request the acceleration of the effectiveness of the
Registration Statement and the Company makes such request.
"Effectiveness Period" shall have the meaning set forth in Section
2.
"Event" shall have the meaning set forth in Section 7(e).
"Event Date" shall have the meaning set forth in Section 7(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock sold as
part of the Units and the shares of Common Stock issuable upon exercise of the
Warrants.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Shelf Registration.
On or prior to the Filing Date the Company shall prepare and file
with the Commission a "shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall (i) not permit any securities other than
the Registrable Securities to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the date on which
the Registrable Securities may be sold without any restriction pursuant to Rule
144 as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent to such effect (the
"Effectiveness Period"). If at any time and for any reason, an additional
Registration Statement is required to be filed because at such time the actual
number of shares of Common Stock into which the Warrants are exercisable exceeds
the number of shares of Registrable Securities remaining under the Registration
Statement, the Company shall have twenty (20) Business Days to file such
additional Registration Statement, and the Company shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than forty-five (45) days
after filing. If at such time in the reasonable opinion of the Purchasers there
is not or will not be a sufficient number of Registrable Securities to be issued
upon the exercise of the Warrants then outstanding, the Purchasers shall be
entitled to demand that the Company prepare and file an additional Registration
Statement.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of such Holders and such Special Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of counsel to
such Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible, but in no event later
than ten (10) business days, to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and as promptly
as possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and any
Special Counsel as promptly as possible (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will 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,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the American Stock
Exchange, OTC Bulletin Board or any other securities exchange, quotation system
or market, if any, on which similar securities issued by the Company are then
listed as and when required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 20
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period; provided, however, that no such postponement or suspension
shall be permitted for consecutive 20 day periods, arising out of the same set
of facts, circumstances or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
American Stock Exchange and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the National Association of Securities Dealers,
Inc. and the NASD Regulation, Inc. and (C) in compliance with state securities
or Blue Sky laws (including, without limitation, fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the Holders of
a majority of Registrable Securities may designate)), (ii) expenses of printing
certificates for Registrable Securities, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities
Act liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company's independent public accountants (including the
expenses of any comfort letters or costs associated with the delivery by
independent public accountants of a comfort letter or comfort letters). In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder or such other Indemnified Party
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use therein or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review), as incurred, arising solely out of or based solely upon
any untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or arising solely out of or based
solely upon any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder or other Indemnified Party to the Company
specifically for inclusion in the Registration Statement or such Prospectus and
that such information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties. The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; 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).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying,
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
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.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties
6. Rule 144.
As long as any Holder owns Common Stock, Warrants or Warrant Shares,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Holders with true and complete copies
of all such filings. As long as any Holder owns Shares of Common Stock, Warrants
or Warrant Shares, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell the Common Stock and Warrant Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including providing any legal
opinions relating to such sale pursuant to Rule 144. Upon the request of any
Holder, the Company shall deliver to such Holder a written certification of a
duly authorized officer as to whether it has complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(c) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto or
as disclosed in Schedule 2.1(c) of the Purchase Agreement) may include
securities of the Company in the Registration Statement, and the Company shall
not after the date hereof enter into any agreement providing such right to any
of its securityholders, unless the right so granted is subject in all respects
to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering (i) Conversion Shares or (ii) Warrant
Shares, the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each holder of Registrable Securities written
notice of such determination and, if within thirty (30) days after receipt of
such notice, any such holder shall so request in writing, (which request shall
specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will cause the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities, would materially adversely affect the offering contemplated in such
registration statement, and based on such determination recommends inclusion in
such registration statement of fewer or none of the Registrable Securities of
the Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holders shall be included in such
registration statement, if the Company after consultation with the
underwriter(s) recommends the inclusion of none of such Registrable Securities;
provided, however, that if Securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of Registrable Securities intended to be offered
by the Holders than the fraction of similar reductions imposed on such other
persons or entities (other than the Company).
(e) Failure to File Registration Statement and Other Events. The
Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement is
filed because the actual number of shares of Common Stock into which the
Warrants are exercisable exceeds the number of shares of Common Stock initially
registered is not filed and declared effective with the time periods set forth
in Section 2), or (B) the Company fails to file with the Commission a request
for acceleration in accordance with Rule 461 promulgated under the Securities
Act within five (5) Business Days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not subject to further review,
or (C) the Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities at any time prior to the expiration of the Effectiveness Period,
without being succeeded immediately by a subsequent Registration Statement filed
with and declared effective by the Commission, or (D) trading in the Common
Stock shall be suspended or if the Common Stock is delisted from the American
Stock Exchange or the OTC Bulletin Board for any reason for more than three
Business Days in the aggregate, or (E) the Company breaches in a material
respect any covenant or other material term or condition to this Agreement, the
Purchase Agreement (other than a representation or warranty contained therein)
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, and such
breach continues for a period of thirty days after written notice thereof to the
Company, or (any such failure or breach being referred to as an "Event," and for
purposes of clause (A) the date on which such Event occurs, or for purposes of
clause (B) the date on which such five day period is exceeded, or for purposes
of clause (C) after more than fifteen Business Days, or for purposes of clause
(D) the date on which such three Business Day period is exceeded, or for clause
(E) the date on which such thirty day period is exceeded, being referred to as
"Event Date"), the Company shall pay, at the option of the Holder, an amount in
cash or shares of Common Stock, as liquidated damages to the Holder equal to 1%
for the first calendar month and 2% per calendar month thereafter or portion
thereof of the Purchase Price of the shares of Common Stock owned by the Holder
until the applicable Event is cured. Payments to be made pursuant to this
Section 7(e) shall be due and payable immediately upon demand in immediately
available funds. If the Holder elects to be paid in shares of Common Stock, the
number of such shares of Common Stock shall be based on the liquidated damage
amount divided by the Purchase Price of the shares of Common Stock.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., New York
City time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., New York
City time, on any date and earlier than 11:59 p.m., New York City time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule 1 attached hereto, or with respect to the Company,
addressed to:
Cel-Sci Corporation
8229 Boone Boulevard
Suite 802
Vienna, Virginia 22182
Attention: Geert Kersten
Telecopier: (703) 506-9460
Telephone: (703) 506-9471
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Hart & Trinen
L.L.P., 1624 Washington Street, Denver, Colorado 80203, Attention: William T.
Hart, Esq., Facsimile No.: (303) 839-5414.
(h) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement, (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement, and (vi) at least 100,000 shares of Registrable Securities
(appropriately adjusted for any stock dividend, split or combination of the
Common Stock) are being transferred to such transferee or assignee in connection
with such assignment of rights. In addition, each Holder shall have the right to
assign its rights hereunder to any other Person with the prior written consent
of the Company, which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders (and to subsequent) successors and
assigns.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(k) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Virginia, without regard to
principles of conflicts of law thereof.
(l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, 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
reasonable 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 such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(o) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
CEL-SCI CORPORATION
By:
_____________________________________
Name: Geert R. Kersten
Title: Chief Executive Officer
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title: