EXHIBIT 10(ii)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 4, 2012, between Cel-Sci Corporation, a Colorado corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company, securities of the Company as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
"Acquiring Person" shall have the meaning ascribed to such term in
Section 4.5.
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except any Saturday, any Sunday, any
day which is a federal legal holiday in the country-regionUnited States or
any day on which banking institutions in the State of StateplaceNew York
are authorized or required by law or other governmental action to close.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day on which all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations
to pay the Subscription Amount and (ii) the Company's obligations to
deliver the Securities, in each case, have been satisfied or waived, but
in no event later than 3 Trading Days following the date hereof.
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"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock of the Company, par value
$0.01 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means Hart & Trinen, addressStreet1624 Washington
Street, CityDenver, StateColorado PostalCode80206.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"EGS" means Ellenoff Grossman & Schole LLP, with offices located at
addressStreet150 East 42nd Street, CityNew York, StateNew York
PostalCode10017.
"Evaluation Date" shall have the meaning ascribed to such term in
Section 3.1(r).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers or directors of the Company pursuant to
any stock or option plan duly adopted for such purpose, by a majority of
the non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise or exchange of or conversion of
any Securities issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the
number of such securities or to decrease the exercise price, exchange
price or conversion price of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equityholders of a Person)
which is, itself or through its subsidiaries, an operating company or an
owner of an asset in a business synergistic with the business of the
Company and shall provide to the Company additional benefits in addition
to the investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities.
"FDA" shall have the meaning ascribed to such term in Section
3.1(gg).
"FDCA" shall have the meaning ascribed to such term in Section
3.1(gg).
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"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Indebtedness" shall have the meaning ascribed to such term in
Section 3.1(z).
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(o).
"Liens" means a lien, charge, pledge, security interest,
encumbrance, right of first refusal, preemptive right or other
restriction.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Participation Maximum" shall have the meaning ascribed to such term
in Section 4.11(a).
"Per Share Purchase Price" equals $0.30, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date
of this Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Pharmaceutical Product" shall have the meaning ascribed to such
term in Section 3.1(gg).
"Pre-Notice" shall have the meaning ascribed to such term in Section
4.11(b).
"Pro Rata Portion" shall have the meaning ascribed to such term in
Section 4.11(a).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Prospectus" means the final prospectus filed for the Registration
Statement.
"Prospectus Supplement" means the supplement to the Prospectus
complying with Rule 424(b) of the Securities Act that is filed with the
Commission and delivered by the Company to each Purchaser at the Closing.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.8.
"Registration Statement" means the effective registration statement
with Commission file No. 333-184094 which registers the sale of the
Shares, the Warrants and the Warrant Shares to the Purchasers.
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"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"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 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Short Sales" means all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include
the location and/or reservation of borrowable shares of Common Stock).
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser's name on the signature page of this Agreement and
next to the heading "Subscription Amount," in United States dollars and in
immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such term
in Section 4.11(a).
"Subsequent Financing Notice" shall have the meaning ascribed to
such term in Section 4.11(b).
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a), and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date
hereof.
"Trading Day" means a day on which the principal Trading Market is
open for trading.
"Trading Market" means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange or
the OTC Bulletin Board (or any successors to any of the foregoing).
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"Transaction Documents" means this Agreement, the Warrants and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent" means Computershare Investor Services, the current
transfer agent of the Company, with a mailing address of addressStreet350
Indiana Street, Suite 800 CityGolden, StateCO PostalCode80401 and a
facsimile number of (303) 262-0700, and any successor transfer agent of
the Company.
"Warrants" means, collectively, the Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section
2.2(a) hereof, which Warrants shall be exercisable on the 6 month
anniversary of the Closing Date and have a term of exercise equal to 4
years from the Closing Date, in the form of Exhibit A attached hereto.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND CityplaceSALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and delivery of
this Agreement by the parties hereto, the Company agrees to sell, and the
Purchasers, severally and not jointly, agree to purchase, up to an aggregate of
$10,500,000 of Shares and Warrants. Each Purchaser shall deliver to the Company,
via wire transfer or a certified check of immediately available funds equal to
such Purchaser's Subscription Amount as set forth on the signature page hereto
executed by such Purchaser and the Company shall deliver to each Purchaser its
respective Shares and a Warrant as determined pursuant to Section 2.2(a), and
the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of EGS or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to
be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit B attached hereto;
(iii) a copy of the irrevocable instructions to the Company's transfer
agent instructing the transfer agent to deliver on an expedited
basis via the Depository Trust Company Deposit or Withdrawal at
Custodian system ("DWAC") Shares equal to such Purchaser's
Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser;
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(iv) a Warrant registered in the name of such Purchaser to purchase up
to a number of shares of Common Stock equal to 75% of such
Purchaser's Shares, with an exercise price equal to $0.40,
subject to adjustment therein (such Warrant certificate may be
delivered within three Trading Days of the Closing Date); and
(v) the Prospectus and Prospectus Supplement (which may be delivered
in accordance with Rule 172 under the Securities Act).
(b) On or prior to the Closing Date, each Purchaser shall deliver or cause
to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchaser's Subscription Amount by wire transfer to the
account as specified in writing by the Company.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein
(unless as of a specific date therein);
(ii) all obligations, covenants and agreements of each Purchaser
required to be performed at or prior to the Closing Date shall
have been performed; and
(iii) the delivery by each Purchaser of the items set forth in Section
2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in connection
with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company
contained herein (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of the Company required
to be performed at or prior to the Closing Date shall have been
performed;
(iii) the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
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(iv) there shall have been no Material Adverse Effect with respect to
the Company since the date hereof; and
(v) from the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission or the
Company's principal Trading Market, and, at any time prior to the
Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or
minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading
Market, nor shall a banking moratorium have been declared either
by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable
to purchase the Securities at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company
has no subsidiaries, all other references to the Subsidiaries or any
of them in the Transaction Documents shall be disregarded.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation nor default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have or
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reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and
no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Board of
Directors or the Company's stockholders in connection therewith other
than in connection with the Required Approvals. Each Transaction
Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance by the Company
of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and
thereby to which it is a party do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the filing with the
Commission of the Prospectus Supplement, (iii) application(s) to each
applicable Trading Market for the listing of the Shares and Warrant
Shares for trading thereon in the time and manner required thereby and
(iv) such filings as are required to be made under applicable state
securities laws (collectively, the "Required Approvals").
(f) Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Warrant Shares, when issued in accordance with the
terms of the Warrants, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The
Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants. The Company has prepared and filed the
Registration Statement in conformity with the requirements of the
Securities Act, which became effective on October 5, 2012 (the
"Effective Date"), including the Prospectus, and such amendments and
supplements thereto as may have been required to the date of this
Agreement. The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus has been issued by the Commission
and no proceedings for that purpose have been instituted or, to the
knowledge of the Company, are threatened by the Commission. The
Company, if required by the rules and regulations of the Commission,
proposes to file the Prospectus, with the Commission pursuant to Rule
424(b). At the time the Registration Statement and any amendments
thereto became effective, at the date of this Agreement and at the
Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendments or
supplements thereto, at time the Prospectus or any amendment or
supplement thereto was issued and at the Closing Date, conformed and
will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). Except as shown on Schedule 3.1(g), (i) the Company
has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company's stock option
plans, the issuance of shares of Common Stock to employees pursuant to
the Company's employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding as
of the date of the most recently filed periodic report under the
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Exchange Act (ii) no Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents, (iii)
except as a result of the purchase and sale of the Securities, there
are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents and (iv) the issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and, except as shown on Schedule 3.1(g), will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is
required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements
with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the
Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, together with the Prospectus and
the Prospectus Supplement, being collectively referred to herein as
the "SEC Reports") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the
Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may
be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain
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all footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for 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, immaterial, year-end audit
adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report or on Schedule 3.1(i) filed prior to the date
hereof, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered
its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of the
Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur
or exist with respect to the Company or its Subsidiaries or their
respective business, prospects, properties, operations, assets or
financial condition that would be required to be disclosed by the
Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this
representation is made.
(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary
or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current
or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company or any Subsidiary
under the Exchange Act or the Securities Act.
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(k) Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a
Material Adverse Effect. None of the Company's or its Subsidiaries'
employees is a member of a union that relates to such employee's
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive
officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant in favor of any third party, and the continued
employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in compliance
with all country-regionplaceU.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where
the failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any
judgment, decree or order of any court, arbitrator or governmental
body or (iii) is or has been in violation of any statute, rule,
ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except in
each case as could not have or reasonably be expected to result in a
Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably
be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of
any Material Permit.
(n) Title to Assets. Except as shown on Schedule 3.1(n) attached hereto,
the Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the
12
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases with which the Company and the Subsidiaries are
in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively,
the "Intellectual Property Rights"). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise) that
any of, the Intellectual Property Rights has expired, terminated or
been abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement. Neither the
Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement
by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least equal
to the aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports and in Schedule 3.1(q), none of the officers or directors
of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$120,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock
option agreements under any stock option plan of the Company.
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(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient 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 GAAP 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 action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
Commission's rules and forms. The Company's certifying officers have
evaluated the effectiveness of the Company's disclosure controls and
procedures as of the end of the period covered by the Company's most
recently filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no changes in the Company's
internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over
financial reporting.
(s) Certain Fees. Except for the fees and expenses as set forth in the
Prospectus Supplement, no brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the
Transaction Documents.
(t) Investment Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
"investment company" subject to registration under the Investment
Company Act of 1940, as amended.
(u) Registration Rights. Except as shown on Schedule 3.1(g), no Person has
any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
14
(v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company
is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(w) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or
other similar anti-takeover provision under the Company's certificate
of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
(x) Disclosure. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its
behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute
material, non-public information which is not otherwise disclosed in
the Prospectus Supplement. The Company understands and confirms that
the Purchasers will rely on the foregoing representation in effecting
transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement
taken as a whole do not contain any untrue statement of a material
fact or omit 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 and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set
forth in Section 3.2 hereof.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales of
15
any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of any
applicable shareholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or designated.
(z) Solvency. Based on the consolidated financial condition of the Company
as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i)
the fair saleable value of the Company's assets exceeds the amount
that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business as now
conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the
business conducted by the Company, consolidated and projected capital
requirements and capital availability thereof, and (iii) the current
cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts beyond
its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt). The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. Schedule 3.1(z)
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" means (x) any liabilities for borrowed money
or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business), (y) 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 consolidated 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 (z) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all
necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted
or threatened against the Company or any Subsidiary.
(bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related
16
to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the
Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
(cc) Accountants. The Company's accounting firm is set forth on Schedule
3.1(cc) of the Disclosure Schedules. To the knowledge and belief of
the Company, such accounting firm (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in
the Company's Annual Report for the fiscal year ending September 30,
2012.
(dd) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to
the Transaction Documents and the transactions contemplated thereby.
The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers' purchase
of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and
its representatives.
(ee) Acknowledgement Regarding Purchaser's Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(e) and 4.14 hereof), it is understood and
acknowledged by the Company that: (i) none of the Purchasers have been
asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the
Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) past or
future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
"derivative" transactions, before or after the closing of this or
future private placement transactions, may negatively impact the
market price of the Company's publicly-traded securities; (iii) any
Purchaser, and counter-parties in "derivative" transactions to which
any such Purchaser is a party, directly or indirectly, presently may
have a "short" position in the Common Stock, and (iv) each Purchaser
shall not be deemed to have any affiliation with or control over any
arm's length counter-party in any "derivative" transaction. The
Company further understands and acknowledges that (y) one or more
Purchasers may engage in hedging activities at various times during
the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares
deliverable with respect to Securities are being determined, and (z)
such hedging activities (if any) could reduce the value of the
17
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
(ff) Regulation M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any
of the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with
the placement of the Securities.
(gg) FDA. As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration ("FDA") under the Federal Food, Drug and
Cosmetic Act, as amended, and the regulations thereunder ("FDCA") that
is manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such product,
a "Pharmaceutical Product"), such Pharmaceutical Product is being
manufactured, packaged, labeled, tested, distributed, sold and/or
marketed by the Company in compliance with all applicable requirements
under FDCA and similar laws, rules and regulations relating to
registration, investigational use, premarket clearance, licensure, or
application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse Effect.
There is no pending, completed or, to the Company's knowledge,
threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or
investigation) against the Company or any of its Subsidiaries, and
none of the Company or any of its Subsidiaries has received any
notice, warning letter or other communication from the FDA or any
other governmental entity, which (i) contests the premarket clearance,
licensure, registration, or approval of, the uses of, the distribution
of, the manufacturing or packaging of, the testing of, the sale of, or
the labeling and promotion of any Pharmaceutical Product, (ii)
withdraws its approval of, requests the recall, suspension, or seizure
of, or withdraws or orders the withdrawal of advertising or sales
promotional materials relating to, any Pharmaceutical Product, (iii)
imposes a clinical hold on any clinical investigation by the Company
or any of its Subsidiaries, (iv) enjoins production at any facility of
the Company or any of its Subsidiaries, (v) enters or proposes to
enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by the FDA
that the FDA will prohibit the marketing, sale, license or use in the
United States of any product proposed to be developed, produced or
marketed by the Company nor has the FDA expressed any concern as to
approving or clearing for marketing any product being developed or
proposed to be developed by the Company.
18
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows (unless as of a
specific date therein):
(a) Organization; Authority. Such Purchaser is either an individual or an
entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and performance by such
Purchaser of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate, partnership, limited
liability company or similar action, as applicable, on the part of
such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable
against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Understandings or Arrangements. Such Purchaser is acquiring the
Securities as principal for its own account and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to
sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state securities
laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date
on which it exercises any Warrants, it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities
Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not, nor has
any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or
19
sales, including Short Sales, of the securities of the Company during
the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) as of the Company or any other
Person representing the Company setting forth the material terms of
the transactions contemplated hereunder and ending immediately prior
to the execution hereof. Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such
Purchaser's assets and the portfolio managers have no direct knowledge
of the investment decisions made by the portfolio managers managing
other portions of such Purchaser's assets, the representation set
forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other
Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order
to effect Short Sales or similar transactions in the future.
The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect such Purchaser's right to rely on
the Company's representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Warrant Shares. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares or if the Warrant is exercised via cashless
exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall
immediately notify the holders of the Warrants in writing that such registration
statement is not then effective and thereafter shall promptly notify such
holders when the registration statement is effective again and available for the
sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or any Purchaser
to sell, any of the Warrant Shares in compliance with applicable federal and
state securities laws). The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants.
4.2 Furnishing of Information. Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, 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 the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange Act.
20
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by 9:15
a.m. (New York City time) on the Trading Day immediately following the date
hereof, issue a press release disclosing the material terms of the transactions
contemplated hereby and (b) file a Current Report on Form 8-K with the
Commission disclosing the material terms of the transactions contemplated
hereby, and including the Transaction Documents as exhibits thereto, within the
time required by the Exchange Act. From and after the issuance of such press
release, the Company shall have publicly disclosed all material, non-public
information delivered to any of the Purchasers by the Company or any of its
subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Purchaser shall issue any such press
release nor otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents with
the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause (b).
4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
4.6 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
21
prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for: (a) the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.
4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser Party's representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with
any such stockholder or any violations by such Purchaser Party of state or
federal securities laws or any conduct by such Purchaser Party which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel
for all Purchaser Parties. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party effected
22
without the Company's prior written consent, which shall not be unreasonably
withheld or delayed; or (z) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party's breach of
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.8 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.10 Listing of Common Stock. The Company hereby agrees to use best efforts
to maintain the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Shares and Warrant Shares on such
Trading Market and promptly secure the listing of all of the Shares and Warrant
Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
then include in such application all of the Shares and Warrant Shares, and will
take such other action as is necessary to cause all of the Shares and Warrant
Shares to be listed or quoted on such other Trading Market as promptly as
possible. The Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
4.11 [RESERVED]
4.12 Subsequent Equity Sales. From the date hereof until 90 days after the
Closing Date, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares
of Common Stock or Common Stock Equivalents. Notwithstanding the foregoing, this
Section 4.12 shall not apply in respect of an Exempt Issuance.
4.13 Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
4.14 Certain Transactions and Confidentiality. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither it nor any
Affiliate acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales of any of the Company's
securities during the period commencing with the execution of this Agreement and
ending at such time that the transactions contemplated by this Agreement are
23
first publicly announced pursuant to the initial press release as described in
Section 4.4. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company pursuant to the initial
press release as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules. Notwithstanding the foregoing
and notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws from
and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in
Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the
Company or its Subsidiaries after the issuance of the initial press release as
described in Section 4.4. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.
4.15 Capital Changes. Until the 6 month anniversary of the Closing Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
December 11, 2012; provided, however, that no such termination will affect the
right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, 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. The Company shall pay all Transfer
Agent fees (including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and any exercise
notice delivered by a Purchaser), stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.
24
5.3 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, the Prospectus and the Prospectus Supplement, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.4 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 earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 67% in
interest of the Shares based on the initial Subscription Amounts hereunder or,
in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought. No waiver 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 subsequent default 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.
5.6 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
"Purchasers."
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
StateplaceNew York, without regard to the principles of conflicts of law
25
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then, in addition to the obligations of the Company
under Section 4.8, the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Securities.
5.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf" signature page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially 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.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
26
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of an exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the return to
such Purchaser of the aggregate exercise price paid to the Company for such
shares and the restoration of such Purchaser's right to acquire such shares
pursuant to such Purchaser's Warrant (including, issuance of a replacement
warrant certificate evidencing such restored right).
5.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
27
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, each Purchaser and
its respective counsel have chosen to communicate with the Company through EGS.
EGS does not represent any of the Purchasers other than the placement agent. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Purchaser, solely,
and not between the Company and the Purchasers collectively and not between and
among the Purchasers.
5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.
5.21 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
(Signature Pages Follow)
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
CEL-SCI CORPORATION Address for Notice:
------------------
8229 Boone Blvd., Suite 802
Vienna, Virginia 22182
By:________________________________ Attn: Geert Kersten
Name: Geert Kersten Tel: (703) 506-9460
Title: Chief Executive Officer Fax: (703) 506-9471
With a copy to (which shall not constitute e-mail: grkersten@cel-sci.com
notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
29
[PURCHASER SIGNATURE PAGES TO CVM SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: ____________________________________________________________
Signature of Authorized Signatory of Purchaser: _______________________________
Name of Authorized Signatory: _________________________________________________
Title of Authorized Signatory: ________________________________________________
Email Address of Authorized Signatory:_________________________________________
Facsimile Number of Authorized Signatory: _____________________________________
Address for Notice to Purchaser:
Address for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription Amount: $_________________
Shares: _________________
Warrant Shares: __________________
EIN Number: ______________________
|_| Notwithstanding anything contained in this Agreement to the contrary, by
checking this box (i) the obligations of the above-signed to purchase the
securities set forth in this Agreement to be purchased from the Company by
the above-signed, and the obligations of the Company to sell such
securities to the above-signed, shall be unconditional and all conditions
to Closing shall be disregarded, (ii) the Closing shall occur on the third
(3rd) Trading Day following the date of this Agreement and (iii) any
condition to Closing contemplated by this Agreement (but prior to being
disregarded by clause (i) above) that required delivery by the Company or
the above-signed of any agreement, instrument, certificate or the like or
purchase price (as applicable) shall no longer be a condition and shall
instead be an unconditional obligation of the Company or the above-signed
(as applicable) to deliver such agreement, instrument, certificate or the
like or purchase price (as applicable) to such other party on the Closing
Date.
30
COMMON STOCK PURCHASE WARRANT
CEL-SCI CORPORATION
Warrant Shares: ________________
Initial Exercise Date: June 7, 2013
Issue Date: December 7, 2012
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ or its assigns (the "Holder") is entitled, upon
the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after June 7, 2013 (the "Initial
Exercise Date") and on or prior to the close of business on December 7, 2016
(the "Termination Date") but not thereafter, to subscribe for and purchase from
Cel-Sci Corporation, a Colorado corporation (the "Company"), up to ________
shares (as subject to adjustment hereunder, the "Warrant Shares") of Common
Stock. The purchase price of one share of Common Stock under this Warrant shall
be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "Purchase Agreement"), dated December 4, 2012, among the Company
and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before the Termination
Date by delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy of the Notice of Exercise
Form annexed hereto; and, within three (3) Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall
have received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier's check drawn on a
United States bank or, if available, pursuant to the cashless exercise
procedure specified in Section 2(c) below. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or
other type of guarantee or notarization) of any Notice of Exercise
form be required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to
the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in
which case, the Holder shall surrender this Warrant to the Company for
cancellation within three (3) Trading Days of the date the final
Notice of Exercise is delivered to the Company. Partial exercises of
1
this Warrant resulting in purchases of a portion of the total number
of Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such
purchases. The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Day of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Holder shall
be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder,
the number of Warrant Shares available for purchase hereunder at any
given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of the Common Stock under
this Warrant shall be $0.40, subject to adjustment hereunder (the
"Exercise Price").
c) Cashless Exercise. If, at the time of exercise hereof, there is no
effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant
Shares to the Holder, then this Warrant may only be exercised, in
whole or in part, at such time by means of a "cashless exercise" in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the VWAP on the Trading Day immediately preceding the date on
which Holder elects to exercise this Warrant by means of a
"cashless exercise," as set forth in the applicable Notice of
Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this
Warrant if such exercise were by means of a cash exercise
rather than a cashless exercise.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time)
to 4:02 p.m. (New York City time), (b) if the OTC Bulletin Board is not a
Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if
the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the
"Pink Sheets" published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or (d)
in all other cases, the fair market value of a share of Common Stock as
2
determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
Notwithstanding anything herein to the contrary, on the Termination
Date, this Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall
use best efforts to cause the Warrant Shares purchased hereunder to be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder's prime broker with the Depository Trust Company
through its Deposit or Withdrawal at Custodian system ("DWAC") if the
Company is then a participant in such system and either (A) there is
an effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B)
this Warrant is being exercised via cashless exercise, and otherwise
by physical delivery to the address specified by the Holder in the
Notice of Exercise by the date that is three (3) Trading Days after
the latest of (A) the delivery to the Company of the Notice of
Exercise or (B) surrender of this Warrant (if required) (such date,
the "Warrant Share Delivery Date"). The Warrant Shares shall be deemed
to have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid by
the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance
of such shares, having been paid. If the Company fails for any reason
to deliver to the Holder the Warrant Shares subject to a Notice of
Exercise by the Warrant Share Delivery Date, the Company shall pay to
the Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of Warrant Shares subject to such exercise (based on the
VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day on
the fifth Trading Day after such liquidated damages begin to accrue)
for each Trading Day after such Warrant Share Delivery Date until such
Warrant Shares are delivered or Holder rescinds such exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall
have been exercised in part, the Company shall, at the request of a
Holder and upon surrender of this Warrant certificate, at the time of
delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
3
iii. Rescission Rights. If the Company fails to cause the
Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2(d)(i) by the Warrant Share Delivery Date, then, the
Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant
Shares Upon Exercise. In addition to any other rights available to the
Holder, if the Company fails to cause the Transfer Agent to transmit
to the Holder the Warrant Shares pursuant to an exercise on or before
the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or
otherwise) or the Holder's brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (A) pay in cash to the
Holder the amount, if any, by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the exercise at
issue times (2) the price at which the sell order giving rise to such
purchase obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of
Warrant Shares for which such exercise was not honored (in which case
such exercise shall be deemed rescinded) or deliver to the Holder the
number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an
attempted exercise of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause
(A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of
the amount of such loss. Nothing herein shall limit a Holder's right
to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company's failure to
timely deliver shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which the Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied by
the Exercise Price or round up to the next whole share.
4
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall
be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the Company,
and such Warrant Shares shall be issued in the name of the Holder or
in such name or names as may be directed by the Holder; provided,
however, that in the event Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for
any transfer tax incidental thereto. The Company shall pay all
Transfer Agent fees required for same-day processing of any Notice of
Exercise.
vii. Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.
e) Holder's Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as set
forth on the applicable Notice of Exercise, the Holder (together with the
Holder's Affiliates, and any other Persons acting as a group together with
the Holder or any of the Holder's Affiliates), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (i)
exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the
Holder or any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the
5
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and the
Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together
with any Affiliates) and of which portion of this Warrant is exercisable
shall be in the sole discretion of the Holder, and the submission of a
Notice of Exercise shall be deemed to be the Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned
by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company's most
recent periodic or annual report filed with the Commission, as the case may
be, (B) a more recent public announcement by the Company or (C) a more
recent written notice by the Company or the Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Warrant, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The "Beneficial Ownership Limitation" shall be
4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon not less than 61 days' prior
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by
the Holder and the provisions of this Section 2(e) shall continue to apply.
Any such increase or decrease will not be effective until the 61st day
after such notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(e) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to
make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon exercise of this Warrant), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (iv) issues by
reclassification of shares of the Common Stock any shares of capital stock
of the Company, then in each case the Exercise Price shall be multiplied by
6
a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the number of
shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall
remain unchanged. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b) [RESERVED]
c) Subsequent Rights Offerings. In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants, issues
or sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
any class of shares of Common Stock (the "Purchase Rights"), then the
Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights (provided, however, to the extent that the Holder's
right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or
beneficial ownership of such shares of Common Stock as a result of such
Purchase Right to such extent) and such Purchase Right to such extent shall
be held in abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
d) Pro Rata Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of
this Warrant, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would
have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation,
the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
7
determined for the participation in such Distribution (provided, however,
to the extent that the Holder's right to participate in any such
Distribution would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares
of Common Stock as a result of such Distribution to such extent) and the
portion of such Distribution shall be held in abeyance for the benefit of
the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Beneficial Ownership Limitation). .
e) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company
with or into another Person, (ii) the Company, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and
has been accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, or (v) the Company,
directly or indirectly, in one or more related transactions consummates a
stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby such other
Person or group acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock or share purchase agreement or
other business combination) (each a "Fundamental Transaction"), then, upon
any subsequent exercise of this Warrant, the Holder shall have the right to
receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any limitation
in Section 2(e) on the exercise of this Warrant), the number of shares of
Common Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional consideration (the
"Alternate Consideration") receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on the
exercise of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder
shall be given the same choice as to the Alternate Consideration it
8
receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a "Rule
13e-3 transaction" as defined in Rule 13e-3 under the Exchange Act, or (3)
a Fundamental Transaction involving a person or entity not traded on a
national securities exchange, including, but not limited to, the NYSE MKT,
the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq
Capital Market, the Company or any Successor Entity (as defined below)
shall, at the Holder's option, exercisable at any time concurrently with,
or within 30 days after, the consummation of the Fundamental Transaction,
purchase this Warrant from the Holder by paying to the Holder an amount of
cash equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the date of the consummation of such Fundamental
Transaction. "Black Scholes Value" means the value of this Warrant based on
the Black and Scholes Option Pricing Model obtained from the "OV" function
on Bloomberg, L.P. ("Bloomberg") determined as of the day of consummation
of the applicable Fundamental Transaction for pricing purposes and
reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the Termination
Date, (B) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of the
Trading Day immediately following the public announcement of the applicable
Fundamental Transaction, (C) the underlying price per share used in such
calculation shall be the sum of the price per share being offered in cash,
if any, plus the value of any non-cash consideration, if any, being offered
in such Fundamental Transaction and (D) a remaining option time equal to
the time between the date of the public announcement of the applicable
Fundamental Transaction and the Termination Date. The Company shall cause
any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the "Successor Entity") to assume in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the
Holder and approved by the Holder (without unreasonable delay) prior to
such Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable
upon exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) prior to such Fundamental Transaction, and with
an exercise price which applies the exercise price hereunder to such shares
of capital stock (but taking into account the relative value of the shares
of Common Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital stock and
such exercise price being for the purpose of protecting the economic value
of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to
the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the "Company"
shall refer instead to the Successor Entity), and may exercise every right
9
and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the
same effect as if such Successor Entity had been named as the Company
herein.
f) Calculations. All calculations under this Section 3 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed
to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any) issued
and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company
shall promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and any resulting adjustment to the number
of Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock, (C) the Company
shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders of
the Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property, or
(E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company,
then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of
the Company, at least 20 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
10
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the
extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set
forth herein.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of the
Company or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees, as applicable, and in
the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company
unless the Holder has assigned this Warrant in full, in which case, the
Holder shall surrender this Warrant to the Company within three (3) Trading
Days of the date the Holder delivers an assignment form to the Company
assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice. All
Warrants issued on transfers or exchanges shall be dated the initial
issuance date set forth on the first page of this Warrant and shall be
identical with this Warrant except as to the number of Warrant Shares
issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.
11
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not
entitle the Holder to any voting rights, dividends or other rights as a
stockholder of the Company prior to the exercise hereof as set forth in
Section 2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of
such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and
issue the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights
represented by this Warrant and payment for such Warrant Shares in
accordance herewith, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder,
the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
12
the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of
Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (i) not
increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par
value, (ii) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant and
(iii) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof, as may be, necessary to enable the
Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in
the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having
jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, and the
Holder does not utilize cashless exercise, will have restrictions upon
resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such amounts as
shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase
Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of the Holder for the purchase
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price of any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Company and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder from time
to time of this Warrant and shall be enforceable by the Holder or holder of
Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.
m) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Pages Follow)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date first above indicated.
CEL-SCI CORPORATION
By:___________________________
Name:
Title:
15
NOTICE OF EXERCISE
TO: CEL-SCI CORPORATION
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted, the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number of
Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in
such other name as is specified below:
-------------------------------------
The Warrant Shares shall be delivered to the following DWAC Account Number:
-------------------------------------
-------------------------------------
-------------------------------------
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________
Signature of Authorized Signatory of Investing Entity: _______________________
Name of Authorized Signatory: ___________________________
Title of Authorized Signatory: __________________________
Date: _________________
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
________________________________________________
________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
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