SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 22, 1997
CEL-SCI CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO 0-11503 84-0916344
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification No.)
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 22314
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 549-5293
Not Applicable
Former Name or Former Address, If Changed Since Last Report
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ITEM 5. OTHER INFORMATION
On December 22, 1997, the Company sold 10,000 shares of its Series D
Preferred Stock, 550,000 Series A Warrants and 550,000 Series B Warrants, to ten
institutional investors for $10,000,000. The Series D Preferred Shares may be
converted into shares of the Company's Common Stock. Prior to September 19, 1998
(or such earlier date as the market price of the Company's Common Stock is $3.45
or less for five consecutive trading days) the number of shares issuable upon
the conversion of each Series D Preferred Share is to be determined by dividing
$1,000 by $8.28. On or after September 19, 1998 the number of shares issuable
upon the conversion of each Series D Preferred Share is to be determined by
dividing $1,000 by the lower of (i) $8.28, or (ii) the average price of the
Company's common stock for any two trading days during the ten trading days
preceeding the conversion date. Each Series A Warrant allows the holder to
purchase one share of the Company's common stock for $8.62 at any time prior to
December 22, 2001. Each Series B Warrant allows the holder to purchase one share
of the Company's Common Stock for $9.31 at any time prior to December 22, 2001.
The Company has agreed to file a registration statement with the Securities
and Exchange Commission covering the sale of the common stock issuable upon the
conversion of the Series D Preferred Stock and/or the exercise of the Series A
and Series B Warrants.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Exhibit
Number Name
4.1 Securities Purchase Agreement (without
Exhibits and Schedules)
4.2 Certificate of Designations Preferences and
Rights of Series D Preferred Stock.
4.3 Form of Common Stock Purchase Warrant;
4.4 Registration Rights Agreement;
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CEL-SCI CORPORATION
Date: December 24, 1997 By /s/ Geert R. Kersten
Geert R. Kersten
Chief Executive Officer
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 22, 1997, by and between Cel-Sci Corporation, a Colorado corporation
(the "Company"), with headquarters located at 66 Canal Center Plaza, Suite 510,
Alexandria, Virginia, 22314 and the purchasers ("Purchasers") set forth on the
schedule of Purchasers attached hereto, with regard to the following:
RECITALS
A. The Company and Purchasers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D"), as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").
B. Purchasers desire (a) to purchase, upon the terms and conditions stated
in this Agreement, Ten Million U.S. Dollars face amount of the Company's Series
D Preferred Stock (the "Preferred Shares"), in the form attached hereto as
Exhibit A, convertible into shares of the Company's Common Shares, par value
$0.01 per share (the "Common Stock"), and (b) to receive, in consideration for
such purchase, Stock Purchase Warrants (the "Warrants"), in the form attached
hereto as Exhibit B, to acquire shares of Common Stock. The shares of Common
Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as "Warrant Shares". The shares of Common Stock to be issued
to the Purchasers upon conversion of the Preferred Shares are referred to herein
as the "Common Shares." The Preferred Shares, the Common Shares, the Warrants,
and the Warrant Shares are collectively referred to herein as the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement in
the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase of Preferred Shares. Subject to the terms and conditions of
this Agreement, the issuance, sale and purchase of the Preferred Shares shall be
consummated in a "Closing". On the date of the Closing, subject to the
satisfaction or waiver of the conditions set forth in Articles VI and VII, the
Company shall issue and sell to the Purchasers, and the Purchasers agree to
purchase from the Company, Preferred Shares in the respective amounts set forth
opposite each Purchaser's name on the Schedule of Purchasers. The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000
for an aggregate purchase price of Ten Million U.S. Dollars.
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1.2 Form of Payment. The Purchaser shall pay the Purchase Price for the
Preferred Shares by wire transfer to the account designated pursuant to the
Escrow Agreement by and among the Company, the Purchaser and the escrow agent
("Escrow Agent") designated therein in the form attached hereto as Exhibit D
("Escrow Agreement") upon delivery to the Escrow Agent of the Preferred Shares
and the Warrants, all in accordance with the terms of the Escrow Agreement, and
upon satisfaction of the other Closing conditions.
1.3 Closing Date. Subject to the satisfaction (or waiver) of the conditions
set forth in Articles VI and VII below, and further subject to the terms and
conditions of the Escrow Agreement, the date and time of the issuance, sale and
purchase of the Preferred Shares pursuant to this Agreement shall be at 10:00
a.m. California time, on December 22, 1997, (the "Closing Date").
1.4 Warrants. In consideration of the purchase by Purchaser of the
Preferred Shares, the Company shall at the Closing issue to the Purchasers
Warrants to acquire an aggregate of One Million One Hundred Thousand (1,100,000)
Common Shares.
ARTICLE II
PURCHASER'S REPRESENTATIONS AND
WARRANTIES
Each Purchaser represents and warrants to the Company as of the date hereof
and as of the Closing, severally and solely with respect to itself and its
purchase hereunder and not with respect to any other Purchaser, (and no
Purchaser shall be deemed to make or have any liability for any representation
or warranty made by any other Purchaser) as set forth in this Article II.
2.1 Investment Purpose. Purchaser is purchasing the Preferred Shares and
the Warrants for Purchaser's own account for investment only and not with a view
toward the public sale or distribution thereof in violation of the applicable
securities laws. Purchaser will not, directly or indirectly, offer, sell, pledge
or otherwise transfer the Preferred Shares or Warrants or any interest therein
except pursuant to transactions that are exempt from the registration
requirements of the Securities Act and/or sales registered under the Securities
Act, the rules and regulations promulgated pursuant thereto and applicable state
securities laws. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement. By making the representations in this
Section 2.1, the Purchaser does not agree to hold the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption from registration under the Securities Act and any applicable state
securities laws.
2.2 Accredited Investor Status. Purchaser is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D and Purchaser has indicated
on the Investor Questionnaire and Representation Agreement attached hereto as
Exhibit E in which capacity that it so qualifies as an "accredited investor."
2.3 Reliance on Exemptions. Purchaser understands that the Preferred Shares
and Warrants are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Preferred Shares and Warrants.
2.4 Information. Purchaser or its counsel have been furnished all materials
relating to the business, finances and operations of the Company and materials
<PAGE>
relating to the offer and sale of the Securities which have been specifically
requested by Purchaser, including without limitation the Company's Annual Report
on Form 10-K/A for the Year ended September 30, 1996, Quarterly Reports on Form
10-Q for the periods ended December 31, 1996, March 31, 1997 and June 30, 1997,
Proxy Statement relating to the Company's June 3, 1997 Annual Meeting of
Shareholders (the "Proxy Statement") and Private Offering Memorandum dated
December 15, 1997 (the "Offering Memorandum") (such documents collectively, the
"SEC Documents"). Purchaser has been afforded the opportunity to ask questions
of the Company and has received what Purchaser believes to be complete and
satisfactory answers to any such inquiries. Neither such inquiries nor any other
due diligence investigation conducted by Purchaser or any of its representatives
nor any other disclosures or documents (including without limitation the SEC
Documents) shall modify, amend or affect Purchaser's right to rely on the
Company's representations and warranties contained in this Agreement or in any
Exhibit hereto or in any certificate issued in connection herewith or therewith.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk, including without limitation the risks and uncertainties
disclosed in the SEC Documents. Subject to the foregoing, Purchaser acknowledges
the disclosures presented under the caption "Risk Factors" in the Offering
Memorandum, and the incorporation of those disclosures by reference herein.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
2.6 Transfer or Resale. Purchaser understands that (i) except as provided
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the Securities Act or any state securities laws, and may
not be offered, sold, pledged or otherwise transferred unless subsequently
registered thereunder or an exemption from such registration is available (which
exemption the Company expressly agrees may be established as contemplated in
clauses (b) and (c) of Section 5.1 hereof); and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
this Agreement or the Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V hereof, the
certificates for the Preferred Shares and Warrants and, until such time as the
resale of the Common Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser pursuant to Rule 144 (subject to and in accordance with
the procedures specified in Article V hereof), the certificates for the Common
Shares and Warrant Shares, will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT
BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
2.8 Authorization: Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their respective terms, except (i) to the extent
that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or
remedies of creditors generally, or by other equitable principles of general
application, and (ii) as rights to indemnity and contribution under the
Registration Rights Agreement may be limited by Federal or state securities
laws.
<PAGE>
2.9 Residency. Purchaser is a resident of the jurisdiction set forth under
Purchaser's name on the signature page hereto executed by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as of the date hereof
and
as of the Closing as set forth in this Article III.
3.1 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify or be in good standing would have a Material
Adverse Effect. "Material Adverse Effect" means any effect which, individually
or in the aggregate with all other effects, is or reasonably could be expected
to be materially adverse to the business, operations, properties, financial
condition, operating results or prospects of the Company and its subsidiaries,
taken as a whole on a consolidated basis or on the transactions contemplated
hereby or on any of the Securities, or any of the documents or agreements to be
entered into in connection herewith.
3.2 Authorization: Enforcement. (a) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue, sell and perform its obligations
with respect to the Preferred Shares and Warrants in accordance with the terms
hereof and the terms of the Preferred Shares and Warrants, and to issue the
Common Shares and Warrant Shares upon conversion of the Preferred Shares and
exercise of the Warrant, respectively, in accordance with the terms and
conditions of the Preferred Shares and Warrants, respectively; (b) the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance of
the Preferred Shares and the Warrants, and the issuance and reservation for
issuance of the Common Shares and the Warrant Shares) have been duly authorized
by all necessary corporate action and, except as set forth on Schedule 3.2
hereof, no further consent or authorization of the Company, its board of
directors, or its stockholders or any other person, body or agency, and no
filing with any person, body or agency, is required with respect to any of the
transactions contemplated hereby or thereby (whether under rules of the American
Stock Exchange ("AMEX"), the National Association of Securities Dealers or
otherwise); (c) this Agreement, the Registration Rights Agreement, certificates
for the Preferred Shares, and the Warrants have been duly executed and delivered
by the Company; (d) this Agreement, the Registration Rights Agreement, the
Preferred Shares, and the Warrants constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except (i) to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights or remedies of
creditors generally, or by other equitable principles of general application,
and (ii) as rights to indemnity and contribution under the Registration Rights
Agreement may be limited by Federal or state securities laws; and (e) prior to
the Closing Date, the Certificate of Designation in the form of Exhibit F has
been filed with the Secretary of State of Colorado and will be in full force and
effect, enforceable against the Company in accordance with its terms.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
<PAGE>
pursuant to securities (other than the Preferred Shares or the Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants is set forth in the "Dilution
and Comparative Share Data" Section of the Offering Memorandum. All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
(including the Common Shares and the Warrant Shares) are, and no such shares
will be, subject to preemptive rights or any other similar rights of the
stockholders of the Company or of any other person or entity or any liens or
encumbrances. Except as disclosed in the "Dilution and Comparative Share Data"
Section of the Offering Memorandum, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries, and (ii) issuance of the Securities will not
trigger antidilution or similar rights for any other present or future
outstanding or authorized securities of the Company, (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement), and (iv) there are no
outstanding debt securities. The Company has furnished to Purchaser true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof ("Certificate of Incorporation"), and the Company's By-laws as in
effect on the date hereof (the "By-laws"). The Company has set forth on in the
"Dilution and Comparative Share Data" Section of the Offering Memorandum all
instruments and agreements (other than the Certificate of Incorporation and
By-laws) governing or concerning securities convertible into or exercisable or
exchangeable for Common Shares of the Company (and the Company shall provide to
Purchaser copies thereof upon the request of Purchaser).
3.4 Issuance of Shares. The Common Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Preferred
Shares and the Warrants, in accordance with the terms thereof, as applicable,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances directly or indirectly imposed or suffered by the
Company or any of its subsidiaries, will be entitled to all rights and
preferences accorded to a holder of Common Stock, shall be entitled to be traded
on the same markets and exchanges as the other shares of Common Stock of the
Company are traded, and will not be subject to preemptive rights or other
similar rights of stockholders of the Company or of any other person or entity.
The Preferred Shares and Warrants are duly authorized and validly issued, fully
paid and nonassessable, and free from all liens, claims and encumbrances
directly or indirectly imposed or suffered by the Company or any of its
subsidiaries or affiliates and will not be subject to preemptive rights or other
similar rights of stockholders of the Company or of any other person or entity.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Preferred Shares, the Warrants and the Registration Rights
Agreement by the Company, and the consummation by the Company of transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Common Shares,
Warrants, and Warrant Shares) will not (a) result in a violation of the
Certificate of Incorporation or By-laws or (b) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including U.S. federal and
state securities laws and regulations and the rules and regulations of AMEX)
applicable to the Company or any of its subsidiaries, or by which any property
or asset of the Company or any of its subsidiaries, is bound or affected (except
<PAGE>
for such possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
is in violation of its Certificate of Incorporation or other organizational
documents, and neither the Company nor any of its subsidiaries is in default
(and no event has occurred which has not been waived which, with notice or lapse
of time or both, would put the Company or any of its subsidiaries in default)
under, nor has there occurred any event giving others (with notice or lapse of
time or both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible violations, defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as Purchaser (or any direct or indirect
transferee, assignee or participant of Purchaser or of such transferee, assignee
or participant in a transaction of the type referred to in Section 5.1(b) below
("Purchaser Transferee")) owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either individually or in the aggregate would
not have a Material Adverse Effect. Except as set forth on Schedule 3.5, or
except (A) such as may be required under the Securities Act in connection with
the performance of the Company's obligations under the Registration Rights
Agreement, (B) filing of a Form D with the SEC, and (C) compliance with the
state securities or Blue Sky laws of applicable jurisdictions, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement or to perform its obligations in accordance with
the terms hereof or thereof. The Company is not in violation of the listing
requirements of AMEX, does not know of or anticipate any event which could be
grounds for such delisting and does not reasonably anticipate that the Common
Stock (including the Common Shares) will be delisted by AMEX for the foreseeable
future.
3.6 SEC Documents. Except as disclosed in Schedule 3.6, since September 30,
1996, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company has delivered to each Purchaser true and complete
copies of the SEC Documents, except for exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents which is
required to be updated or amended under applicable law has not been so updated
or amended. The financial statements of the Company included in the SEC
Documents have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, and the rules and regulations of
the SEC during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they do not include footnotes or are condensed
or summary statements) and, fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, immaterial year-end audit adjustments). Except as set
forth in the financial statements or the notes thereto of the Company included
in the SEC Documents, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
consistent with past practice subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business consistent with past practice and not required under
<PAGE>
generally accepted accounting principles to be reflected in such financial
statements, in each case of clause (i) and (ii) next above which, individually
or in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company and its
subsidiaries or to the transactions contemplated hereby or to the Securities. To
the extent required by the rules of the SEC applicable thereto, the SEC
Documents contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments existing as
of the respective date of each such SEC Document (or such other date required by
the rules of the SEC) to which the Company or any subsidiary is a party or by
which the Company or any subsidiary is bound or to which any of the properties
or assets of the Company or any subsidiary is subject (each a "Contract").
Except as set forth in Schedule 3.6, none of the Company, its subsidiaries or,
to the best knowledge of the Company, any of the other parties thereto, is in
breach or violation of any Contract, which breach or violation would have a
Material Adverse Effect. No event, occurrence or condition exists which, with
the lapse of time, the giving of notice, or both, would become a default by the
Company or its subsidiaries thereunder which would have a Material Adverse
Effect.
3.7 Absence of Certain Changes. Since September 30, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in Schedule 3.7.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, or self-regulatory organization or body pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company, any of its subsidiaries, or any of their
respective directors or officers in their capacities as such, which if adversely
determined could have a Material Adverse Effect or would adversely affect the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents. There are no facts known to the
Company which, if known by a potential claimant or governmental authority, could
reasonably be expected to give rise to a claim or proceeding which, if asserted
or conducted with results unfavorable to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect.
3.9 Disclosure. No information, statement or representation relating to or
concerning the Company or any of its subsidiaries set forth in this Agreement or
provided to a Purchaser in connection with the transactions contemplated hereby
contains an untrue statement of a material fact. No information relating to or
concerning the Company or any of its subsidiaries set forth in any of the SEC
Documents contains a statement of material fact that was untrue as of the date
such SEC Document was filed with the SEC. The Company has not omitted to state a
material fact necessary in order to make the statements and representations made
herein or therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement, no
material fact (within the meaning of the federal securities laws of the United
States and of applicable state securities laws) exists with respect to the
Company or any of its subsidiaries which has not been publicly disclosed.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities. The
Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company or any of its subsidiaries (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, that this Agreement and the transaction contemplated
hereby, and the relationship between the Purchaser and the Company, are
"arms-length", and that any statement made by Purchaser (except as set forth in
Article II), or any of its representatives or agents, in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to Purchaser's purchase of the Securities
and has not been relied upon as such in any way by the Company, its officers or
directors. The Company further represents to Purchaser that the Company's
decision to enter into this Agreement and the transactions contemplated hereby
have been based solely on an independent evaluation by the Company and its
representatives.
3.11 S-3 Registration. The Company is currently eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. The Company acknowledges that once the resale of the Common
Stock and Warrant Shares have been registered under the Securities Act or
otherwise may be sold by a Purchaser pursuant to Rule 144, the Common Stock and
Warrant Shares will not contain the legend set forth in Section 2.7.
<PAGE>
3.12 No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as described in Rule 502(c) under
Regulation D, with respect to any of the Securities being offered hereby.
3.13 No Integrated Offering. 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 any security or solicited any offers to
buy any security under circumstances that would either require registration of
any of the Securities under the Act or prevent the parties hereto from
consummating, or delay or interfere with the consummation of, the transactions
contemplated hereby pursuant to an exemption from the registration under the
Securities Act pursuant to the provisions of Regulation D. The transactions
contemplated hereby are exempt from the registration requirements of the
Securities Act, assuming the accuracy of the relevant representations and
warranties herein contained of the Purchaser and of Shoreline Pacific
Institutional Finance, the Institutional Division of Financial West Group
("Shoreline") in their letter to the Company dated as of December 22, 1997 (a
copy of which is attached as Schedule 3.13 hereto) to the extent relevant for
such determination. To the Company's knowledge, such representations and
warranties of Shoreline are accurate.
3.14 No Brokers. The Company has taken no action, directly or indirectly,
which would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by Purchaser relating to this Agreement or the
transactions contemplated hereby, except for dealings with Shoreline the fees of
which shall be paid in full by the Company. The Company will indemnify the
Purchaser from and against any fees and expenses (including without limitation
reasonable attorneys fees and expenses) sought or other claims made by Shoreline
with respect to its brokerage commission.
3.15 Intellectual Property. The Company owns or has obtained valid and
enforceable licenses for the US, Japanese and European patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names
and, copyright registrations described in Schedule 3.15 as being owned or used
by or licensed to it or necessary for the conduct of its business (collectively
with any other patents, patent applications, inventions, technology, copyrights
and trade secrets, the "Intellectual Property"). Except as set forth in Schedule
3.15 (i) there are no rights of third parties of any such Intellectual Property;
(ii) to the Company's knowledge there is no infringement by third parties of any
such Intellectual Property; (iii) there is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others challenging
the Company's rights in or to any such Intellectual property, and the Company is
unaware of any facts which would form a reasonable basis for any such claim;
(iv) there is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others challenging the validity or scope of any
such Intellectual Property, and the Company is unaware of any facts which would
form a reasonable basis for any such claim; (v) there is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by others that
the Company infringes or otherwise violates any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any facts which would form a reasonable basis for any such claim; (vi) to the
Company's knowledge there is no patent or patent application which contains
claims that dominate or may dominate any Intellectual Property described in the
Schedule 3.15 as being owned by or licensed to the Company or that is necessary
for the conduct of its business or that interferes with the issue or pending
claims of any such Intellectual Property, and (vii) there is no prior art of
which the Company is aware that may render any patent held by or licensed to the
Company invalid or any patent application held by the Company unpatentable which
has not been disclosed to the U.S. Patent and Trademark Office.
3.16 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in the Proxy Statement. No Key
Employee, to the best of the knowledge of the Company and its subsidiaries, is,
or is now expected to be, in violation of any material term of any employment
<PAGE>
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best of the knowledge of the
Company and its subsidiaries, any intention to terminate his employment with, or
services to, the Company or any of its subsidiaries, and the Company has no
intention to terminate the employment or services of any Key Employee. "Key
Employee" means each of the Executive Officers listed in the Proxy Statement.
Neither the Company nor any subsidiary is involved in any union labor dispute
and none of their employees is a member of a union. The Company and its
subsidiaries believe their employee relations are good.
3.17 The Company has in effect a shareholders rights plan. None of the
Purchaser's Preferred Shares, Warrants, Common Shares and Warrant Shares will be
deemed to trigger such plan.
3.18 Dilution. The number of Common Shares and Warrant Shares may increase
substantially in certain circumstances, including the circumstances where the
trading price of the Company's Common Stock declines. The Company acknowledges
that its obligation to issue Common Shares and Warrant Shares upon conversion of
the Preferred Shares (to the extent of the "AMEX Limit," as defined in the
Registration Rights Agreement as it relates to the Common Share Limit (the
"Common Share Limit"), as defined in the Certificate of Designation attached
hereto as Exhibit F and exercise of the Warrants is absolute and unconditional,
regardless of the dilution that such issuance may have on other shareholders of
the Company.
3.19 Certain Transactions. Except as disclosed in Schedule 3.19 and except
for arm's length transactions pursuant to which the Company or any of its direct
or indirect subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its direct or indirect
subsidiaries could obtain from third parties, none of the officers, directors,
or employees of the company is presently a party to any transaction with the
Company or any of its direct or indirect subsidiaries (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 corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
3.20 Permits; Compliance. The Company and each of its direct and indirect
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits
except for such Company Permits the failure of which to possess, or the
cancellation or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. Neither the Company nor any of its
direct or indirect subsidiaries is in conflict with, or in default or violation
of, any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. Since January 1, 1995, neither the
Company nor any of its direct or indirect Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
3.21 Insurance. The Company and each of its direct and indirect
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its direct and indirect subsidiaries are engaged. Neither the Company nor any
<PAGE>
such direct or indirect 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 at a cost that would not have a Material Adverse Effect.
3.22 Title. The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3.22 or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
3.23 Environmental. The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
3.24 Tax Status. Except as set forth on Schedule 3.24, the Company and each
of its subsidiaries has made or filed all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
3.25 Investment Company Act. The Company is not, and as result of the sale
of the Securities to the Purchasers and application of the net proceeds
therefrom as described in Section 4.9, will not become, an "investment company"
or any entity controlled by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The parties shall use their best efforts to timely
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 Securities Laws. The Company agrees to timely file a Form D with
respect to the Securities with the SEC as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The Company
agrees to file a press release disclosing the transactions contemplated hereby
with the SEC within one (1)) business day following the date of Closing and to
file an 8-K disclosing this Agreement and the transactions contemplated hereby
with the SEC within five (5) business days following the date of Closing. The
<PAGE>
Company shall, on or prior to the date of Closing, take such action as is
necessary to qualify the Securities for sale to the Purchaser in compliance with
applicable securities laws of the states of the United States or obtain
exemption therefrom, and shall provide evidence of any such action so taken to
the Purchaser on or prior to the date of the Closing.
4.3 Reporting Status. So long as the Purchaser or a Purchaser Transferee
beneficially owns any of the Securities, (a) the Company shall timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination, and (b) the Company will maintain its
ability and eligibility to register its Common Shares on Form S-3.
4.4 Information. The Company agrees to send the following reports to the
Purchaser and Purchaser's Transferee until the Purchaser and Purchaser's
Transferee transfers, assigns or sells all of its Securities in transactions in
which the transferee is (unless such transferee is an affiliate) not subject to
securities law resale restrictions: (a) within three (3) business days after the
filing with the SEC, a copy of its Annual Report on Form 10-KSB, its Quarterly
Reports on Form 10-QSB, any proxy statements and any Current Reports on Form
8-K; and (b) within one (1) business day after release, copies of all press
releases issued by the Company or any of its subsidiaries. The Company further
agrees to promptly provide to the Purchaser and Purchaser's Transferee any
information with respect to the Company, its properties, or its business or
Purchaser's investment as the Purchaser and Purchaser's Transferee may
reasonably request; provided, however, that the Company shall not be required to
give the Purchaser any material nonpublic information. If any information
requested by the Purchaser from the Company contains material nonpublic
information, the Company shall inform the Purchaser in writing that the
information requested contains material nonpublic information and shall in no
event provide such information to Purchaser without the express written consent
of the Purchaser after being so informed.
4.5 Listing. The Company shall continue the uninterrupted listing and
trading of its Common Stock and the Common Shares and Warrant Shares on the
AMEX, the Nasdaq National Market, the Nasdaq Small Cap Market or the New York
Stock Exchange; and comply in all material respects with the Company's
reporting, filing and other obligations under the By-laws and rules of such
Exchange or Nasdaq, as applicable (including without limitation, filing an
Additional Listing Application with AMEX for the Common Shares and the Warrant
Shares not later than ten (10) days after the date of Closing). During a period
of two years from the date of Closing, if and so long as the Common Stock and
the Common Shares and Warrant Shares are not listed on one of such Exchanges or
Nasdaq, as partial compensation for the added liquidity risk of such delisting
the Company shall be obligated to make the following additional cash payments
(the "Delisting Payments"). The Delisting Payments will be equal to two percent
(2%) of the Purchase Price (plus accrued but unpaid interest) of any outstanding
Preferred Shares for each month (or part thereof) following the date the Common
Stock is delisted (the "Delisting Date") continuing through the date the Common
Stock is listed on one of such Exchanges or Nasdaq (the "New Listing"). The
Delisting Payments will be paid to the holder of the Preferred Shares in cash
within five (5) business days following the earlier of (i) the end of each month
following the Delisting Date, or (ii) the effective date of the New Listing.
Nothing herein shall limit the Preferred Share holder's right to pursue actual
damages for the Company's failure to maintain its listing on such Exchange or
Nasdaq.
4.6 Prospectus Delivery Requirement. The Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common
Shares in connection with any sale thereof pursuant to a registration statement
under the Securities Act covering the resale by the Purchaser of the Common
Shares being sold, and the Purchaser shall comply with the applicable prospectus
delivery requirements of the Securities Act in connection with any such sale.
4.7 Corporate Existence. So long as any Preferred Shares or Warrants remain
outstanding, the Company shall not directly or indirectly (i) consummate any
merger, reorganization, restructuring, consolidation or similar transaction by
<PAGE>
or involving the Company except a merger or consolidation where the Company is
the survivor, (ii) consummate any sale of all or substantially all of the assets
of the Company or of all of its material subsidiaries or any similar transaction
or related transactions which effectively results in a sale of all or
substantially all of the assets of the Company and/or its subsidiaries, or (iii)
fail to continue to own, directly or indirectly, all of the capital stock of all
of its material subsidiaries (other than due to a merger or consolidation of any
subsidiary into the Company or a wholly-owned subsidiary of the Company, or a
public or private Offering of Viral Technologies, Inc. ("VTI") where the Company
owns at least 50% of the voting control and 50% of the economic interest in VTI
following such offering).
4.8 Cash Maintenance Requirement. As of November 13, 1997, the Company's
balance sheet reflects cash and cash equivalents equal to approximately Six
Million Seven Hundred Thousand U.S. Dollars ($6,700,000). From the Closing Date
through September 30, 1998, the Company agrees to maintain not less than Six
Million Dollars ($6,000,000) in cash or cash equivalents (as reflected in the
Company's quarterly financial statements). The Company does not presently intend
to declare or distribute dividends on any of its outstanding shares or
distribute any of its assets to stockholders, or to incur any liabilities not in
the ordinary course of its business.
4.9 Use of Proceeds. The Company will use the proceeds from the sale of the
Preferred Shares for working capital and general corporate matters.
4.10 Reservation of Shares. The company shall take all action necessary to
at all times have authorized, and reserved for the purpose of issuance, no less
than 3,343,782 or such greater number of shares of Common Stock needed to
provide for the issuance of the Common Shares and the Warrants Shares.
4.11 Additional Financing; Right of First Refusal. Subject to the
exceptions described below, the Company agrees that during the period beginning
on the date hereof and ending one year following the Closing Date (the "Lock-Up
Period"), the Company and its subsidiaries shall not negotiate or contract with
any party for any equity financing (including any debt financing with an equity
component) or issue any equity securities of the Company or any subsidiary or
securities convertible or exchangeable into or for equity securities of the
Company or any subsidiary (including debt securities with an equity component)
in any form ("Future Offerings") unless it shall have first delivered to each
Purchaser or a designee appointed by such Purchaser written notice (the "Future
Offering Notice") describing the proposed Future Offering, including the terms
and conditions thereof, and providing each Purchaser an option to purchase up to
its Aggregate Percentage (as defined below), as of the date of delivery of the
Future Offering Notice, in the Future Offering (the limitations referred to in
this and the preceding sentence are collectively referred to as the "Capital
Raising Limitation"). For purposes of this Section 4.11, "Aggregate Percentage"
at any time with respect to any Purchaser shall mean the percentage obtained by
dividing (i) the aggregate number of Common Shares issued or issuable, as if a
conversion occurred on such date, upon conversion of the Preferred Shares
initially owned by such Purchaser by (ii) the aggregate number of Common Shares
issued or issuable, as if a conversion occurred on such date, upon conversion of
the Preferred Shares initially owned by all Purchasers. A Purchaser can exercise
its option to participate in a Future Offering by delivering written notice
thereof to participate to the Company within three (3) business days of receipt
of a Future Offering Notice, which notice shall state the quantity of securities
being offered in the Future Offering that such Purchaser will purchase, up to
its Aggregate Percentage, and that number of securities it is willing to
purchase in excess of its Aggregate Percentage. In the event the Purchasers fail
to elect to fully participate in the Future Offering within the periods
<PAGE>
described in this Section 4.11, the Company shall have sixty (60) days
thereafter to sell the securities of the Future Offering respecting which such
Purchaser's rights were not exercised, upon terms and conditions, no more
favorable to the purchasers thereof than specified in the Future Offering
Notice. In the event the Company has not sold such securities of the Future
Offering within such sixty (60) day period, the Company shall not thereafter
issue or sell such securities without first offering such securities to the
Purchasers in the manner provided in this Section 4.11. The Capital Raising
Limitations shall not apply to (i) a loan from a commercial bank, (ii) any
transaction involving the Company's issuances of securities in connection with
(A) a merger, consolidation or purchase of assets, (B) any strategic partnership
or joint venture (the primary purpose of which is not to raise equity capital),
or (C) the acquisition of a business, product, technology or license by the
Company, (iii) the issuance of Common Stock in a firm commitment, underwritten
public offering, (iv) the issuance of securities upon exercise or conversion of
the company's options, warrants or other convertible securities outstanding as
of the date hereof, or (v) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan for the benefit of the Company's employees, directors or consultants.
4.12 Restriction on Certain Issuances of Securities. (a) For a period of
one year following the Closing Date, the Company shall not issue or agree to
issue, (except (i) to Purchasers pursuant to this Agreement, (ii) pursuant to
any employee stock option, stock purchase or restricted stock plan of the
Company in effect on the date hereof, (iii) pursuant to any existing security,
option, warrant, scrip, call or commitment or right or; (iv) pursuant to any
grant or exercise of any warrants or options granted or awarded to any person as
compensation for services provided to the Company, in the reasonable discretion
of the Board of Directors; (v) pursuant to a strategic joint venture or
partnership entered into by the Company, undertaken at the reasonable discretion
of the Board of Directors of the Company, the primary purpose of which is not to
raise equity capital, or (vi) the Additional Financing referred to in Section
4.11), any equity securities of the Company (or any security convertible into or
exercisable or exchangeable, directly or indirectly, for equity securities of
the Company) if such securities are issued at a price (or in the case of
securities convertible into or exercisable or exchangeable, directly or
indirectly, for Common Stock such securities provide for a conversion, exercise
or exchange price) which is less than the Applicable Price (as defined in the
Certificate of Designation attached hereto as Exhibit F) for Common Stock on the
date of issuance of such security.
4.13 Transaction with Affiliates. So long as Purchasers own any Preferred
Shares, the Company shall not, and shall cause each of its subsidiaries not to,
enter into, amend, modify or supplement, or permit any subsidiary to enter into,
amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, or (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction commitment or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a 5% or more equity interest in
that person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common control with
that person or entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
4.14 Indemnification. In consideration of each Purchaser's execution and
delivery of this Agreement and acquiring the Securities hereunder and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
all of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
<PAGE>
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by an Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Certificate of Designation, the Warrants or the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby, or
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement, the Certificate of Designations, the Warrants or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, or the status of such Purchaser or holder of the Securities as an
investor in the Company, except for any such Indemnified Liabilities which
directly and primarily results from the particular Indemnitee's (i) gross
negligence or willful misconduct, and (ii) breach or default by the particular
Indemnitee of an agreement or contract between the particular Indemnitee and a
third party not related to, or arising out of, this transaction. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
4.15 Notification. The Company agrees to notify each holder within three
(3) business days of the Company becoming aware of the relevant facts, that any
holder has (a) converted all of its Preferred Shares, (b) requested redemption
of its Preferred Shares or (c) been issued a number of shares, upon conversion
of Preferred Shares, which equals or exceeds such holder's portion of the Common
Share Limit.
ARTICLE V
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.1 Removal of Legend. The Legend shall be removed and the Company shall
issue, or shall cause to be issued, a certificate without such Legend to the
holder of any Security upon which it is stamped, and a certificate for a
security shall be originally issued without the Legend, if (a) the resale of
such Security is registered under the Securities Act, (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions and reasonably satisfactory
to the Company and its counsel (the reasonable cost of which shall be borne by
the Company if neither an effective registration statement under the Securities
Act or Rule 144 is available in connection with such sale) to the effect that a
public sale or transfer of such Security may be made without registration under
the Securities Act pursuant to an exemption from such registration requirements
or (c) such Security can be sold pursuant to Rule 144, the Holder provides the
Company with reasonable assurances that the Security can be so sold without
restriction, or (d) such Security can be sold pursuant to Rule 144(k). Each
Purchaser agrees to sell all registered Securities, including those represented
by a certificate(s) from which the Legend has been removed, or which were
originally issued without the Legend, pursuant to an effective registration
statement, in accordance with the manner of distribution described in such
registration statement and to deliver a prospectus in connection with such sale
or in compliance with an exemption from the registration requirements of the
Securities Act. In the event the Legend is removed from any Security or any
Security is issued without the Legend and the Security is to be disposed of
other than pursuant to the registration statement or pursuant to Rule 144, then
prior to, and as a condition to, such disposition such Security shall be
relegended as provided herein in connection with any disposition if the
subsequent transfer thereof would be restricted under the Securities Act. Also,
in the event the Legend is removed from any Security or any Security is issued
without the Legend and thereafter the effectiveness of a registration statement
covering the resale of such Security is suspended or the Company determines that
a supplement or amendment thereto is required by applicable securities laws,
then upon reasonable advance notice to Purchaser holding such Security, the
Company may require that the Legend be placed on any such Security that cannot
then be sold pursuant to an effective registration statement or Rule 144 or with
respect to which the opinion referred to in clause (b) next above has not been
rendered, which Legend shall be removed when such Security may be sold pursuant
to an effective registration statement or Rule 144 or such holder provides the
opinion with respect thereto described in clause (b) next above.
<PAGE>
5.2 Transfer Agent Instructions. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the Purchaser or its
nominee, for the Common Shares and the Warrant Shares in such amounts specified
from time to time by the Purchaser upon conversion or exercise of the Preferred
Shares and the Warrants, respectively. Such certificates shall bear the Legend
only to the extent provided by Section 5.1 above. The Company covenants that no
instruction other than such instructions referred to in this Article V, and stop
transfer instructions to give effect to Section 2.6 hereof in the case of the
Common Shares and Warrant Shares prior to registration of the Common Shares and
Warrant Shares under the Securities Act or "black-out" periods as provided in
the Registrations Rights Agreement between the Company and the Purchaser, dated
of such date herewith, will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company. Nothing in this Section shall affect in any way the
Purchaser's obligations and agreement set forth in Section 5.1 hereof to resell
the Securities pursuant to an effective registration statement and to deliver a
prospectus as required in Section 5.1 in connection with such sale or in
compliance with an exemption from the registration requirements of applicable
securities laws. If (a) the Purchaser provides the Company with an opinion of
counsel, which opinion of counsel shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
satisfactory to the Company and its counsel (the reasonable cost of which shall
be borne by the Company if neither an effective registration statement under the
Securities Act (beginning after a registration statement is required to be
declared effective pursuant to the Registration Rights Agreement and with
respect to the Common Shares only) nor Rule 144 is available in connection with
such sale), to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from registration or (b) the
Purchaser transfers Securities to an affiliate which is an accredited investor
(within the meaning of Regulation D under the Securities Act) and which delivers
to the Company in written form the same representations, warranties and
covenants made by Purchaser hereunder or pursuant to Rule 144, the Company shall
permit the transfer, and, in the case of the Common Shares and Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denomination as specified by the Purchaser which shall contain
a legend if required by Section 5.1.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 The obligation of the Company hereunder to issue and sell the Preferred
Shares and Warrants to the Purchaser at the Closing is subject to the
satisfaction, as of the date of the Closing, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(i) The Purchaser shall have executed the signature page to this Agreement,
the Registration Rights Agreement and the Escrow Agreement and delivered the
same to the Company and Shoreline.
(ii) The Purchaser shall have wired to the account of the Escrow Agent
pursuant to the Escrow Agreement the Purchase Price.
(iii) The representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date), and the Purchaser shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing.
<PAGE>
(iv) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
by this Agreement.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of the Purchaser hereunder to purchase the Preferred
Shares and Warrants to be purchased by it on the date of the Closing is subject
to the satisfaction as of the date of the Closing, of each of the following
conditions, provided that these conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time in the Purchaser's sole
discretion:
(i) The Company shall have executed the signature page to this Agreement,
the Registration Rights Agreement and the Escrow Agreement and delivered the
same to Purchaser and Shoreline.
(ii) The Company shall have delivered to the Escrow Agent duly issued
Preferred Shares being so purchased by Purchaser and certificates for the
Warrants being issued to the Purchaser at the Closing in such number and
denominations as are reasonably requested by Purchaser.
(iii) The Common Stock shall be listed on the AMEX and trading in the
Common Stock shall not have been suspended or limited by the AMEX or the SEC or
other regulatory authority, and no such proceeding seeking suspension shall be
pending.
(iv) The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing. Purchaser shall have received a certificate,
executed by the Chief Executive Officer or Chief Financial Officer of the
Company, dated as of the Closing to the foregoing effect.
(v) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(vi) Purchaser shall have received opinions of Hart & Trinen, LLP, dated as
of the Closing, in the form attached hereto as Exhibit G.
(vii)The Certificate of Designations, shall have been filed with the
Secretary of State of the Sate of Colorado, and a copy thereof certified by such
Secretary of State shall have been delivered to such Purchaser.
(viii)As of Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for purpose of effecting the
conversion of the Preferred Shares and the exercise of the Warrants, at least
3,343,782 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of Exhibit H
attached hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
<PAGE>
(x) The Company shall have delivered a certificate evidencing the
incorporation and good standing of the Company and each subsidiary in the state
of such corporation's state of incorporation issued by the Secretary of Sate of
the state of incorporation as of a date within ten (10) days of the Closing.
(xi) The Company shall have delivered certified copies of its charter and
bylaws, each as in effect at the Closing.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement shall be governed by and
construed in accordance with the Colorado Business Corporation Act (in respect
of matters of corporation law) and the laws of the State of New York (in respect
of all other matters) applicable to contracts made and to be performed in the
State of New York. The parties hereto irrevocably consent to the jurisdiction of
the United States federal courts and state courts located in the Borough of
Manhattan in the State of New York in any suit or proceeding based on or arising
under this Agreement or the transactions contemplated hereby and irrevocably
agree that all claims in respect of such suit or proceeding may be determined in
such courts. The Company and each Purchaser irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company and each Purchaser further agrees that service of process upon the
Company or such Purchaser, as applicable, mailed by the first class mail in
accordance with Section 8.6 shall be deemed in every respect effective service
of process upon the Company or such Purchaser in any suit or proceeding arising
hereunder. Nothing herein shall affect any Purchaser's right to serve process in
any other manner permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner. The parties hereto irrevocably waive any right to trial by jury
under applicable law.
The Company and each Purchaser hereby waive any and all rights to a jury
trial of any claim or cause of action based upon arising out of this Agreement
or the other related agreements and documents or any dealings among them
relating to the subject matter hereof and the relationship that is being
established. The scope of this waiver is intended to encompass any and all
disputes that may be filed in any court and that relate to the subject matter of
this Agreement, including without limitation, contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims. The
parties acknowledge that this waiver is a material inducement to enter into a
business relationship, that each has already relied on the waiver and that each
will continue to rely on the waiver in their related future dealings. The
Company and each Purchaser hereby warrants and represents that it has reviewed
this waiver with its legal counsel, and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. This waiver is
irrevocable, meaning that it shall apply to any subsequent amendments, renewals,
supplements or modifications to this Agreement or to any other related documents
or agreements. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts 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. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall promptly cause
additional original executed signature pages to be delivered to the other
parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
<PAGE>
8.4 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
8.5 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the maters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall be in
writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
If to the Company:
Cel-Sci Corporation
66 Canal Center Plaza
Suite 510
Alexandria, VA 22314
Telecopy: (703) 549-6269
Attention: Mr. Geert R. Kersten
with a copy to:
Hart & Trinen, LLP
1624 Washington Street
Denver, CO 80203
Telecopy: (303) 839-5414
Attention: Mr. Bill Hart, Esq.
If to Nelson Partners:
Nelson Partners
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM 12
Bermuda
Telecopy: (441) 292-2239
Attention: Ms. Anne Dupuy
with a copy to:
Citadel Investment Group, LLC
225 West Washington Street
9th Floor
Chicago, IL 60606
Telecopy: (312) 368-1347
Attention: Mr. Michael J. Hughes and Mr. Kenneth C. Griffin
and with a copy to:
<PAGE>
Katten, Muchin, & Zavis
525 West Monroe Street
Suite 1700
Chicago, IL 60661-3693
Telecopy: (312) 902-1061
Attention: Steven G. Martin, Esq.
If to Olympus Securities, Ltd.:
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM 12
Bermuda
Telecopy: (441) 292-2239
Attention: Ms. Anne Dupuy
with a copy to:
Citadel Investment Group, LLC
225 West Washington Street
9th Floor
Chicago, IL 60606
Telecopy: (312) 368-1347
Attention: Mr. Michael J. Hughes and Mr. Kenneth C. Griffin
and with a copy to:
Katten, Muchin, & Zavis
525 West Monroe Street
Suite 1700
Chicago, IL 60661-3693
Telecopy: (312) 902-1061
Attention: Steven G. Martin, Esq.
If to KA Investments LDC:
KA Investments LDC
c/o Tarmachan Capital
1712 Hopkins Crossroads
Minnetonka, MN 55305
Telecopy: (612) 542-4253
Attention: Ms. Ivana Bozjack
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1150 Avenue Of The Americas
@ 51st Street
New York, NY 10104
Telecopy: (212) 541-1432
Attention: Mr. Eric Louis Cohen, Esq.
<PAGE>
If to the following Purchasers:
Leonardo, L.P.
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Telecopy: (212) 692-6395
Attention: Mr. Gary Wolf
GAM Arbitrage Investments, Inc.
11 Athol Street
Douglas, Isle of Man
British Isles, British Virgin Islands
Attention: Mr. Michael L. Gordon
AG Super Fund International Partners, L.P.
Abbott Building
PO Box 3186
Road Town, Tortola
British Virgin Islands
Attention: Mr. Michael L. Gordon
Raphael, L.P.
c/o Raphael Capital Management Limited
Abott Building
PO Box 3186 Main Street
Road Town, Tortola
British Virgin Islands
Attention: Mr. Michael L. Gordon
Ramius Fund, Ltd.:
c/o Bank of Bermuda Building
6 Front Street
PO Box HM 1020
Hamilton, Bermuda HMDX
Attention: Michael L. Gordon
Baldwin Enterprises, Inc.
529 East South Temple
Salt Lake City, Utah 84102
Attention: Michael L. Gordon
and a copy to:
Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Telecopy: (212) 867-6395
Attention: Mr. Gary Wolf
<PAGE>
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telecopy: (415) 332-7800
Attention: General Counsel
Each party shall provide notice to the other party of any change in
address. Failure of any party to give notice to Shoreline Pacific as provided
herein shall not invalidate notice given to any other party, which would
otherwise be a valid notice.
8.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither the
Company nor the Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Purchaser may, subject to and in compliance
with Section 5.2 hereof, assign all or part of its rights and obligations
hereunder to any of its "affiliates," as that term is defined under the
Securities Act, without the consent of the Company so long as such affiliate is
an accredited investor (within the meaning of Regulation D under the Securities
Act) and agrees in writing to be bound by this Agreement. This provision shall
not limit the Purchaser's right to transfer the Securities pursuant to the terms
of this Agreement or to assign the Purchaser's rights hereunder to any such
transferee pursuant to the terms of this Agreement.
8.8 Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
8.9 Survival. The representations and warranties of the Company and the
Purchaser and the agreements and covenants set forth herein shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Company or any Purchaser as the case may be.
8.10 Public Filings: Publicity. As soon as practicable following the
Closing (and not later than one (1) business days thereafter), the Company shall
issue a press release with respect to the transactions contemplated hereby. The
Company and Citadel Investment Group, LLC on behalf of the Purchasers shall have
the right to approve before issuance any press releases, SEC or AMEX or other
exchange filings, or any other public statements with respect to the
transactions contemplated hereby (which approval shall not be unreasonably
withheld or delayed).
8.11 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy to a
Purchaser shall limit any remedy which would otherwise be available to such
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
a Purchaser may have under any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company and each Purchaser
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to each Purchaser, in the case of the Company, and the
Company, in the case of a Purchaser. Accordingly, the Company and each Purchaser
acknowledges that the remedy at law for a material breach of its respective
<PAGE>
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company or a Purchaser, as the case may be,
of the provisions of this Agreement, that a Purchaser or the Company, as the
case may be, shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate compliance, without
the necessity of showing economic loss and without any bond or other security
being required.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have caused
this Agreement to be duly executed as of the date first above written.
CEL-SCI CORPORATION
By:
Geert R. Kersten
Chief Executive Officer
PURCHASER:
NELSON PARTNERS
By:
Name: Anne Dupuy
Title: Officer
Residency: Bermuda
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
OLYMPUS SECURITIES, LTD.
By:
Name: Anne Dupuy
Title: Officer
Residency: Bermuda
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
<PAGE>
KA INVESTMENTS LDC.
By:
Name:
Title: Secretary
Residency: Cayman Island
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
Residency: Cayman Islands
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
Residency: British Virgin Islands
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
<PAGE>
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
Residency: Cayman Islands
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
RAPHAEL, L.P.
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
Residency: Cayman Islands
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Managing Officer
Residency: Bermuda
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
<PAGE>
BALDWIN ENTERPRISES, INC.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Managing Officer
Residency: Colorado
Aggregate Subscription Amount
Preferred Shares Purchased:
Warrants Purchased:
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D CONVERTIBLE PREFERRED STOCK
OF CEL-SCI CORPORATION
Cel-Sci Corporation (the "Company"), a corporation organized and existing
under the Colorado Corporation Code, does hereby certify that, pursuant to
authority conferred upon the Board of Directors of the Company by the
Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 7-106-102 of the Colorado Corporation Code, the Board of Directors of
the Company at a meeting duly held, adopted resolutions (i) authorizing a series
of the Company's previously authorized preferred stock, par value $.01 per
share, and (ii) providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Ten Thousand (10,000) shares of Series D Preferred
Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue Ten Thousand (10,000)
shares of Series D Preferred Stock (the "Preferred Shares"), par value $.01 per
share, which shall have the following powers, designations, preferences and
other special rights:
1. Dividends. The Preferred Shares shall pay a dividend equal to two
percent (2%) per month, payable on the first day of each month with appropriate
proration for partial months. Such dividend shall only be payable if, and during
such time as, (i) the Registration Statement has not been declared effective by
the SEC prior to the date that is 120 days after the Closing Date; (ii) the
Registration Statement does not cover the resale of all of the Conversion Shares
or the Company gives notice that Common Stock issued or issuable upon conversion
of the Preferred Shares cannot be sold under the Registration Statement for any
period of thirty (30) consecutive days after the date the Registration Statement
has been declared effective by the SEC; (iii) the Common Stock is not listed on
the Nasdaq National Market, the Nasdaq Small Cap Market, The New York Stock
Exchange, Inc. or The American Stock Exchange, Inc. for a period of twenty (20)
consecutive trading days.
2. Holder's Conversion of Preferred Shares. A holder of Preferred Shares
shall have the right, at such holder's option, to convert the Preferred Shares
into shares of the Company's common stock, $.01 par value per share (the "Common
Stock"), on the following terms and conditions:
(a) Conversion Right. At any time or times after the Closing Date
until 3 years after Closing, any holder of Preferred Shares shall be entitled to
convert any whole number of Preferred Shares into fully paid and nonassessable
shares (rounded to the nearest whole share in accordance with Section 2(i)
below) of Common Stock, at the Conversion Rate (as defined below); provided,
however, that in no event shall any holder be entitled to convert Preferred
Shares in excess of that number of Preferred Shares which, upon giving effect to
such conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.9% of the
outstanding shares of the Common Stock following such conversion and, provided
further, a holder may elect, upon sixty one (61) days prior written notice to
the Company, not to be bound by such provision. For purposes of the foregoing
proviso, the aggregate 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 conversion of the Preferred Shares with respect to which the
determination of such proviso is being made, but shall exclude the
<PAGE>
number of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, nonconverted Preferred Shares beneficially owned by the holder
and its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including, without
limitation, any warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the holder
and its affiliates. Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. Any Preferred
Shares outstanding on 3 year anniversary of Closing will be converted into
shares of Common Stock at the applicable Conversion Price (as defined below).
(b) Conversion Price. The number of shares of Common Stock issuable
upon conversion of each of the Preferred Shares shall be determined according to
the following formula (the "Conversion Rate"):
1000
Conversion Price
(i) At any time or times on and prior to the Anniversary Date,
the "Conversion Price" means the Fixed Conversion
Price.
(ii) At any time or times on and following the trading day
following the Anniversary Date or upon occurrence of a Triggering Event, the
"Conversion Price" means the lesser of (a) the Market Price or (b) the Fixed
Conversion Price.
For purposes of this Certificate of Designations, the following terms shall have
the following meanings:
(1) "Anniversary Date" means the earlier of
(A) 270 days after the Closing Date, or the first trading day thereafter or (B)
the trading day immediately following a period of 5 consecutive trading days
during which the Closing Bid Price (as defined below) of the Common Stock is
equal to or less than 50% of the Closing Price.
(2) "Fixed Conversion Price" means 120% of
the Closing Price, subject to adjustment as provided herein;
(3) "Market Price" means the average of the
weighted average prices on AMEX (as currently shown by the ticker symbol HIV.A
as reported by Bloomberg Financial Markets ("Bloomberg")) of the Company's
Common Stock for any two consecutive trading days, chosen by the holder, in the
ten trading day period ending on the day prior to a holder's submission of a
Conversion Notice less one half of the difference between the average Closing
Ask Price and average Closing Bid Price of the Company's Common Stock during
such two trading days;
(4) "Average Market Price" means, with
respect to any security for any period, that price which shall be computed as
the arithmetic average of the Closing Bid Prices (as defined below) for such
security for each trading day in such period;
(5) "Closing Bid Price" or "Closing Asked
Price" means, for any security as of any date, the last closing bid price or
asked price, respectively, for such security on the American Stock Exchange
("AMEX") as reported by Bloomberg, as currently shown by the ticker symbol
HIV.A, or, if the AMEX is not the principal trading market for such security,
the last closing bid price or asked price, respectively, of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or asked price, respectively, of such security in the
over-the-counter
<PAGE>
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or asked price, respectively, is reported
for such security by Bloomberg, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices or asked prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the
Closing Asked Price cannot be calculated for such security on such date on any
of the foregoing bases, the Closing Bid Price or the Closing Asked Price,
respectively, of such security on such date shall be the fair market value as
mutually determined by the Company and the holders of Preferred Shares. If the
Company and the holders of Preferred Shares are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved pursuant
to Section 2(e)(iii) below with the term "Closing Bid Price" or "Closing Asked
Price," respectively, being substituted for the term "Average Market Price."
(All such determinations to be appropriately adjusted for any stock dividend,
stock, split or other similar transaction during such period).
(6) "Closing Price" means the average of the
Closing Bid Price of the Common Stock for five consecutive trading days
immediately proceeding the Closing Date; and
(7) "Closing Date" means the initial date of
issuance of the Preferred Shares.
(c) Adjustment to Conversion Price -- Dilution and Other
Events. In order to prevent dilution of the rights granted under this
Certificate of Designations, the Conversion Price will be subject to adjustment
from time to time as provided in this Section 2(c).
(i) Adjustment of Fixed Conversion Price upon Issuance of
Common Stock. If and whenever on or after the date of issuance of the Preferred
Shares, the Company issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than shares of Common Stock deemed to have been
issued by the Company in connection with an Approved Stock Plan (as defined
below)) for a consideration per share less than the lesser of the Average Market
Price of the Common Stock for the previous five (5) consecutive trading days or
the twenty (20) consecutive trading days immediately preceding the date of such
issuance or sale (the "Applicable Price"), then immediately after such issue or
sale, the Fixed Conversion Price shall be reduced to an amount equal to the
product of (x) the Fixed Conversion Price in effect immediately prior to such
issue or sale and (y) the quotient determined by dividing (1) the sum of (I) the
product derived by multiplying the Applicable Price by the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately prior to such
issue or sale, and (II) the consideration, if any, received by the Company upon
such issue or sale, by (2) the product derived by multiplying (I) the Applicable
Price by (II) the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale. For purposes of determining the adjusted
Fixed Conversion Price under this Section 2(c)(i), the following shall be
applicable:
(A) Issuance of Rights or Options. If
the Company in any manner grants or sells any Option and the lowest price per
share for which any one share of Common Stock is issuable upon the exercise of
any such Option, or upon conversion or exchange of any Convertible Security
issuable upon exercise of any such Option, is less than the Applicable Price (as
defined above) in effect on the day immediately prior to the time of the
granting or sale of such Option, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the granting or sale of such Option for such price per share. For purposes of
this paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest
<PAGE>
amount of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion or exchange of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Fixed Conversion Price shall be made upon the actual issue of
such Common Stock or such Convertible Security upon the exercise of such Options
or upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
(B) Issuance of Convertible Securities. If
the Company in any manner issues or sells any Convertible Security and the
lowest price per share for which any one share of Common Stock is issuable upon
conversion or exchange thereof, calculated on the date of such issue or sale of
such convertible security, is less than the Applicable Price (as defined above)
in effect on the day immediately prior to the time of such issue or sale of such
convertible security, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per share. For
the purposes of this paragraph, the "lowest price per share for which any one
share of Common Stock is issuable" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale of the
Convertible Security and upon the conversion or exchange of such Convertible
Security. No further adjustment of the Fixed Conversion Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of any
Convertible Security, and if any such issue or sale of such Convertible Security
is made upon exercise of any Options for which adjustments of the Conversion
Price had been or are to be made pursuant to other provisions of this Section
2(c)(i), no further adjustment of the Conversion Price shall be made by reason
of such issue or sale.
(C) Change in Option Price or Conversion Rate.
If the purchase price provided for in any Option, the additional consideration
(if any) payable upon the issue, conversion or exchange of any Convertible
Security or the rate at which any Convertible Security is convertible into or
exchangeable for Common Stock changes at any time, the Fixed Conversion Price in
effect at the time of such change shall be adjusted immediately to the Fixed
Conversion Price which would have been in effect at such time had such Option or
Convertible Security originally provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. If the terms of any Option or Convertible
Security which was outstanding as of the Closing Date are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change; provided that no such change shall at any time cause the Fixed
Conversion Price hereunder to be increased, except that, in the event any such
Options or Convertible Securities expire, the Fixed Conversion Price shall be
readjusted to remove the effect of such Options or Convertible Securities.
(D) Certain Definitions. For purposes of
determining the adjusted Fixed Conversion Price under this Section 2(c)(i), the
following terms have meanings set forth below:
(I) "Options" means any rights,
warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(II) "Convertible Securities" means any
stock or securities (other than Options) directly or indirectly convertible into
or exchangeable for Common Stock.
(III) "Approved Stock Plan" shall mean
any contract, plan or agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities may be
issued to any employee, officer, director, consultant or other service provider.
<PAGE>
(IV) "Common Stock Deemed Outstanding"
means, at any given time, the number of shares of Common Stock actually
outstanding at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Section 2(c)(i) hereof regardless of whether the Options
or Convertible Securities are actually exercisable at such time, but excluding
any shares of Common Stock issuable upon conversion of the Preferred Shares.
(E) Effect on Fixed Conversion Price of
Certain Events. For purposes of determining the adjusted Fixed
Conversion Price under this Section 2(c)(i), the following shall be
applicable:
(I) Calculation of Consideration
Received. If any Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the amount received by the Company therefor
calculated on the date of issuance or sale without giving effect to sales
commission or offering expenses, if any, upon the sale, conversion or exercise
of such securities. In case any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Average Market Price of such securities for the twenty (20) consecutive trading
days immediately preceding the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of a majority of the
Preferred Shares then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser selected by the Company. The
determination of such appraiser shall be deemed binding upon all parties absent
manifest error.
(II) Integrated Transactions. In case
any Option is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, consideration
given upon the grant of such Option will be deemed to be $.01.
(III) Treasury Shares. The number of
shares of Common Stock outstanding at any given time does not include shares
owned or held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(IV) Record Date. If the Company takes
a record of the holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such
<PAGE>
record date will be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(ii) Adjustment of Fixed Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Fixed
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Fixed Conversion Price in
effect immediately prior to such combination will be proportionately increased.
(iii) Adjustment of Market Price upon Issuance of Convertible
Securities. If the Company in any manner issues or sells Convertible Securities
that are convertible into more than 500,000 shares of Common Stock (subject to
adjustment for stock splits, stock dividends, consolidation or
recapitalizations) at a price which varies with the market price of the Common
Stock (the formulation for such variable price being herein referred to as, the
"Variable Price") and such Variable Price is not calculated using the same
formula used to calculate the Market Price in effect immediately prior to the
time of such issue or sale, the Company shall provide written notice thereof via
facsimile and overnight courier to each holder of the Preferred Shares
("Variable Notice") on the date of issuance of such Convertible Securities. If
the holders of Preferred Shares representing at least two-thirds (2/3) of the
Preferred Shares then outstanding provide written notice via facsimile and
overnight courier (the "Variable Price Election Notice") to the Company within
five (5) business days of receiving a Variable Notice that such holders desire
to replace the Market Price then in effect with the Variable Price described in
such Variable Notice, the Company shall prepare and deliver to each holder of
the Preferred Shares via facsimile and overnight courier a copy of an amendment
to this Certificate of Designations (the "Variable Price Amendment") that
substitutes the Variable Price for the Market Price (together with such
modifications to this Certificate of Designations as may be required to give
full effect to the substitution of the Variable Price for the Market Price)
within five (5) business days after receipt of the requisite number of Variable
Price Election Notices set forth above. The Company shall file such Variable
Price Amendment with the Secretary of State of the State of Colorado within five
(5) business days after delivery of the Variable Price Amendment to the holders
of the Preferred Shares; provided that in the event that the Company receives a
notice prior to the filing of the Variable Price Amendment from any holder who
has delivered a Variable Price Election Notice in connection with such Variable
Price Amendment that such holder objects to the form of the Variable Price
Amendment, the Company shall not file such Variable Price Amendment until such
time as the Variable Price Amendment has been revised to the reasonable
satisfaction of such holder and approved in writing by the holders of the
Preferred Shares representing at least two-thirds (2/3) of the Preferred Shares
then outstanding. Except as provided in the preceding proviso, a holder's
delivery of a Variable Price Election Notice shall serve as the consent required
to amend this Certificate of Designations pursuant to Section 12 below.
(iv) Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person (as defined below) or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any Organic Change, the Company
<PAGE>
will make appropriate provision (in form and substance satisfactory to the
holders of a majority of the Preferred Shares then outstanding) to insure that
each of the holders of the Preferred Shares will thereafter have the right to
acquire and receive in lieu of or addition to (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Preferred Shares, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Preferred Shares had such
Organic Change not taken place. In any such case, the Company will make
appropriate provision (in form and substance satisfactory to the holders of a
majority of the Preferred Shares then outstanding) with respect to such holders'
rights and interests to insure that the provisions of this Section 2(c) and
Section 2(d) below will thereafter be applicable to the Preferred Shares
(including, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Company, an immediate
adjustment of the Fixed Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, if the value so
reflected is less than the Fixed Conversion Price in effect immediately prior to
such consolidation, merger or sale). The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the holders of a majority of the Preferred
Shares then outstanding), the obligation to deliver to each holder of Preferred
Shares such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire. "Person" shall
mean an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2(c) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of the Preferred
Shares; provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 2(c).
(vi) Notices.
(A) Immediately upon any adjustment of the
Conversion Price, the Company will give written notice thereof to each holder of
Preferred Shares, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(B) The Company will give written notice to
each holder of Preferred Shares at least twenty (20) days prior to the date on
which the Company closes its books or takes a record (I) with respect to any
dividend or distribution upon the Common Stock, (II) with respect to any pro
rata subscription offer to holders of Common Stock or (III) for determining
rights to vote with respect to any Organic Change, dissolution or liquidation;
provided that in no event shall such notice be provided to such holder prior to
such information being made known to the public.
(C) The Company will also give written notice
to each holder of Preferred Shares at least twenty (20) days prior to the date
on which any Organic Change, dissolution or liquidation will take place.
(vii) Notwithstanding the above, the provisions of this
Section 2(c) shall not apply to (i) shares of Common Stock issued in connection
with any underwritten public offering (ii) any transaction involving the
Company's issuance of securities in
<PAGE>
connection with any partnership or joint venture, the primary purpose of which
is not to raise equity capital, (iii) issuance of securities by a subsidiary of
the Company, and (iv) any issuance of securities by the Company as consideration
for the acquisition of technology or rights to technology.
(d) Purchase Rights. In addition to any adjustments of the
Conversion Price pursuant to Section 2(c) above, if at any time the Company
grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the holders
of Preferred Shares will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Preferred Shares 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
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(e) Mechanics of Conversion. Subject to the Company's inability to
fully satisfy its obligations under a Conversion Notice (as defined below) as
provided for in Section 4 below:
(i) Holder's Delivery Requirements. To convert Preferred
Shares into full shares of Common Stock on any date (the "Conversion Date"), the
holder thereof shall (A) deliver or transmit by facsimile, for receipt on or
prior to 11:59 p.m., Central Time on such date, a copy of a fully executed
notice of conversion in the form attached hereto as Exhibit I (the "Conversion
Notice"), to the Company along with a printout from Bloomberg L.P. of the
weighted average prices over the relevant ten trading day period, and (B)
surrender to a common carrier for delivery to the Company as soon as practicable
following such date, the original certificates representing the Preferred Shares
being converted (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) (the "Preferred Stock
Certificates") and the originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the Company of a
facsimile copy of a Conversion Notice, the Company shall use its best efforts
to, by the end of the following business day send, via facsimile, a confirmation
of receipt of such Conversion Notice to such holder. Upon receipt by the Company
of the Preferred Stock Certificates to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice, the Company
shall, on the third business day following the date of receipt of the faxed
Conversion Notice (or the fourth business day following the date of receipt of
the faxed Conversion Notice if received after 11:00 a.m. local time of the
Company), provided that the Company receives the original documents listed above
prior to such issue date, (I) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for the
number of shares of Common Stock to which the holder shall be entitled, or (II)
credit such aggregate number of shares of Common Stock to which the holder shall
be entitled to the holder's or its designee's balance account with The
Depository Trust Company. If the number of Preferred Shares represented by the
Preferred Stock Certificate(s) submitted for conversion is greater than the
number of Preferred Shares being converted, then the Company or Transfer Agent,
as the case may be, shall, as soon as practicable and in no event later than
three (3) business days after receipt of the Preferred Stock Certificate(s) and
at its own expense, issue and send to the holder a new Preferred Stock
Certificate representing the number of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a dispute as to the
determination of the Average Market Price or the arithmetic calculation of the
Conversion Rate, the Company shall promptly issue to the holder the number of
shares of Common Stock that is not disputed
<PAGE>
the holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one (1) business day of receipt of such holder's Conversion
Notice, provided that the holder has provided the Company with the Bloomberg
printout required in Section 2(e)(i). If such holder and the Company are unable
to agree upon the determination of the Average Market Price or arithmetic
calculation of the Conversion Rate within one (1) business day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall within one (1) business day submit via facsimile (A) the disputed
determination of the Average Market Price to an independent, reputable
investment bank or (B) the disputed arithmetic calculation of the Conversion
Rate to its independent, outside accountant. The Company shall use its best
efforts to cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the holder
of the results no later than four (4) business days from the time it receives
the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled to receive
the shares of Common Stock issuable upon a conversion of Preferred Shares shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date, provided the Company receives the Preferred
Stock Certificates within two (2) business days of the Conversion Notice.
(v) Company's Failure to Timely Convert. If the Company shall
fail to issue and deliver to a courier for delivery to a holder on a timely
basis as described in this Section 2(e)(ii), a certificate for the number of
shares of Common Stock to which such holder is entitled upon such holder's
conversion of Preferred Shares or a new Preferred Stock Certificate representing
the number of shares of Common Stock to which such holder is entitled pursuant
to Section 2(e)(ii) except as provided in Section 4(a)(y), in addition to all
other available remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement between the Company and the initial holders of the
Preferred Shares (the "Securities Purchase Agreement") (including
indemnification pursuant to Section 8 thereof), the Company shall pay additional
damages to such holder on each date such conversion is not timely effected in an
amount equal to 1.0% of the product of (A) the number of shares of Common Stock
not issued to the holder on a timely basis and to which such holder is entitled
and, in the event the Company has failed to deliver the Preferred Stock
Certificate to the holder on a timely basis pursuant to Section 2(e)(ii), the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares represented by such Preferred Stock Certificate, and (B) the Closing Bid
Price of the Common Stock on the last possible date which the Company could have
issued such Common Stock and the Preferred Stock Certificate, as the case may
be, to such holder without violating this Section 2(e).
(f) Taxes. The Company shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of Common Stock upon
the conversion of the Preferred Shares.
(3) Redemption at Option of Holders.
(a) Redemption Option Upon Major Transaction. In addition to
all other rights of the holders of Preferred Shares contained herein, after a
Major Transaction (as defined below), each holder of Preferred Shares shall have
the right, at such holder's option, to require the Company to redeem all or a
portion of such holder's Preferred Shares at a price per Preferred Share equal
to
<PAGE>
greater of (i) $1,250 and (ii) the product of (A) the Conversion Rate at such
time and (B) the Closing Bid Price on the date of the public announcement of
such Major Transaction or the next date on which the exchange or market on which
the Common Stock is traded is open if such public announcement is made (X) after
12:00 p.m., Central Time, time on such date or (Y) on a date on which the
exchange or market on which the Common Stock is traded is closed ("Major
Transaction Redemption Price").
(b) Redemption Option Upon Triggering Event. In addition to all
other rights of the holders of Preferred Shares contained herein, after a
Triggering Event (as defined below), each holder of Preferred Shares shall have
the right, at such holder's option, to require the Company to redeem all or a
portion of such holder's Preferred Shares at a price per Preferred Share equal
to the greater of (i) $1,250 and (ii) the product of (A) the Conversion Rate at
such time and (B) the Closing Bid Price calculated as of the date immediately
preceding such Triggering Event on which the exchange or market on which the
Common Stock is traded is open ("Triggering Event Redemption Price" and,
collectively with "Major Transaction Redemption Price," the "Redemption Price").
(c) "Major Transaction". A "Major Transaction" shall be deemed to
have occurred at such time as any of the following events occur with the
recommendation and approval of the Company's Board of Directors:
(i) the consolidation, merger, reorganization, restructuring
or similar transaction of the Company with or into another Person (other than
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or any such transaction where the
Company is the survivor); or
(ii) the sale or transfer of substantially all of the assets
of the Company or all of its material subsidiaries or any similar transaction or
related transactions which effectively results in a sale of all or substantially
all of the assets of the Company and/or its subsidiaries (other than a public or
private offering of Viral Technologies, Inc. ("VTI") if the Company owns at
least 50% of the voting control and 50% of the economic interest in VTI after
such offering).
(d) "Triggering Event". A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events:
(i) the Company's notice to any holder of Preferred Shares,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Preferred Shares into shares
of Common Stock, including due to any of the reasons set forth in Section 4(a)
below;
(ii) the Company, with the approval of its Board of Directors,
fails to continue to own, directly or indirectly, all of the capital stock of
all of its material subsidiaries (other than due to a merger or consolidation of
any subsidiary into the Company or a wholly-owned subsidiary of the Company or
in the case of a public or private offering of VTI where the Company owns at
least 50% of the voting control and 50% of the economic interest in VTI
following such Offering);
(iii) if for any reason, the Company fails to perform or
observe any, agreement or other provision contained herein or in the Securities
Purchase Agreement or the Registration Rights Agreement, and such failure is not
cured within ten (10) business days after the Company has been notified of the
occurrence thereof, and such failure
<PAGE>
has had, or could reasonably be expected to have, a material adverse effect on
(A) the financial condition, operating results, business, properties or
operation of the Company and its subsidiaries taken as a whole or (B) the
Preferred Shares; or
(iv) any representation or warranty contained in the
Securities Purchase Agreement or the Registration Rights Agreement is false or
misleading on or as of the date made and which either reflects or has had a
material adverse effect on (A) the financial condition, operating results,
business, properties or operations of the Company and its subsidiaries taken as
a whole or (B) the Preferred Shares.
(e) Mechanics of Redemption at Option of Buyer Upon Major
Transaction. No sooner than 15 days nor later than 10 days prior to the
consummation of a Major Transaction, but not prior to the public announcement of
such Major Transaction, the Company shall deliver written notice thereof via
facsimile and overnight courier ("Notice of Major Transaction") to each holder
of Preferred Shares. At any time after receipt of a Notice of Major Transaction,
the holders of at least two-thirds (2/3) of the Preferred Shares then
outstanding may require the Company to redeem all of the holder's Preferred
Shares then outstanding by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option of Buyer Upon Major
Transaction") to the Company, which Notice of Redemption at Option of Buyer Upon
Major Transaction shall indicate (i) the number of Preferred Shares that such
holders are voting in favor of redemption and (ii) the applicable Major
Transaction Redemption Price, as calculated pursuant to Section 3(a) above.
(f) Mechanics of Redemption at Option of Buyer Upon Triggering
Event. Within three (3) business days after the occurrence of a Triggering
Event, the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Triggering Event") to each holder of Preferred
Shares. At any time after receipt of a Notice of Triggering Event, the holders
of at least two-thirds (2/3) of the Preferred Shares then outstanding may
require the Company to redeem all of the Preferred Shares by delivering written
notice thereof via facsimile and overnight courier ("Notice of Redemption at
Option of Buyer Upon Triggering Event") to the Company, which Notice of
Redemption at Option of Buyer Upon Triggering Event shall indicate (i) the
number of Preferred Shares that such holders are voting in favor of redemption
and (ii) the applicable Triggering Event Redemption Price, as calculated
pursuant to Section 3(b) above.
(g) Payment of Redemption Price. Upon the Company's receipt of a
Notice(s) of Redemption at Option of Buyer Upon Major Transaction or a Notice(s)
of Redemption at Option of Buyer Upon Triggering Event, as the case may be, from
the holders of at least two-thirds (2/3) of the Preferred Shares then
outstanding, the Company shall immediately notify each holder by facsimile of
the Company's receipt of such requisite notices necessary to affect a redemption
and each holder of Preferred Shares shall thereafter promptly send such holder's
Preferred Stock Certificates to be redeemed to the Company or its Transfer
Agent. The Company shall deliver the applicable Redemption Price to such holder
within 30 days after the Company's receipt of the requisite notices required to
affect a redemption; provided that a holder's Preferred Stock Certificates shall
have been so delivered to the Company or its Transfer Agent; provided further
that if the Company is unable to redeem all of the Preferred Shares, the Company
shall redeem an amount from each holder of Preferred Shares equal to such
holder's pro-rata amount (based on the number of Preferred Shares held by such
holder relative to the number of Preferred Shares outstanding) of all Preferred
Shares being redeemed.
<PAGE>
If the Company shall fail to redeem all of the Preferred Shares submitted for
redemption (other than pursuant to a dispute as to the arithmetic calculation of
the Redemption Price), in addition to any remedy such holder of Preferred Shares
may have under this Certificate of Designations and the Securities Purchase
Agreement, the applicable Redemption Price payable in respect of such unredeemed
Preferred Shares shall bear interest at the rate of 1.75% per month (prorated
for partial months) until paid in full or until voided as provided herein. Until
the Company pays such unpaid applicable Redemption Price in full to each holder,
holders of at least two-thirds (2/3) of the Preferred Shares then outstanding,
including shares of Preferred Shares submitted for redemption pursuant to this
Section 3 and for which the applicable Redemption Price has not been paid, shall
have the option (the "Void Optional Redemption Option") to, in lieu of
redemption, require the Company to promptly return to each holder all of the
Preferred Shares that were submitted for redemption by such holder under this
Section 3 and for which the applicable Redemption Price has not been paid, by
sending written notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice"). Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full applicable Redemption Price to each
holder, (i) the Notice(s) of Redemption at Option of Buyer Upon Triggering Event
or the Notice(s) of Redemption at Option of Buyer Upon Major Transaction, as the
case may be, shall be null and void with respect to those Preferred Shares
submitted for redemption and for which the applicable Redemption Price has not
been paid, (ii) the Company shall immediately return any Preferred Shares
submitted to the Company by each holder for redemption under this Section 3(i)
and for which the applicable Redemption Price has not been paid, and (iii) the
Fixed Conversion Price of such returned Preferred Shares shall be adjusted to
the lesser of (A) the Fixed Conversion Price as in effect on the date on which
the Void Optional Redemption Notice(s is delivered to the Company and (B) the
lowest Closing Bid Price during the period beginning on the date on which the
Notice(s) of Redemption of Option of Buyer Upon Major Transaction or the
Notice(s) of Redemption at Option of Buyer Upon Triggering event, as the case
may be, is delivered to the Company and ending on the date on which the Void
Optional Redemption Notice(s) is delivered to the Company; provided that no
adjustment shall be made if such adjustment would result in an increase of the
Fixed Conversion Price then in effect. Notwithstanding the foregoing, in the
event of a dispute as to the determination of the Closing Bid Price or the
arithmetic calculation of the Redemption Price, such dispute shall be resolved
pursuant to Section 2(c)(iii) above with the term "Closing Bid Price" being
substituted for the term "Average Market Price" and the term "Redemption Price"
being substituted for the term "Conversion Rate." Payments provided for in this
Section 3 shall have priority to payments to other stockholders in connection
with a Major Transaction.
(4) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If, upon
the Company's receipt of a Conversion Notice, the Company can not issue shares
of Common Stock registered for resale under the Registration Statement for any
reason, including, without limitation, because the Company (x) does not have a
sufficient number of shares of Common Stock authorized and available, (y) is
otherwise prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its Securities, including
without limitation the Common Share Limit, from issuing all of the Common Stock
which is to be issued to a holder of Preferred Shares pursuant to a Conversion
Notice or (z) fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then the Company shall
issue as many shares of Common Stock as it is able to issue in accordance with
such holder's Conversion Notice and pursuant to Section 2(e) above and, with
respect to the unconverted Preferred Shares, the holder, solely at such holder's
option, can elect to:
(i) require the Company to redeem from such
holder those Preferred Shares for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("Mandatory
Redemption") at a price per Preferred Share (the "Mandatory Redemption Price")
equal to the Redemption Price as of such Conversion Date;
<PAGE>
(ii) if the Company's inability to fully
convert Preferred Shares is pursuant to Section 4(a)(z) above, require the
Company to issue restricted shares of Common Stock in accordance with such
holder's Conversion Notice and pursuant to Section 2(e) above;
(iii) void its Conversion Notice and retain or
have returned, as the case may be, the nonconverted Preferred Shares that were
to be converted pursuant to such holder's Conversion Notice.
(b) Mechanics of Fulfilling Holder's Election. The Company
shall immediately send via facsimile to a holder of Preferred Shares, upon
receipt of a facsimile copy of a Conversion Notice from such holder which cannot
be fully satisfied as described in Section 4(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the "Inability to
Fully Convert Notice"). Such Inability to Fully Convert Notice shall indicate
(i) the reason why the Company is unable to fully satisfy such holder's
Conversion Notice, (ii) the number of Preferred Shares which cannot be converted
and (iii) the applicable Mandatory Redemption Price. Such holder must within
five (5) business days of receipt of such Inability to Fully Convert Notice
deliver written notice via facsimile to the Company ("Notice in Response to
Inability to Convert") of its election pursuant to Section 4(a) above.
(c) Payment of Redemption Price. If such holder shall elect to
have its shares redeemed pursuant to Section 4(a)(i) above, the Company shall
pay the Mandatory Redemption Price in cash to such holder within thirty (30)
days of the Company's receipt of the holder's Notice in Response to Inability to
Convert. If the Company shall fail to pay the applicable Mandatory Redemption
Price to such holder on a timely basis as described in this Section 4(c) (other
than pursuant to a dispute as to the determination of the arithmetic calculation
of the Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under this Certificate of Designations and the Securities
Purchase Agreement, such unpaid amount shall bear interest at the rate of 1.75%
per month (prorated for partial months) until paid in full. Until the full
Mandatory Redemption Price is paid in full to such holder, such holder may void
the Mandatory Redemption with respect to those Preferred Shares for which the
full Mandatory Redemption Price has not been paid and receive back such
Preferred Shares. Notwithstanding the foregoing, if the Company fails to pay the
applicable Mandatory Redemption Price within such thirty (30) days time period
due to a dispute as to the determination of the arithmetic calculation of the
Redemption Price, such dispute shall be resolved pursuant to Section 2(e)(iii)
above with the term "Redemption Price" being substituted for the term
"Conversion Rate".
(d) Pro-rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one holder of Preferred
Shares on the same day and the Company can convert and redeem some, but not all,
of the Preferred Shares pursuant to this Section 4, the Company shall convert
and redeem from each holder of Preferred Shares electing to have Preferred
Shares converted and redeemed at such time an amount equal to such holder's
pro-rata amount (based on the number of Preferred Shares held by such holder
relative to the number of Preferred Shares outstanding) of all Preferred Shares
being converted and redeemed at such time.
(5) Reissuance of Certificates. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all of the
Preferred Shares represented by a particular Preferred Stock Certificate, the
Company shall promptly cause to be issued and delivered to the holder of such
Preferred Shares a preferred stock certificate representing the remaining
Preferred Shares which have not been so converted or redeemed.
<PAGE>
(6) Reservation of Shares. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding; provided that the number of shares of Common
Stock so reserved shall at no time be less than 200% of the number of shares of
Common Stock for which the Preferred Shares are at any time convertible;
provided further that such shares of Common Stock so reserved shall be allocated
for issuance upon conversion of Preferred Shares pro rata among the holders of
Preferred Shares based on the number of Preferred Shares held by such holder
relative to the total number of then outstanding Preferred Shares.
(7) Voting Rights. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the General
Corporation Law of the State of Colorado, and as expressly provided in this
Certificate of Designations.
(8) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "Preferred Funds"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and winding up of
the Company, an amount per Preferred Share equal to the sum of $1,000 (such sum
being referred to as the "Liquidation Value"); provided that, if the Preferred
Funds are insufficient to pay the full amount due to the holders of Preferred
Shares and holders of shares of other classes or series of preferred stock of
the Company that are of equal rank with the Preferred Shares as to payments of
Preferred Funds (the "Pari Passu Shares"), then each holder of Preferred Shares
and Pari Passu Shares shall receive a percentage of the Preferred Funds equal to
the full amount of Preferred Funds payable to such holder as a liquidation
preference, in accordance with their respective Certificate of Designations,
Preferences and Rights, as a percentage of the full amount of Preferred Funds
payable to all holders of Preferred Shares and Pari Passu Shares. The purchase
or redemption by the Company of stock of any class, in any manner permitted by
law, shall not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation or merger of
the Company with or into any other Person, nor the sale or transfer by the
Company of less than substantially all of its assets, shall, for the purposes
hereof, be deemed to be a liquidation, dissolution or winding up of the Company.
No holder of Preferred Shares shall be entitled to receive any amounts with
respect thereto upon any liquidation, dissolution or winding up of the Company
other than the amounts provided for herein.
(9) Preferred Rank. All shares of Common Stock shall be of junior
rank to all Preferred Shares in respect to the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the Company.
The rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Preferred Shares. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue additional
or other capital stock that is of senior or equal rank to the Preferred Shares
in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares, the Company shall not hereafter authorize or
make any amendment to the Company's Certificate of Incorporation or bylaws, or
file any resolution of the board of directors of the Company with the Delaware
Secretary of State containing any provisions, which would adversely affect or
otherwise impair the rights or relative priority of the holders of the Preferred
Shares relative to the holders of the Common Stock or the holders of any other
class of capital stock. In the event of the merger or consolidation of the
Company with or into another corporation, the Preferred Shares shall maintain
their relative powers, designations and preferences provided for herein and no
merger shall result inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with respect to
Other Capital Stock. Until all of the Preferred Shares have been converted or
redeemed as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its Common Stock
without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares.
(11) Limitation on Number of Conversion Shares. The Company shall
not be obligated to issue, in the aggregate, more than 2,243,782 shares of
Common Stock (such amount to be proportionately and equitably adjusted from time
to time in the event of stock splits, stock dividends, combinations, reverse
stock splits, reclassification, capital reorganizations and similar events
relating to the Common Stock) (the "Common Share Limit") upon conversion of the
Preferred Shares, if issuance of a larger number of shares of Common Stock would
constitute a breach of the Company's obligations under the rules or regulations
of The American Stock Exchange or any other principal securities exchange or
market upon which the Common Stock becomes traded. The Common Share Limit shall
be allocated among the holders of Preferred Shares pro rata based on the total
number of Preferred Shares issued on the Closing Date. The remaining portion of
the Common Share Limit attributable to any holder of Preferred Shares, all of
whose Preferred Shares has been converted or redeemed, shall be allocated among
the remaining holders of Preferred Shares pro rata based on the number of
Preferred Shares then outstanding.
(12) Vote to Change the Terms of Preferred Shares. The affirmative
vote at a meeting duly called for such purpose or the written consent without a
meeting, of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares, shall be required for any change to this
Certificate of Designations or the Company's Certificate of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares.
(13) Lost or Stolen Certificates. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests the
Company to convert such Preferred Shares into Common Stock.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Geert Kersten, its Chief Executive Officer, as of
the 22nd day of December 1997.
ISSUER
By:
Name: Geert Kersten
Its: Chief Executive Officer
<PAGE>
EXHIBIT I
ISSUER
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Cel-Sci Corporation (the "Certificate of Designations"). In accordance with and
pursuant to the Certificate of Designations, the undersigned hereby elects to
convert the number of shares of Series D Preferred Stock, par value $1,000 per
share (the "Preferred Shares"), of Cel-Sci Corporation, a Colorado corporation
(the "Company"), indicated below into shares of Common Stock, par value $0.01
per share (the "Common Stock"), of the Company, by tendering the stock
certificate(s) representing the share(s) of Preferred Shares specified below as
of the date specified below.
Date of Conversion:
Number of Preferred Shares to be converted:
Stock certificate no(s). of Preferred Shares to be converted:
Please confirm the following information:
Conversion Price:
Number of shares of Common Stock to be issued:
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Preferred Shares are being converted in the
following name and to the following address:
Issue to:
Facsimile Number:
Authorization:
By:
Title:
Dated:
[ADD INFORMATION RE: DTC / DWAC PROCEDURES]
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH OFFER, SALE OR TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: December 22, 1997
to Purchase [NO SHARES] Shares of Common Stock, par value $0.01 per
Share, of
CEL-SCI CORPORATION
CEL-SCI CORPORATION, a Colorado corporation (the "Company"), hereby
certifies that [INVESTOR NAME], its permissible transferees, designees,
successors and assigns (collectively, the "Holder"), for value received, is
entitled to purchase from the Company at any time commencing on December 22,
1997, and terminating on December 22, 2001 ("Termination Date") up to [WARRANT
SHARE NO] (#) shares (each a "Share" and collectively the "Shares") of the
Company's common stock par value $0.01 per Share (the "Common Stock"), at an
exercise price of [$8.625][$9.315] per Share (the "Exercise Price"). The number
of Shares purchasable hereunder and the Exercise Price are subject to adjustment
as provided in Section 4 hereof.
1. Exercise of Warrants.
(a) This Common Stock Purchase Warrant Certificate ("Warrant
Certificate" or "Certificate") may be exercised by delivering (via facsimile or
otherwise) a completed Election to Purchase in the form attached hereto as
Exhibit A (the "Election to Purchase") duly executed, to the Company at their
principal office, currently located at 66 Canal Center Plaza, Suite 510,
Alexandria, VA 22314, Attn: Geert R. Kersten, Chief Executive Officer, (or such
other office or agency of the Company within the United States as the Company
may designate to the Holder). The date of such delivery shall be the "Warrant
Exercise Date". The Holder must also surrender to a common carrier for overnight
delivery to the principal office of the Company this original Certificate and
the original Election to Purchase form, together with a certified check payable
to, or wire transfer to, the Company in the amount of the Exercise Price
multiplied by the number of Shares being purchased. The Company or the Company's
Transfer Agent, as the case may be, shall within three (3) business days of the
Warrant Exercise Date send to the Holder hereof by overnight courier
certificates of fully paid and non-assessable Common Stock which in the
aggregate represent the number of Shares being purchased; provided, however,
that the Holder may elect to utilize the cashless exercise provisions set forth
below in lieu of tendering the Exercise Price in cash, which election must be
agreed to by the Company in writing. The certificates so delivered shall be in
such denominations as may be requested by the Holder and shall be registered in
the name of the Holder or such other name as shall be designated by the Holder.
Notwithstanding the foregoing, the Company shall not be required to deliver
shares of Common Stock unless and until this original Warrant Certificate is
surrendered to the Company. All or less than all of the Warrants represented by
this Certificate may be exercised and, in case of the exercise of less than all,
the Company, upon surrender hereof, will at the Company's expense deliver to the
Holder a new Warrant Certificate or Certificates of like tenor and dated the
date hereof entitling said holder to purchase the number of Shares represented
by this Certificate which have not been exercised and to receive Registration
Rights with respect to such Shares.
(b) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, the Holder may request in
writing and provided the Company agrees in writing, to
<PAGE>
receive a reduced number of Shares in lieu of tendering the Exercise Price in
cash. In the case of cashless exercise the number of Shares to be issued to the
Holder shall be computed using the following formula:
X = Y(A-B)
A
where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common Stock;
and
B = the Exercise Price.
As used in this Section 1(b), "Market Value" refers to the closing bid price of
the Common Stock as currently shown by the ticker symbol HIV.A (as reported by
Bloomberg, L.P.) on the day before the date that Election to Purchase and this
Warrant Certificate are duly surrendered to the Company for a full or partial
exercise hereof. Notwithstanding the foregoing definition, if the Common Stock
is not listed on a national securities exchange or quoted in the Nasdaq System
at the time said Election to Purchase is submitted to the Company in the
foregoing manner, the Market Value of the Common Stock shall be the fair market
value thereof, as determined in good faith by the Holders of the Warrants and
the Board of Directors of the Company, unless the Company shall become subject
to a merger, acquisition, or other consolidation pursuant to which the Company
is not the surviving entity, in which case the Market Value of the Common Stock
shall be deemed to be the value received by the Company's common stockholders
pursuant to such merger, acquisition or other consolidation.
2. Exchange, Transfer and Replacement. (a) At any time prior to the
exercise hereof, this Certificate may be exchanged upon presentation and
surrender to the Company, alone or with other Certificates of like tenor of
different denominations registered in the name of the same Holder, for another
Certificate or Certificates of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the Certificate or Certificates
surrendered.
(b) Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant Certificate and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant Certificate, the Company, at its
expense, will execute and deliver in lieu thereof, a new Warrant Certificate of
like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant Certificate in connection with any transfer, exchange or replacement as
provided in this Section 2, this Warrant Certificate shall be promptly canceled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution and delivery of Warrant Certificates pursuant to this
Section 2.
(d) Warrant Register. The Company shall maintain, at its principal
executive offices (or at the offices of the transfer agent for the Warrant
Certificate or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant Certificate (the
"Warrant Register"), in which the Company shall record the name and address of
the person in whose name this Warrant Certificate has been issued, as well as
the name and address of each transferee and each prior owner of this Warrant
Certificate.
3. Rights and Obligations of Holders of this Certificate. The Holder of
this Certificate shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity;
<PAGE>
provided, however, that in the event any certificate representing shares of
Common Stock or other securities is issued to the holder hereof upon exercise of
some or all of the Warrants, such holder shall, for all purposes, be deemed to
have become the holder of record of such Common Stock on the date on which this
Certificate, together with a duly executed Election to Purchase, was surrendered
and payment of the aggregate Exercise Price was made, irrespective of the date
of delivery of such Common Stock certificate.
4. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations, Etc. In
the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock into
a greater number of shares, (iii) combines its outstanding Common Stock into a
smaller number of shares or (iv) increases or decreases the number of shares of
Common Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (2) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Cash Dividends and Other Distributions. In the event that at any
time or from time to time the Company shall distribute to all holders of Common
Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than in each case, (w) the issuance of any rights under
a shareholder rights plan, (x) any dividend or distribution described in Section
4(a), (y) any rights, options, warrants or securities described in Section 4(c)
and (z) any cash dividends or other cash distributions from current or retained
earnings), then the number of shares of Common Stock issuable upon the exercise
of each Warrant Certificate shall be increased to a number determined by
multiplying the number of shares of Common Stock issuable upon the exercise of
such Warrant Certificate immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be such
Current Market Value (as hereinafter defined) per share of Common Stock on the
record date for such dividend or distribution, and the denominator of which
shall be such Current Market Value per share of Common Stock on the record date
for such dividend or distribution less the sum of (x) the amount of cash, if
any, distributed per share of Common Stock and (y) the fair value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be evidenced by a board resolution, a copy of which will be sent to the
Holders upon request) of the portion, if any, of the distribution applicable to
one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other property, warrants, options or subscription or purchase
rights; and the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such record date by the above
fraction. Such adjustments shall be made whenever any distribution is made and
shall become effective as of the date of distribution, retroactive to the record
date for any such distribution. No adjustment shall be made pursuant to this
Section 4(b) which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each Warrant Certificate or increasing
the Exercise Price.
(c) Rights Issue. In the event that at any time or from time to time
the Company shall issue rights, options or warrants entitling the holders
thereof to subscribe for shares of Common Stock, or securities convertible into
or exchangeable or exercisable for Common Stock (other than in connection with
the adoption of a shareholder rights plan by the Company) (collectively, the
"Rights") where the consideration received by the Company for such Rights (equal
to the sum of the lowest amounts of consideration, if any, received or
<PAGE>
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Rights or upon exercise or conversion of the Rights),
entitling such holders to subscribe for or purchase shares of Common Stock at a
price per share that as of the record date for such issuance is less than the
then Current Market Value per share of Common Stock, the number of shares of
Common Stock issuable upon the exercise of each Warrant Certificate shall be
increased to a number determined by multiplying the number of shares of Common
Stock theretofore issuable upon exercise of each Warrant Certificate by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, warrant or
securities plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding on the date of issuance of
such rights, option, warrants or securities plus the total number of shares of
Common Stock which the aggregate consideration received or expected to be
received by the Company (assuming the exercise or conversion of all such rights,
options, warrants or securities) would purchase at the then Current Market Value
per share of Common Stock. In the event of any such adjustment, the Exercise
Price shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be immediately after such rights, options or warrants are
issued and shall become effective (retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities, if applicable). No adjustment shall be made pursuant to this
Section 4(c) which shall have the effect of decreasing the number of shares of
Common Stock purchasable upon exercise or each Warrant Certificate or of
increasing the Exercise Price. In the event any such Rights expire without
exercise, the Exercise Price shall be readjusted to remove the effect of such
Rights.
(d) Combination: Liquidation. (i) Except as provided in Section
4(d)(ii) below, in the event of a Combination (as defined below), each Holder
shall have the right to receive upon exercise of the Warrant Certificates the
kind and amount of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant Certificate been exercised immediately prior to
such event (subject to further adjustment in accordance with the terms hereof).
Unless paragraph (ii) is applicable to a Combination, the Company shall provide
that the surviving or acquiring Person (the "Successor Company") in such
Combination will assume by written instrument the obligations under this Section
4 and the obligations to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to acquire. The provisions of this Section 4(d)(i) shall similarly
apply to successive Combinations involving any Successor Company. "Combination"
means an event in which the Company consolidates with, mergers with or into, or
sells all or substantially all of its assets to another Person, where "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
(ii) In the event of (x) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (y) the dissolution, liquidation or winding-up of the Company, the Holders
shall be entitled to receive, upon surrender of their Warrant Certificates,
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrant Certificates, as if the Warrant
Certificates had been exercised immediately prior to such event, less the
Exercise Price. In case of any Combination described in this Section 4(d)(ii),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with an agent or trustee for the benefit of the Holders the funds, if any,
necessary to pay to the Holders the amounts to which they are entitled as
described above. After such funds and the surrendered Warrant Certificates are
received, the Company is required to deliver a check in such amount as is
appropriate (or, in the case or consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrant Certificates.
(e) Change in Option Price or Conversion Rate. If the purchase price
provided for in any option, the additional consideration (if any) payable upon
the issue, conversion or exchange of any convertible security or the rate at
which any convertible security is
<PAGE>
convertible into or exchangeable for Common Stock changes at any time, the
Exercise Price in effect at the time of such change shall be adjusted
immediately to the Exercise Price which would have been in effect at such time
had such option or convertible security originally provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold. If the terms of any option or
convertible security which was outstanding as of the date hereof are changed in
the manner described in the immediately preceding sentence, then such option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; provided that no such change shall at any time cause the
Exercise Price hereunder to be increased, except that, in the event any such
options or convertible securities expire, the Exercise Price shall be readjusted
to remove the effect of such options or convertible securities.
(f) Notice of Adjustment. Whenever the Exercise Price or the number
of shares of Common Stock and other property, if any, issuable upon exercise of
the Warrant Certificates is adjusted, as herein provided, the Company shall
deliver to the holders of the Warrant Certificates in accordance with Section 10
a certificate of the Company's Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board of Directors determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the common
Stock was determined, if either of such determinations were required), and
specifying the Exercise Price and number of shares of Common Stock issuable upon
exercise of Warrant Certificates after giving effect to such adjustment.
(g) Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) to offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) to effect any capital reorganization,
reclassification, consolidation or merger affecting the class of Common Stock,
as a whole, or (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, the Company shall, within the time
limits specified below, send to each Holder a notice of such proposed action or
offer. Such notice shall be mailed to the Holders at their addresses as they
appear in the Warrant Register (as defined in Section 2(d)), which shall specify
the record date for the purposes of such dividend, distribution or rights, or
the date such issuance or event is to take place and the date of participation
therein by the holders of Common Stock, if any such date is to be fixed, and
shall briefly indicate the effect of such action on the Common Stock and on the
number and kind of any other shares of stock and on other property, if any, and
the number of shares of Common Stock and other property, if any, issuable upon
exercise of each Warrant Certificate and the Exercise Price after giving effect
to any adjustment pursuant to Section 4 which will be required as a result of
such action. Such notice shall be given as promptly as possible and (x) in the
case of any action covered by clause (a) or (b) above, at least 10 days prior to
the record date for determining holders of the Common Stock for purposes of such
action or (y) in the case of any other such action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the earlier.
(h) Current Market Value. As used in this Section 4, "Current Market
Value" per share of Common Stock or any other security at any date means (i) if
the security is not registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the value of the security, determined in good
faith by the Holders of the Warrants and the Board of Directors of the Company
and certified in a board resolution, or (ii) if the security is registered under
the Exchange Act, the average of the daily closing bid prices (or the equivalent
in an over-the-counter market) for each day on which the Common Stock is traded
for any period on the principal securities exchange or other securities market
on which the common Stock is being traded (each, a "Trading Day") during the
period commencing ten (10)
<PAGE>
Trading Days before such date and ending on the date one day prior to such date,
or if the security has been registered under the Exchange Act for less than ten
(10) consecutive Trading Days before such date, the average of the daily closing
bid prices (or such equivalent) for all of the Trading Days before such date for
which daily closing bid prices are available; provided, however, that if the
closing bid price is not determinable for at least five (5) Trading Days in such
period, the "Current Market Value" of the security shall be determined as if the
security were not registered under the Exchange Act.
(i) Other Adjustments. If the event of any other transaction of the
type contemplated by this Section 4, but not expressly provided for by the
provisions hereof, the Board of Directors of the Company will make appropriate
adjustment in the Exercise Price so as to equitably protect the rights of the
Holder.
(j) No Impairment of Holder's Rights. The Company will not, by
amendment of its certificate of incorporation or bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant Certificate, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all action as may be necessary or appropriate in order to
protect the rights of the Holder against dilution or other impairment.
5. Company's Representations.
(a) The Company covenants and agrees that all shares of Common Stock
issuable upon exercise of this Warrant Certificate will, upon delivery, be duly
and validly authorized and issued, fully-paid and non-assessable and free from
all taxes, liens, claims and encumbrances.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of all
outstanding options, warrants and rights, including this Warrant Certificate.
(c) The Company shall promptly secure the listing of the Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant Certificate) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant Certificate; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
company issuable upon the exercise of this Warrant Certificate if and so long as
any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) The Company has taken all necessary action and proceedings as
required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the principal market on which the Common
Stock is traded, for the legal and valid issuance of this Warrant Certificate to
the Holder under this Warrant Certificate.
(e) The Shares, when issued in accordance with the terms hereof,
will be duly authorized and, when paid for or issued in accordance with the
terms hereof, shall be validly issued, fully paid and non-assessable. The
Company has authorized and reserved for issuance to Warrant Holder the requisite
number of shares of Common Stock to be issued pursuant to this Warrant.
(f) With a view to making available to Holder the benefits of Rule
144 promulgated under the Act and any other rule or regulation of the Securities
and Exchange Commission ("SEC") that may at any time permit Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all
<PAGE>
reports and other documents required of the Company under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(iii) furnish to any Holder forthwith upon request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 and of the Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested to permit any such Holder to
take advantage of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
6. Registration Rights. The Holder is entitled to the benefit of such
registration rights in respect of the Shares as are set forth in the
Registration Rights Agreement dated as of December 22, 1997 by and between the
Company and the Holder.
7. Fractional Shares; Legends. (a) In lieu of issuance of a fractional
share upon any exercise hereunder, the Company will pay the cash value of that
fractional share, calculated on the basis of the Exercise Price. (b) Prior to
registration of the shares of Common Stock underlying this Warrant Certificate,
all such certificates shall bear a restrictive legend to the effect that the
Shares represented by such certificate have not been registered under the 1933
Act, and that the Shares may not be sold or transferred in the absence of such
registration or an exemption therefrom, such legend to be substantially in the
form of the bold-face language appearing at the top of Page 1 of this Warrant
Certificate.
8. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation of the provisions of the 1933 Act.
Furthermore, it shall be a condition to the transfer of the Warrants that any
transferee thereof deliver to the Company his or its written agreement to accept
and be bound by all of the terms and conditions contained in this Warrant
Certificate.
9. Merger or Consolidation. The Company will not merge or consolidate with
or into any other corporation, or sell or otherwise transfer its property,
assets and business substantially as an entirety to another corporation, unless
the corporation resulting from such merger or consolidation (if not the
Company), or such transferee corporation, as the case may be, shall expressly
assume, by supplemental agreement reasonably satisfactory in form and substance
to the Holder, the due and punctual performance and observance of each and every
covenant and condition of this Warrant Certificate to be performed and observed
by the Company.
10. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery. Any such notice shall be deemed to have been
given (a) on the second business day immediately following the mailing thereof,
if mailed by certified or registered U.S. mail as specified above; (b) on the
business day immediately following deposit with a private overnight delivery
service if sent by said service; (c) upon receipt of confirmation of
transmission if sent by facsimile transmission; or (d) upon personal delivery of
the notice. All such notices shall be sent to the following addresses (or to
such other address or addresses as a party may have advised the other in the
manner provided in this Section 9):
If to the Company:
Cel-Sci Corporation
66 Canal Center Plaza, Suite 510
Alexandria, VA 22314
Attention: Mr. Geert R. Kersten
Telephone: (703) 549-5293
Facsimile: (703) 549-6269
<PAGE>
If to the Holder:
[INVESTOR]
[INVESTOR ADDRESS]
Attention:
Telephone:
Facsimile:
With a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Attention: General Counsel
Fax: (415) 332-7808
Tel: (415) 332-7800
Notwithstanding the time of effectiveness of notices set forth in this Section,
an Election to Purchase shall not be deemed effectively given until it has been
duly completed and submitted to the Company together with the original Warrant
Certificate to be exercised and payment of the Exercise Price in a manner set
forth in this Section.
11. Governing Law: Jurisdiction. This Certificate shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts and
state courts located in the County of New York in the State of New York in any
suit or proceeding based on or arising under this Certificate or the
transactions contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
and each Purchaser irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding in such forum. The Company and each
Purchaser further agrees that service of process upon the Company or such
Purchaser, as applicable, mailed by the first class mail in accordance with
Section 10 shall be deemed in every respect effective service of process upon
the Company or such Purchaser in any suit or proceeding arising hereunder.
Nothing herein shall affect Purchaser's right to serve process in any other
manner permitted by law. The parties hereto agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
The parties hereto irrevocably waive the right to trial by jury under applicable
law.
12. Successors and Assigns. This Warrant Certificate shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
13. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not affect the meaning or
construction of any of the provisions hereof.
14. Severability. If any provision of this Warrant Certificate is held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
<PAGE>
15. Modification and Waiver. This Warrant Certificate and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
16. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, this Warrant Certificate may not be exercised by the Holder to
the extent that, after giving effect to Certificate Shares to be issued pursuant
to an Election to Purchase, the total number of shares of Common Stock deemed
beneficially owned by such Holder (other than by virtue of ownership of this
Warrant Certificate, or ownership of other securities that have restrictions on
the Holder's rights to convert or exercise similar to the limitations set forth
herein), together with all shares of Common Stock deemed beneficially owned by
the Holder's "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934 exists, would exceed 4.9% of the total
issued and outstanding shares of the Common Stock; provided that the Holder may
waive the limitation of this Section 16 (i) upon 61 days prior written notice or
(ii) immediately upon a merger in which the Company does not survive, the sale
of all or substantially all of the Company's assets, the failure of the
Company's current stockholders to any longer hold more than 50% of the Company's
voting securities, or any similar change in control transaction. The delivery of
an Election to Purchase by the Holder shall be deemed a representation by such
Holder that it is in compliance with this paragraph. The term "deemed
beneficially owned" as used in this Warrant Certificate shall exclude shares
that might otherwise be deemed beneficially owned by reason of the exercise of
this Warrant Certificate.
17. Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant Certificate were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Warrant Certificate and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which
either of them may be entitled by law or equity.
18. Assignment. This Warrant Certificate may be transferred or assigned,
in whole or in part, at any time and from time to time by the then Holder by
submitting this Warrant to the Company together with a duly executed Assignment
in substantially the form and substance of the Form of Assignment which
accompanies this Warrant Certificate and, upon the Company's receipt hereof, and
in any event, within three (3) business days thereafter, the Company shall issue
a Warrant Certificate to the Holder to evidence that portion of this Warrant
Certificate, if any as shall not have been so transferred or assigned.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
CEL-SCI CORPORATION
Date:_________________ By:_________________________________
Geert R. Kersten
Chief Executive Officer
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the Warrants
represented by the attached Common Stock Purchase Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for securities be issued in the name of:
----------------------------------------------------------
(Please type or print name and address)
==========================================================
----------------------------------------------------------
(Social Security or Tax Identification Number)
and delivered
to:______________________________________________________________
- -----------------------------------------------------------------------------
.
(Please type or print name and address if different from
above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ by certified check, money order or wire transfer payable in United
States currency to the order of Cel-Sci Corporation.] or [The undersigned elects
cashless exercise in accordance with Section 1(b) of the Common Stock Purchase
Warrant Certificate and such election has been agreed to by the Company.]
HOLDER:
Dated:___________________
By:_____________________________________
Name:
Title:
Address:
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of Cel-Sci Corporation, a Colorado corporation, to which
the within Warrant relates, and appoints ____________________ Attorney to
transfer such right on the books of Cel-Sci Corporation, a Colorado Corporation,
with full power of substitution of premises.
Dated: By:
Name:
Title:
(signature must conform to name of holder
as specified on the fact of the Warrant)
Address:
Signed in the presence of :
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of December 22, 1997, (the
"Agreement"), is made by and between CEL-SCI CORPORATION, a Colorado
corporation, 66 Canal Center Plaza, Suite 510, Alexandria, Virginia 22314 (the
"Company"), and the undersigned investors (the "Initial Investors").
W I T N E S S E T H :
WHEREAS, in connection with the Securities Purchase Agreement dated
December 22, 1997 among the Initial Investors and the Company (the "Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of said Purchase Agreement, to issue and sell to the Initial
Investors Ten Thousand (10,000) shares of Series D Convertible Preferred Stock
(the "Preferred Shares") of the Company, convertible into shares of common stock
of the Company par value $0.01 per share (the "Common Stock"), together with
Warrants to purchase additional shares of Common Stock. The shares of Common
Stock into which the Preferred Shares are convertible and the shares of Common
Stock into which the Warrants are exercisable are collectively referred to
herein as the "Registrable Shares." In connection with the sale of the
Registrable Shares to the Initial Investors (the "Offering"), each of such
investors will be entitled to registration rights as set forth in this
Agreement.
WHEREAS, to induce the Initial Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Registrable Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Holders" are stockholders of the Company who, by virtue of
agreements with the Company, are entitled to include their securities in certain
Registration Statements filed by the Company.
(b) "Investors" means the Initial Investors and any transferee or
assignee of the Initial Investors who agree to become bound by the provisions of
this Agreement in accordance with Section 9 hereof.
(c) "Registrable Securities" means the Registrable Shares, together
with any shares of Common Stock or other securities which may be issued as a
dividend or other distribution or in exchange for Registrable Shares and any
additional shares of Common Stock or other securities which may be issued due to
anti-dilution adjustments with respect to the Registrable Shares, which are
required to be included in a Registration Statement pursuant to Section 2(a)
below.
(d) "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the Registrable
Securities (including all shares of Common Stock into which the Warrants are
exercisable) have been sold in transactions where the transferee is not subject
to securities law resale restrictions (or is subject to securities law resale
restrictions solely because it is an "affiliate" of the Company under the
Securities Act and the Rules promulgated thereunder), or (ii) the date on which
the Registrable Securities (in the opinion of Investors' counsel) may be
immediately sold without registration and free of restrictions on transfer under
Rule 144k or otherwise.
<PAGE>
(e) "Registration Statement" means a registration statement of the
Company filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act.
(f) The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act and applicable rules and regulations
thereunder and pursuant to Rule 415 under the Securities Act, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
(g) "AMEX Limit" means 2,243,782 shares of Common Stock, unless the
Company has obtained shareholder approval to issue a greater number of common
shares or has otherwise received a waiver from AMEX to such effect. If the
Company has obtained such shareholder approval or waiver, then the limit shall
not apply.
2. Registration.
(a) Mandatory Registration. The Company will prepare and file a
Registration Statement on Form S-3 with the SEC, registering all of the
Registrable Securities for resale promptly following the closing of the purchase
of the Preferred Shares and the Warrants (the "Closing Date") and in any event,
not later than twenty five (25) days after the Closing Date. To the extent
allowable under the Securities Act and the Rules promulgated thereunder, the
Registration Statement shall include the Registrable Securities and such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares and exercise of the Warrants (i) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions, or (ii) by reason of changes in the exercise price of the Warrants
in accordance with the terms thereof or the conversion price of the Preferred
Shares. The number of shares of Common Stock initially included in such
Registration Statement shall include no less than 125% of the number of
Registrable Securities that are issued on the Closing Date and issuable upon
exercise of the Warrants as of the Closing Date. The Registration Statement (and
each amendment or supplement thereto) shall be provided to, and subject to the
reasonable approval of, the Initial Investors and their counsel. The Company
shall use its best efforts to cause such Registration Statement to be declared
effective by the SEC as soon as practicable after filing and in any event no
later than sixty (60) days after the Closing Date or, if the Company is notified
by the SEC that the Registration Statement will be reviewed, one hundred twenty
(120) days after the Closing Date (either such date, as applicable, the
"Required Effective Date"). Such best efforts shall include, but not be limited
to, promptly responding to all comments received from the staff of the SEC.
Should the Company receive notification from the SEC that the Registration
Statement will receive no action or no review from the SEC, the Company shall
cause such Registration Statement to become effective within five (5) business
days of such SEC notification. Once declared effective by the SEC, the Company
shall cause such Registration Statement to remain effective throughout the
Registration Period.
(b) Piggyback Registrations. If, at any time prior to the expiration
of the Registration Period, the Company decides to register any of its
securities for its own account or for the account of others (excluding
registrations relating to equity securities to be issued solely in connection
with an acquisition of any entity or business or in connection with stock option
or other employee benefit plans), the Company will promptly give the Investors
written notice thereof, and will use its best efforts to include in such
registration all or any part of the Registrable Securities so requested by such
Investors (excluding any Registrable Securities previously included in a
Registration Statement). Each Investor's request for registration must be given
to the Company in writing within ten (10) days after receipt of the notice from
the Company. If the registration for which the Company gives notice is a public
offering involving an underwriting, the Company will so advise the Investors as
part of the above-described written notice. In such event, if the managing
underwriter(s) of the public offering impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation would be necessary to
effect an orderly public distribution, then the Company will be obligated to
include only such limited portion, if any, of the Registrable Securities with
respect to which such Investors have requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro-rata among all Holders of
the Company's securities seeking to include shares of Common Stock in proportion
to the number of shares of Common Stock sought to be included by such Holders;
provided, however, that the Company will not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities the Holders of
which are not entitled by right to inclusion of securities in such Registration
Statement.
<PAGE>
No right to registration of Registrable Securities under this Section 2(b) shall
be construed to limit in any way the registration required under Section 2(a)
above. The obligations of the Company under this Section 2(b) will expire upon
the earlier of: (i) the effectiveness of the Registration Statement filed
pursuant to Section 2(a) above; (ii) after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(b) for two registrations; provided, however, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(b) shall be entitled to include in any additional
Registration Statement filed by the Company the Registrable Securities so
excluded; or (iii) when all of the Registrable Securities held by any Investor
may be sold by such Investor under Rule 144 under the 1933 Act without being
subject to any volume restrictions.
(c) Late Registration Payments. If the Registration Statement
required pursuant to Section 2(a) above has not been declared effective by the
Required Effective Date, or if after the Registration Statement has been
declared effective by the SEC sales cannot be made pursuant to the Registration
Statement (whether because of failure to keep effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, to register sufficient shares, subject to the AMEX limit, or
otherwise) the Company will make cash payments to the Investor as partial
compensation for such delay (the "Late Registration Payments"). The Late
Registration Payments will be equal to one percent (1%) of the purchase price
paid for the Common Shares for the first month following the Required Effective
Date, two percent (2%) of the purchase price paid for the Common Shares for the
second month, and three percent (3%) of said purchase price for each month
thereafter, continuing through the date the Registration Statement is declared
effective by the SEC. The Late Registration Payments will be prorated on a daily
basis for partial months and will be paid to the Initial Investors in cash
within five (5) business days following the earlier of: (i) the end of each
month following the Required Effective Date, or (ii) the effective date of the
Registration Statement. Nothing herein shall limit the Investor's right to
pursue actual damages for the Company's failure to file a Registration Statement
or to have it declared effective by the SEC on or prior to the Required
Effective Date in accordance with the terms of this Agreement.
(d) Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors of the Registrable Securities, and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain such eligibility for the use of Form S-3.
3. Additional Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall have the following
additional obligations:
(a) The Company shall keep the Registration Statement required by
Section 2(a) hereof effective pursuant to Rule 415 under the Securities Act at
all times during the Registration Period as defined in Section 1(d) above.
(b) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) filed by the Company
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, shall comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the sellers thereof as set forth in the
Registration Statement. In the event the number of shares of Common Stock
included in a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities, the Company shall
amend, if permissible, the Registration Statement and/or file a new Registration
Statement so as to cover all of the Registrable Securities as soon as
practicable, but in no event more than twenty (20) business days after the
Company first determines (or reasonably should have determined) the need
therefor. The Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. The Late Registration Payment provisions of Section 2(c)
above shall become applicable with respect to the effectiveness
<PAGE>
of such amendment and/or new Registration Statement, only with respect to the
shares to be included in such amendment and/or Registration Statement and only
to the extent of the AMEX Limit, on the thirtieth (30th) day following the date
the Company first determines (or reasonably should have determined) the need for
the amendment and/or new Registration Statement.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto; each
preliminary prospectus and final prospectus and each amendment or supplement
thereto; and, in the case of the Registration Statement required under Section
2(a) above, each letter written by or on behalf of the Company to the SEC and
each item of correspondence from the SEC, in each case relating to such
Registration Statement (other than any portion of any item thereof which
contains information for which the Company has sought confidential treatment);
and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto, and such other documents
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as the Investors
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations as
may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions.
Notwithstanding the foregoing provision, the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) subject itself to general taxation in any such
jurisdiction, (iii) file a general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that cause more than nominal expense
or burden to the Company, or (v) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
(e) In the event Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for such
offering, the Company shall enter into and perform its obligations under an
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering. The Investors participating in any such
underwriting shall be responsible for payment of the fees of such underwriters
and the attorney fees and costs incurred by one law firm selected by such
Investors to represent their interests in the underwritten offering. No Investor
shall be obligated to participate in any such underwriting. In the event the
Investors select underwriters for the Offering, the Company shall not be
responsible for any delays in the filing or effectiveness of the Registration
Statement caused by such underwriters (including the payment of any amounts with
respect to such late filing or effectiveness).
(f) The Company shall notify each Investor who holds Registrable
Securities being sold pursuant to a Registration Statement of the happening of
any event of which the Company has knowledge as a result of which the prospectus
included in the Registration Statement as then in effect includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (a "Suspension Event").
The Company shall make such notification as promptly as practicable after the
Company becomes aware of such Suspension Event, shall promptly, but in all
events within five (5) business days, use its best efforts to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and shall deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request.
Notwithstanding the foregoing provision, the Company shall not be required to
maintain the effectiveness of the Registration Statement or to amend or
supplement the Registration Statement for a period (a "Delay Period") expiring
upon the earlier to occur of (i) the date on which such material information is
disclosed to the public or ceases to be material, (ii) the date on which the
Company is able to comply with its disclosure obligations and SEC requirements
related thereto, or (iii) thirty (30) days after the occurrence of the
Suspension Event; provided, however,
<PAGE>
that there shall not be more than two Delay Periods in any twelve (12) month
period. In the event that the aggregate number of days in all Delay Period(s)
taken together within a twelve-month period exceeds forty-five (45) days, or in
the event that there are more than two Delay Periods in any twelve-month period,
regardless of duration, the Company shall compensate the Investors for such
delay by making monthly cash payments, prorated on a daily basis, to each such
Investor of one percent (1%) of the purchase price paid for the Registrable
Shares still held by such Investor at such time for the first month of a
Suspension Event, two percent (2%) of the purchase price paid for the
Registrable Shares held by such Investor for the second month, and three percent
(3%) of said purchase price for each month thereafter, continuing through the
date the Delay Period ceases (the "Delay Compensation"). The Delay Compensation
will begin to accrue on the thirty-first (31st) day falling within one or more
Suspension Events in any twelve-month period (or on the first day of any Delay
Period in excess of the first two Delay Periods) and will be payable thirty days
from that date and each thirty days thereafter until the Registration Statement
is brought effective. Notwithstanding the foregoing, no Delay Compensation will
be due if any Delay Period is a result of actions taken or information provided
by an Investor or the review of any Registration Statement or prospectus by any
attorneys or inspectors representing an Investor.
(g) The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement and, if such an order is issued, shall use its best efforts to obtain
the withdrawal of such order at the earliest possible time and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
(h) The Company shall permit a single firm of counsel designated by
the Investors who hold a majority in interest of the Registrable Securities
being sold pursuant to such registration to review the Registration Statement
and all amendments and supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable period of time prior to
their filing with the SEC, and shall not file any document in a form to which
such counsel reasonably objects. The Investors shall be responsible for payment
of the fees of such counsel.
(i) The Company shall make generally available to its security
Holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in a form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter following the effective date of the Registration Statement.
(j) At the request of any Investor who holds Registrable Securities
being sold pursuant to such registration, the Company shall furnish on the date
that Registrable Securities are delivered to an underwriter for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the Investors; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and Investors.
(k) The Company shall make available for inspection by any Investor
whose Registrable Securities are being sold pursuant to such registration, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction, or such release is reasonably necessary in connection with
litigation or other legal process or (iii) the information in such Records has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company shall not be required to
disclose any confidential information in such Records to any Inspector until and
<PAGE>
unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. Nothing herein shall be
deemed to limit the Investor's ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.
(l) The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant hereto unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or such release is reasonably necessary in connection with
litigation or other legal process or (iv) such information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor and allow such Investor, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(m) The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by the Registration Statement, subject to the
AMEX Limit to be listed on NASDAQ, the AMEX or NYSE and on each additional
national securities exchange on which similar securities issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation of all
the Registrable Securities covered by the Registration Statement, subject to the
AMEX Limit, as a National Association of Securities Dealers Automated Quotations
System ("Nasdaq") "national market system security" within the meaning of Rule
11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or a Nasdaq Small Cap security, and the quotation of the
Registrable Securities on such Nasdaq system.
(n) The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(o) The Company shall cooperate with the Investors who hold
Registrable Securities being sold and the managing underwriter or underwriters,
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be sold
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts as the case may be, and registered in such names
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request; and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) instructions to the transfer agent to issue new stock certificates
without a legend and an opinion of such counsel that the Registrable Shares have
been registered.
(p) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
(q) At the request of any Investor, the Company shall promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement to
conform to written information supplied to the Company by such Investor for such
purpose.
<PAGE>
(r) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith.
(s) From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
(other than the holders of the Registrable Securities) to include any of their
securities in any Registration Statement or any amendment or supplement thereto
under Section 2 hereof without the consent of the holders of a majority of the
Registrable Securities. The execution of this Agreement by the Initial Investors
shall constitute the consent of such holders to the inclusion of approximately
Two Hundred Thousand (200,000) shares in the Registration Statement to be filed
pursuant to Section 2(a) hereof.
4.....Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the number of Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required by rules of the SEC to effect the registration of the
Registrable Securities (the "Requested Information"). The information so
provided by the Investor shall be included without material alteration in the
Registration Statement and shall not be modified without such Investor's written
consent. At least ten (10) business days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor that
it must deliver the Requested Information if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration Statement.
The Closing of the Offering is deemed to be notice with respect to the
information regarding each Investor required by the Company to enable it to
comply with Section 2(a) of this Agreement. If within five (5) business days of
such notice the Company has not received the Requested Information from an
Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the applicable Registration Statement. No Investor
shall be obligated to participate in any such underwriting.
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies, other than file copies, in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of
<PAGE>
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and other
fees and expenses of investment bankers and any manager or managers of such
underwriting and legal expenses of the underwriter applicable with respect to
its Registrable Securities, in each case to the extent not payable by the
Company pursuant to the terms of this Agreement.
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3 or the fees of counsel pursuant to
Section 3(e) hereof, but including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, officers, employees, representatives or agents, if any, of such
Investor, each person, if any, who controls any Investor within the meaning of
the Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, settlements, fines, penalties, judgments, expenses (including attorneys
fees) or liabilities (joint or several) (collectively "Claims") to which any of
them become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or in any
filings made in connection with the qualification of the Offering under the
securities or "blue sky" laws of any jurisdiction in which the Registrable
Securities are offered or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any state securities law or any rule
or regulation (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (A) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (B) with respect to any preliminary prospectus shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if a prospectus was timely
made available by the Company pursuant to Section 3(c) hereof; and (C) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Persons
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor, severally and not jointly,
<PAGE>
agrees to indemnify and hold harmless, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the Securities
Act or the Exchange Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement, and such
Investor will promptly reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof and this indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable. The provisions of this Section 6 shall survive the
termination of this Agreement.
7. Contribution. If the indemnification provided for in Section 6 herein
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Investor on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Investor in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Investor on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Investor.
<PAGE>
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Investors or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Investor or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Investor, the net proceeds received by such Investor from the sale
of Registrable Securities or (ii) in the case of an underwriter, the total price
at which the Registrable Securities purchased by it and distributed to the
public were offered to the public exceeds, in any such case, the amount of any
damages that such Investor or underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act ) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Exchange Act
so long as the Company remains subject to such requirements and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) Furnish to each Investor so long as such Investor holds
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all or
any portion of such securities or Warrants exercisable into Registrable
Securities only if (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws, (iv) at or before the time
the Company received the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and each Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
<PAGE>
11. Third Party Beneficiary. The parties acknowledge and agree that
Shoreline Pacific Institutional Finance, the Institutional Division of Financial
West Group ("Shoreline"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement, and to
indemnification for any damages resulting to Shoreline from any actual or
threatened breach thereof by the Company, both in Shoreline's personal capacity
and, should Shoreline so elect, and provided that Shoreline has obtained the
prior written consent of the Investor, on behalf of the Investor.
12. Miscellaneous.
(a) Conflicting Instructions. A person or entity is deemed to be a
holder of Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (with
return receipt requested) or delivered personally or by courier (including a
nationally recognized overnight delivery service) or by facsimile transmission.
Any notice so given shall be deemed effective upon receipt if delivered
personally, by U.S. Mail or by courier or facsimile transmission, in each case
addressed to a party at the following address or such other address as each such
party furnishes to the other in accordance with this Section 12(b), and:
If to the Company:
Cel-Sci Corporation
66 Canal Center Plaza, Suite 510
Alexandria, VA 22314
Facsimile: (703) 549-6269
Attention: Mr. Geert R. Kersten
with copy to:
Hart & Trinen
1624 Washington Street
Denver, CO 80203
Facsimile: (303) 839-5414
Attention: Mr. Bill Hart, Esq.
If to Nelson Partners:
Nelson Partners
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM 12
Bermuda
Telecopy: (441) 292-2239
Attention: Ms. Anne Dupuy
with a copy to:
Citadel Investment Group, LLC
225 West Washington Street
9th Floor
Chicago, IL 60606
Telecopy: (312) 368-1347
Attention: Mr. Michael J. Hughes and Mr. Kenneth C. Griffin
<PAGE>
and with a copy to:
Katten, Muchin, & Zavis
525 West Monroe Street
Suite 1700
Chicago, IL 60661-3693
Telecopy: (312) 902-1061
Attention: Mr. Steven G. Martin, Esq.
If to Olympus Securities, Ltd.:
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton HM 12
Bermuda
Telecopy: (441) 292-2239
Attention: Ms. Anne Dupuy
with a copy to:
Citadel Investment Group, LLC
225 West Washington Street
9th Floor
Chicago, IL 60606
Telecopy: (312) 368-1347
Attention: Mr. Michael J. Hughes and Mr. Kenneth C. Griffin
and with a copy to:
Katten, Muchin, & Zavis
525 West Monroe Street
Suite 1700
Chicago, IL 60661-3693
Telecopy: (312) 902-1061
Attention: Mr. Steven G. Martin, Esq.
If to KA Investments LDC:
KA Investments LDC
c/o Tarmachan Capital
1712 Hopkins Crossroads
Minnetonka, MN 55305
Telecopy: (612) 542-4253
Attention: Ms. Ivana Bozjack
with a copy to:
Robinson Silverman Pearce Aronsohn Berman LLP
1150 Avenue Of The Americas
@ 51st Street
New York, NY 10104
Telecopy: (212) 541-1432
Attention: Mr. Eric Louis Cohen, Esq.
<PAGE>
If to the following Purchasers:
Leonardo, L.P.
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Telecopy: (212) 692-6395
Attention: Mr. Gary Wolf
GAM Arbitrage Investments, Inc.
11 Athol Street
Douglas, Isle of Man
British Isles, British Virgin Islands
Attention: Mr. Michael L. Gordon
AG Super Fund International Partners, L.P.
Abbott Building
PO Box 3186
Road Town, Tortola
British Virgin Islands
Attention: Mr. Michael L. Gordon
Raphael, L.P.
c/o Raphael Capital Management Limited
Abott Building
PO Box 3186 Main Street
Road Town, Tortola
British Virgin Islands
Attention: Mr. Michael L. Gordon
Ramius Fund, Ltd.:
c/o Bank of Bermuda Building
6 Front Street
PO Box HM 1020
Hamilton, Bermuda HMDX
Attention: Michael L. Gordon
Baldwin Enterprises, Inc.
529 East South Temple
Salt Lake City, Utah 84102
Attention: Michael L. Gordon
and a copy to:
Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Telecopy: (212) 867-6395
Attention: Mr. Gary Wolf
<PAGE>
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Attention: General Counsel
Telephone: (415) 332-7800
Facsimile: (415) 332-7808
(c) Waiver. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed in the State of New York. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts and
state courts located in the County of New York in the State of New York in any
suit or proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts. The Company and each
Investor irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in such forum. The Company and each
Investor further agrees that service of process upon the Company or such
Investor, as applicable, in accordance with Section 12(b) shall be deemed in
every respect effective service of process upon the Company or such Investor in
any suit or proceeding arising hereunder. Nothing herein contained shall affect
Investor's right to serve process in any other manner permitted by law. The
parties hereto agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
The Company and each Investor hereby waive any and all rights to a jury trial of
any claim or cause of action based upon arising out of this Agreement or the
other related agreements and documents or any dealings among them relating to
the subject matter hereof and the relationship that is being established. The
scope of this waiver is intended to encompass any and all disputes that may be
filed in any court and that relate to the subject matter of this Agreement,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The parties acknowledge
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on the waiver and that each will continue to rely
on the waiver in their related future dealings. The Company and each Investor
hereby warrants and represents that it has reviewed this waiver with its legal
counsel, and that it knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. This waiver is irrevocable, meaning
that it shall apply to any subsequent amendments, renewals, supplements or
modifications to this Agreement or to any other related documents or agreements.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
(e) Severability. In the event that any provision of this Agreement
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(f) Entire Agreement. This Agreement and the Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof.
(g) Successors and Assigns. Subject to the requirements of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(h) Use of Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
<PAGE>
(i) Headings. The headings and subheadings in the Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission, and
facsimile signatures shall be binding on the parties hereto.
(k) Further Acts. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Remedies. No provision of this Agreement providing for any
remedy to a Investor shall limit any remedy which would otherwise be available
to such Investor at law or in equity. Nothing in this Agreement shall limit any
rights a Investor may have with any applicable federal or state securities laws
with respect to the investment contemplated hereby. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
a Investor. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Agreement, that a Investor shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate compliance, without the necessity of showing economic loss and without
any bond or other security being required.
(m) Consents. Except as otherwise set forth herein, all consents and
other determinations to be made by the Investors pursuant to this Agreement
shall be made by Investors holding 66 2/3% of the Registrable Securities,
determined as if all Warrants then outstanding had been exercised for
Registrable Securities.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
COMPANY:
CEL-SCI CORPORATION:
By:
Geert R. Kersten
Chief Executive Officer
NELSON PARTNERS
By:
Name: Anne Dupuy
Title: Officer
<PAGE>
OLYMPUS SECURITIES, LTD.
By:
Name: Anne Dupuy
Title: Officer
KA INVESTMENTS LDC.
By:
Name:
Title: Secretary
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
<PAGE>
RAPHAEL, L.P.
By:
Name: Michael L. Gordon
Title: Chief Operating Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Managing Officer
BALDWIN ENTERPRISES, INC.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
Name: Michael L. Gordon
Title: Managing Officer
AGR HALIFAX FUND, LTD
By:
Name: Morgan Stark
Title: Managing Officer, AG Ramius Partners LLC
