As filed with the Securities and Exchange Commission on January __, 2000.
Registration No 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement
Under
THE SECURITIES ACT OF 1933
CEL-SCI Corporation
(Exact name of registrant as specified in charter)
Colorado
(State or other jurisdiction of incorporation)
8229 Boone Blvd. #802
Vienna, Virginia 22182
84-09l6344 (703) 506-9460
(IRS Employer I.D. (Address, including zip code, and telephonenumber
Number) including area of principal executive offices)
Geert Kersten
8229 Boone Blvd. #802
Vienna, Virginia 22182
(703) 506-9460
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit(1) Price Fee
- -------------------------------------------------------------------------------
Common stock (2) 1,148,592 $2.45 $2,814,050 $ 744
Common stock (3) 402,007 $2.45 984,918 260
Common stock (4) 1,327,300 $2.45 3,251,885 858
Common stock (5) 25,000 $2.45 61,250 16
------------ ----------- ---------
Total 2,902,899 $7,112,103 $1,878
========= ========== ======
(1) Offering price computed in accordance with Rule 457(c). (2) Shares of common
stock to be sold by the selling shareholders.
(3) Shares of common stock issuable upon the exercise of Series A Warrants. The
Series A Warrants were issued in connection with the sale of CEL-SCI's
common stock to the selling shareholders. Includes additional shares which
may be issued due to potential adjustments to Warrant exercise price.
(4) Shares of common stock issuable upon the exercise of Series B Warrants. The
Series B Warrants were also issued in connection with the sale of CEL-SCI's
common stock to the selling shareholders. Shares registered are based upon a
number which is required by the terms of the Agreement between CEL-SCI and
the selling shareholders.
(5) Shares of common stock issuable upon the exercise of Sales Agent's Warrants.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the exercise of the warrants as a result of any adjustment in the number of
securities issuable by reason of the anti-dilution provisions of the Series A
Warrants, the Series B Warrants and/or the Sales Agent's Warrants.
<PAGE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
CEL-SCI CORPORATION
Common Stock
This prospectus relates to the sale of up to approximately 2,902,899
shares of the common stock of CEL-SCI Corporation ("CEL-SCI") by certain owners
of such shares. The owners of the shares to be sold by means of this prospectus
are sometimes referred to as the selling shareholders.
CEL-SCI will not receive any proceeds from the sale of the shares by
the selling shareholders.
The selling shareholders have advised CEL-SCI that they may from time
to time sell the shares covered by this prospectus on the American Stock
Exchange and in ordinary brokerage transactions, in negotiated transactions or
otherwise, at prevailing market prices at the time of sale or at negotiated
prices. The costs of registering the shares offered by the selling shareholders
are being paid by CEL-SCI. The selling shareholders will pay all other costs of
the sale of the shares offered by them. The selling shareholders may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933 in
connection with the sale of their shares.
The securities offered by this prospectus are speculative and involve a high
degree of risk and should be purchased only by persons who can afford to lose
their entire investment. For a description of certain important factors that
should be considered by prospective investors, see "Risk Factors" beginning on
page ___ of this prospectus.
These Securities Have Not Been Approved or Disapproved by the Securities and
Exchange Commission Nor Has the Commission Passed Upon the Accuracy or Adequacy
of this Prospectus. Any Representation to the Contrary is a Criminal Offense.
CEL-SCI's common stock is traded on the American Stock Exchange. On January
__, 2000 the closing price of CEL-SCI's common stock on the American Stock
Exchange was $_____.
The Date of this prospectus is January ___, 2000
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.
CEL-SCI
CEL-SCI Corporation was formed as a Colorado corporation in 1983. CEL-SCI is
involved in the research and development of certain drugs and vaccines.
CEL-SCI's first, and main, product, MULTIKINE, is being manufactured using
CEL-SCI's proprietary cell culture technologies, is a combination, or
"cocktail", of natural human interleukin-2 ("IL-2") and certain cytokines and
cytokines. MULTIKINE is being tested to determine if it is effective in
improving the immune response of cancer patients. CEL-SCI `s second most
advanced product, HPG-30W, is being tested to determine if it is an effective
vaccine/treatment against the AIDS virus. The third technology CEL-SCI is
developing, LEAPS (Ligand Epitope Antigen Presentation System), is a T-cell
modulation technology which can be used to direct a specific immune response of
persons vaccinated with HGP-30W and to develop potential treatments and/or
vaccines against various diseases. Present target diseases are AIDS, herpes
simplex, malaria, tuberculosis, prostate cancer and breast cancer.
Before human testing can begin with respect to a drug or biological
product, preclinical studies are conducted in laboratory animals to evaluate the
potential efficacy and the safety of a product. Human clinical studies generally
involve a three-phase process. The initial clinical evaluation, Phase I,
consists of administering the product and testing for safe and tolerable dosage
levels. Phase II trials continue the evaluation of safety and determine the
appropriate dosage for the product, identify possible side effects and risks in
a larger group of subjects, and provide preliminary indications of efficacy.
Phase III trials consist of testing for actual clinical efficacy within an
expanded group of patients at geographically dispersed test sites.
The costs associated with the clinical trials relating to CEL-SCI's
technologies, research expenditures and CEL-SCI's administrative expenses have
been funded with the public and private sales of shares of CEL-SCI's common
stock and borrowings from third parties, including affiliates of CEL-SCI.
CEL-SCI does not expect to develop commercial products for several
years, if at all. CEL-SCI has had operating losses since its inception, had an
accumulated deficit of approximately $(52,627,830) at September 30, 1999, and
expects to incur substantial losses for the foreseeable future.
CEL-SCI's executive offices are located at 8229 Boone Blvd., #802, Vienna,
Virginia 22182, and its telephone number is (703) 506-9460.
<PAGE>
THE OFFERING
Securities Offered:
The prospectus relates to the sale of up to 2,902,899 shares of the
common stock of CEL-SCI by certain owners of such shares. The owners of the
shares to be sold by means of this prospectus are sometimes referred to as the
selling shareholders.
Common stock Outstanding As of December 31,1999, CEL-SCI had 18,027,982 shares
of common stock issued and outstanding. The number of
outstanding shares does not give effect to shares
which may be issued upon the exercise and/or
conversion of options, warrants or other convertible
securities held by the selling shareholders or other
persons. See "Comparative Share Data".
Risk Factors: The purchase of the securities offered by this
prospectus involves a high degree of risk. Risk factors
include the lack of revenues and history of loss, need
for additional capital and need for FDA approval. See
the "Risk Factors" section of this prospectus for
additional Risk Factors.
AMEX Symbol: HIV
Summary Financial Data
Years Ended September 30,
1999 1998 1997
Investment Income and
Other Revenues $ 469,518 $ 792,994 $ 438,145
Expenses:
Research and Development 4,461,051 3,833,854 6,011,670
Depreciation and Amortization 268,210 295,331 313,547
General and Administrative 3,230,982 3,106,492 2,302,386
----------- ------------ ------------
Net Loss $(7,490,725) $(6,442,683) $(8,189,458)
============ ============ ===========
Accretion of Preferred Stock -- 1,980,000 1,062,482
Preferred Stock Dividends -- -- 108,957
------------ ------------ -------
Net Loss attributable to
common stock holders $(7,490,725) $(8,422,683) $(9,360,897)
============ ============ ============
Loss per common share (basic)$ (0.52) $ (0.74) $ (1.00)
<PAGE>
============ ============ ============
Loss per common share (diluted) $ (0.52) $ (0.74) $ (1.00)
============= ============ ============
Weighted average
common shares
outstanding 14,484,352 11,379,437 9,329,419
========== ========== =========
Balance Sheet Data
September 30,
1999 1998
Working Capital $6,152,715 $12,926,014
Total Assets 7,559,772 14,431,813
Current Liabilities 433,265 427,147
Long Term and Other
Liabilities 28,321 29,382
Total Liabilities 461,586 456,529
Shareholders'
Equity 7,098,186 13,975,284
RISK FACTORS
Investors should be aware that this offering involves certain risks,
including those described below, which could adversely affect the value of their
holdings of common stock. CEL-SCI does not make, nor has it authorized any other
person to make, any representation about the future market value of CEL-SCI's
common stock. In addition to the other information contained in this prospectus,
the following factors should be considered carefully in evaluating an investment
in the Shares offered by this prospectus
CEL-SCI Has Earned Only Limited Revenues and Has a History of Losses.
CEL-SCI has had only limited revenues since it was formed in 1983.
Since the date of its formation and through September 30, 1999 CEL-SCI incurred
net losses of approximately $(52,628,000). During the years ended September 30,
1997, 1998 and 1999 CEL-SCI suffered losses of $(8,189,458), $(6,442,683) and
$(7,490,725) respectively. CEL-SCI has relied principally upon the proceeds of
public and private sales of securities to finance its activities to date. All of
CEL-SCI's potential products are in the early stages of development, and any
commercial sale of these products will be many years away. Accordingly, CEL-SCI
expects to incur substantial losses for the foreseeable future.
There can be no assurance CEL-SCI will be profitable. At the present
time, CEL-SCI intends to use available funds to finance CEL-SCI's operations.
Accordingly, while payment of dividends rests within the discretion of the Board
of Directors, no common stock dividends have been declared or paid by CEL-SCI.
CEL-SCI does not presently intend to pay dividends on its common stock and there
can be no assurance that common stock dividends will ever be paid.
<PAGE>
CEL-SCI Needs Additional Capital to Finance Its Operations.
Clinical and other studies necessary to obtain approval of a new drug
can be time consuming and costly, especially in the United States, but also in
foreign countries. The different steps necessary to obtain regulatory approval,
especially that of the Food and Drug Administration ("FDA"), involve significant
costs and may require several years to complete. CEL-SCI expects that it will
need additional financing over an extended period of time in order to fund the
costs of future clinical trials, related research, and general and
administrative expenses. CEL-SCI may be forced to delay or postpone development
and research expenditures if CEL-SCI is unable to secure adequate sources of
funds. These delays in development may have an adverse effect on CEL-SCI's
ability to produce a timely and competitive product. There can be no assurance
that CEL-SCI will be able to obtain additional funding from other sources.
If Cost Estimates for Clinical Trials and Research Are Inaccurate CEL-SCI Will
Require Additional Funding.
CEL-SCI's estimates of the costs associated with future clinical trials
and research may be substantially lower than the actual costs of these
activities. If CEL-SCI's cost estimates are incorrect, CEL-SCI will need
additional funding for its research efforts.
Products Which May Be Developed by CEL-SCI Will Require Regulatory Approvals
Prior to Sale.
Therapeutic agents, drugs and diagnostic products are subject to
approval, prior to general marketing, by the FDA in the United States and by
comparable agencies in most foreign countries. The process of obtaining FDA and
corresponding foreign approvals is costly and time consuming, particularly for
pharmaceutical products such as those which might ultimately be developed by
CEL-SCI, VTI or its licensees, and there can be no assurance that such approvals
will be granted. Any failure to obtain or any delay in obtaining such approvals
may adversely affect the ability of potential licensees or CEL-SCI to
successfully market any products developed. Also, the extent of adverse
government regulations which might arise from future legislative or
administrative action cannot be predicted.
CEL-SCI is Dependent on an Unrelated Corporation to Manufacture Multikine.
CEL-SCI has an agreement with an unrelated corporation for the
production, until August 2000, of Multikine for research and testing purposes.
At present, this is CEL-SCI's only source of multikine. If this corporation
could not, for any reason, supply CEL-SCI with Multikine, CEL-SCI estimates that
it would take approximately six to ten months to obtain supplies of Multikine
under an alternative manufacturing arrangement. CEL-SCI does not know what cost
it would incur to obtain this alternative source of supply.
The Biomedical Field in Which CEL-SCI is Involved is Undergoing Rapid and
Significant Technological Change.
The successful development of therapeutic agents from CEL-SCI's
compounds, compositions and processes through CEL-SCI-financed research or as a
<PAGE>
result of possible licensing arrangements with pharmaceutical or other
companies, will depend on its ability to be in the technological forefront of
this field. There can be no assurance that CEL-SCI will achieve or maintain such
a competitive position or that other technological developments will not cause
CEL-SCI's proprietary technologies to become uneconomical or obsolete.
CEL-SCI's Patents Might Not Protect CEL-SCI's Technology.
Certain aspects of CEL-SCI's technologies are covered by U.S. and
foreign patents. In addition, CEL-SCI has a number of patent applications
pending. There is no assurance that the applications still pending or which may
be filed in the future will result in the issuance of any patents. Furthermore,
there is no assurance as to the breadth and degree of protection any issued
patents might afford CEL-SCI. Disputes may arise between CEL-SCI and others as
to the scope and validity of these or other patents. Any defense of the patents
could prove costly and time consuming and there can be no assurance that CEL-SCI
will be in a position, or will deem it advisable, to carry on such a defense.
Other private and public concerns, including universities, may have filed
applications for, or may have been issued, patents and are expected to obtain
additional patents and other proprietary rights to technology potentially useful
or necessary to CEL-SCI. The scope and validity of such patents, if any, the
extent to which CEL-SCI may wish or need to acquire the rights to such patents,
and the cost and availability of such rights are presently unknown. Also, as far
as CEL-SCI relies upon unpatented proprietary technology, there is no assurance
that others may not acquire or independently develop the same or similar
technology. CEL-SCI's first MULTIKINE patent will expire in the year 2000. Since
CEL-SCI does not know if it will ever be able to sell MULTIKINE on a commercial
basis, CEL-SCI cannot predict what effect the expiration of this patent will
have on CEL-SCI. Notwithstanding the above, CEL-SCI believes that trade secrets
and later issued patents will protect the technology associated with Multikine
past the year 2000.
CEL-SCI's Product Liability Insurance May Not Be Adequate.
Although CEL-SCI has product liability insurance for Multikine and its
HGP-30 vaccine, the successful prosecution of a product liability case against
CEL-SCI could have a materially adverse effect upon its business if the amount
of any judgment exceeds CEL-SCI's insurance coverage.
The Loss of Management and Scientific Personnel Could Adversly Affect CEL-SCI.
CEL-SCI is dependent for its success on the continued availability of
its executive officers. The loss of the services of any of CEL-SCI's executive
officers could have an adverse effect on CEL-SCI's business. CEL-SCI does not
carry key man life insurance on any of its officers. CEL-SCI's future success
will also depend upon its ability to attract and retain qualified scientific
personnel. There can be no assurance that CEL-SCI will be able to hire and
retain such necessary personnel.
Competition in the Research, Development and Commercialization of Products Which
May be Used in the Prevention or Treatment of Cancer and AIDS is Intense.
Most pharmaceutical and biotechnology companies are developing products
for these diseases. Many of these companies have substantial financial, research
and development, and marketing resources and are capable of providing
<PAGE>
significant long-term competition either by establishing in-house research
groups or by forming collaborative ventures with other entities. In addition,
both smaller companies and non-profit institutions are active in research
relating to cancer and AIDS and are expected to become more active in the
future.
Shares Issuable Upon the Conversion of Options, Warrants and Convertible
Securities May Depress the Price of CEL-SCI's Common stock.
CEL-SCI has issued options to its officers, directors, employees and
consultants which allow the holders to acquire additional shares of CEL-SCI's
common stock. In some cases CEL-SCI has agreed that, at its expense, it will
make appropriate filings with the Securities and Exchange Commission so that the
securities issuable upon the exercise of the options will be available for
public sale. Such filings could result in substantial expense to CEL-SCI and
could hinder future financings by CEL-SCI.
Until the options expire, the holders will have an opportunity to
profit from any increase in the market price of CEL-SCI's common stock without
assuming the risks of ownership. Holders of the options may exercise them at a
time when CEL-SCI could obtain additional capital on terms more favorable than
those provided by the options. The exercise of the options will dilute the
voting interest of the owners of presently outstanding shares of CEL-SCI's
common stock and may adversely affect the ability of CEL-SCI to obtain
additional capital in the future. The sale of the shares of common stock
issuable upon the exercise of the options could adversely affect the market
price of CEL-SCI's stock.
In December 1999 and January 2000, CEL-SCI sold 1,148,592 shares of its
common stock, plus Series A and Series B warrants, to three private investors.
The Series A warrants permit the holders of the warrants to purchase 402,007
shares of CEL-SCI's common stock at a price of $2.925 per share at any time
prior to December 8, 2002. The Series B warrants allow the investors, under
certain circumstances, to acquire additional shares of CEL-SCI's common stock at
a nominal price in the event (i) the price of CEL-SCI's common stock falls below
$2.4375 per share or (ii) CEL-SCI raises in excess of $1,000,000 at a price
which is below either the then prevailing market price of CEL-SCI's common stock
or $2.4375 per share. Since the price of CEL-SCI's common stock has been
volatile in the past, investors could experience substantial dilution upon the
exercise of the Series B warrants if there is a decline in the market price of
CEL-SCI's common stock. See "Comparative Share Data".
The 1,148,592 shares of common stock sold in the private offering
referred to above, as well as the shares of common stock issuable upon the
exercise of the Series A and B warrants, are being offered for public sale by
means of this prospectus. The issuance of common stock upon the exercise of the
Series A and B warrants, as well as future sales of such common stock, or the
perception that such sales could occur, could adversely affect the market price
of CEL-SCI's common stock.
The Market Price for CEL-SCI's Common Stock is Volatile.
The market price of CEL-SCI's common stock, as well as the securities
of other biopharmaceutical and biotechnology companies, have historically been
highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
<PAGE>
particular companies. Factors such as fluctuations in CEL-SCI's operating
results, announcements of technological innovations or new therapeutic products
by CEL-SCI or its competitors, governmental regulation, developments in patent
or other proprietary rights, public concern as to the safety of products
developed by CEL-SCI or other biotechnology and pharmaceutical companies, and
general market conditions may have a significant effect on the market price of
CEL-SCI's common stock.
COMPARATIVE SHARE DATA
As of December 31, 1999, the present shareholders of CEL-SCI owned
18,027,982 shares of common stock. The following table illustrates the
comparative stock ownership of the present shareholders of CEL-SCI, as compared
to the investors in this offering, assuming all warrants held by the selling
shareholders are exercised.
Number of Note
Shares Reference
Shares outstanding as of December 31, 1999 18,027,982
Shares offered by selling shareholders:
Shares purchased from CEL-SCI 1,148,592
Shares issuable upon exercise of 402,007 A
Series A warrants
Shares issuable upon exercise of
Series B warrants -- A
Shares issuable upon exercise of 25,000 B
sales agent warrants
Shares which will be outstanding, assuming the
exercise of all warrants listed above 18,454,989
Percentage of CEL-SCI's common stock
represented by shares offered by this
prospectus, assuming the exercise of all
warrants listed above 6.7%
The number of shares outstanding as of December 31, 1999 excludes shares
which may be issued upon the exercise and/or conversion of options, warrants and
other convertible securities previously issued by CEL-SCI. See table below.
Other Shares Which May Be Issued:
The following table lists additional shares of CEL-SCI's common stock
which may be issued as the result of the exercise of outstanding options,
warrants or the conversion of other securities issued by CEL-SCI:
<PAGE>
Number of Note
Shares Reference
Shares issuable upon exercise of 1,100,000 C
warrants sold to investors in
December 1997 private offering
Shares issuable upon exercise of
options granted to investor relations
consultants 305,000 D
Shares issuable upon exercise of
options and warrants granted to
CEL-SCI's officers, directors,
employees, consultants, and third
parties 3,153,448 E
A. In December 1999 and January 2000, CEL-SCI sold 1,148,592 shares of its
common stock, plus Series A and Series B warrants, to a group of private
investors for $2,800,000. The Series A warrants allow the holders to
purchase up to 402,007 shares of CEL-SCI's common stock at a price of
$2.925 per share at any time prior to December 8, 2002. The Series B
warrants allow the holders, under certain circumstances, to acquire
additional shares of CEL-SCI's common stock at a nominal price in the event
(i) the price of CEL-SCI's common stock falls below $2.4375 per share prior
to certain vesting dates, or (ii) CEL-SCI raises in excess of $1,000,000 at
a price which is below either the then prevailing market price of CEL-SCI's
common stock or $2.4375 per share.
The fixed vesting dates for the purposes of the Series B warrants are:
December 8, 2000
June 8, 2001
December 8, 2001
June 8, 2002
December 8, 2002
Other vesting dates will occur when an extraordinary event occurs, such as a
change in the control of CEL-SCI, the bankruptcy or liquidation of CEL-SCI,
or the failure of CEL-SCI's common stock to be listed on the American Stock
Exchange, the NASDAQ Stock Market or the NASDAQ SmallCap market.
Upon the occurrence of a vesting date, the additional shares (if any)
which CEL-SCI will be required to issue to the holders of the Series B warrants
will be determined in accordance with the following formula:
<PAGE>
[(C x PA) / A] - C
C = The number of shares purchased by the Series B warrant
holder and not yet sold
PA = The Adjustment Price from the immediately preceding
vesting date or, with respect to the first vesting date,
$2.4375.
A = Adjustment price, which is equal to the lesser of
$2.4375, or the average of the 10 lowest closing bid
prices of CEL-SCI's common stock during the 30 trading
days immediately preceding the vesting date.
In addition to the foregoing, if CEL-SCI raises in excess of $1,000,000
through the sale of common stock, or securities convertible into common stock,
at a price which is below either the then prevailing market price of CEL-SCI's
common stock or $2.4375 per share, then the holders of the Series B warrants
will be entitled to receive additional shares of CEL-SCI's common stock in
accordance with the following formula:
[(C x $2.4375) / D] - C
C = The number of shares purchased by the Series B warrant
holder and not yet sold on the date of the financing.
D = An amount equal to the lesser of the average of the
closing bid prices of CEL-SCI's common stock for the 10
trading days immediately preceding the date of the
financing, or the price per share of the common stock,
or common stock equivalent (as the case may be), sold in
the financing.
The actual number of shares issuable upon the exercise of the Series B
warrants (if any) will vary depending upon a number of factors, including the
price of CEL-SCI's common stock at certain dates. Accordingly, the number of
shares (if any) which may be issued upon the exercise of the Series B warrants
cannot be determined at this time. However, based upon the market price of
CEL-SCI's common stock on January 12, 2000, CEL-SCI would not be required to
issue any material shares of its common stock if the Series B warrants were
exercised as of that date.
B. In connection with CEL-SCI's December 1999 sale of common stock and
warrants, Reedland Capital Partners, a division of Financial West Group,
acted as the sales agent for such offering and received a commission of
$125,000 plus Series A warrants to purchase 25,000 shares of CEL-SCI's
common stock. The sales agent warrants are exercisable at a price of $2.925
per share at any time prior to December 8, 2002. The shares issuable upon
the exercise of the sales agent warrants are being offered for sale to the
public by means of this prospectus. See "Selling Shareholders".
<PAGE>
C. In December 1997, CEL-SCI sold 10,000 shares of its Series D Preferred
Stock, and 1,100,000 warrants, to ten institutional investors for
$10,000,000. All Series D Preferred shares were subsequently converted into
5,201,400 shares of CEL-SCI's common stock. Warrants for the purchase of
550,000 shares of common stock are exercisable at a price of $8.62 at any
time prior to December 22, 2001. Warrants for the purchase of 550,000
shares of common stock are exercisable at a price of $9.31 at any time
prior to December 22, 2001. As of December 31, 1999 none of the warrants
had been exercised. The shares issuable upon the exercise of warrants are
being offered for sale to the public by means of a separate registration
statement which has been filed with the Securities and Exchange Commission.
D. CEL-SCI has granted options for the purchase of 305,000 shares of common
stock to certain investor relations consultants in consideration for
services provided to CEL-SCI. The options are exercisable at prices ranging
between $2.50 and $7.31 per share and expire between June 2000 and February
2004. The 305,000 shares issuable upon the exercise of these options are
being offered for sale to the public by means of a separate registration
statement which has been filed with the Securities and Exchange Commission.
E. The options are exercisable at prices ranging from $2.38 to $11.00 per
share. CEL-SCI may also grant options to purchase additional shares under
its Incentive Stock Option and Non-Qualified Stock Option Plans.
SELLING SHAREHOLDERS
In December 1999 and January 2000, CEL-SCI sold 1,148,592 shares of its
common stock, plus Series A and Series B warrants, to three private investors.
The Series A warrants permit the holders of the warrants to purchase 402,007
shares of CEL-SCI's common stock at a price of $2.925 per share at any time
prior to December 8, 2002. The Series B warrants allow the investors, under
certain circumstances, to acquire additional shares of CEL-SCI's common stock at
a nominal price in the event (i) the price of CEL-SCI's common stock falls below
$2.4375 per share or (ii) CEL-SCI raises in excess of $1,000,000 at a price
which is below either the then prevailing market price of CEL-SCI's common stock
or $2.4375 per share. The actual number of shares issuable upon the exercise of
the Series B warrants (if any) will vary depending upon a number of factors,
including the price of CEL-SCI's common stock at certain dates. Accordingly, the
number of shares (if any) which may be issued upon the exercise of the Series B
warrants cannot be determined at this time. However, based upon the market price
of CEL-SCI's common stock on January 12, 2000, CEL-SCI would not be required to
issue any material shares of its common stock if the Series B warrants were
exercised as of that date. See "Comparative Share Data". The 1,148,592 shares
sold to the three investors, as well as the shares issuable upon the exercise of
the Series A and Series B warrants, are being offered to the public by means of
this prospectus.
Each Series A and Series B warrant holder is prohibited from exercising
the warrants to the extent that such exercise would result in such holder,
together with any affiliate of the warrant holder, beneficially owning in excess
of 4.999% of the outstanding shares of Cel-Sci's common stock following such
exercise. This restriction may be waived by each holder on not less than 61
<PAGE>
days' notice to Cel-Sci. However, the 4.999% limitation would not prevent each
warrant holder from acquiring and selling in excess of 4.999% of Cel-Sci's
common stock through a series of acquisitions and sales under the warrants so
long as the warrant holder never beneficially owns more than 4.999% of Cel-Sci's
common stock at any one time.
In connection with the December 1999 financing, Reedland Capital Partners,
an Institutional Division of Financial West Group, received a commission of
$125,000 plus Series A warrants to purchase 25,000 shares of Cel-Sci's common
stock at $2.925 per share for its role as sales agent. The 25,000 shares are
also being offered to the public by means of this prospectus.
The three private investors and the sales agent are referred to in this
prospectus as the "selling shareholders". CEL-SCI will not receive any proceeds
from the sale of the shares by the selling shareholders.
Genesee International Inc., of which Mr. Donald R. Morken is the
controlling stockholder, has voting and investment power over the securities
beneficially owned by Advantage Fund II Ltd. Koch Industries, Inc., of which
Messrs. Charles Koch and David Koch are controlling stockholders, have voting
and investment power over the securities beneficially owned by Koch Investment
Group Ltd. Mooring Capital Fund is controlled by John M. Jacquemin. Mr.
Jacquemin is a director of Cel-Sci Corporation.
The names of the selling shareholders are:
Share
Shares to Owner-
be Sold ship
Shares in this After
Name Owned Offering Offering
Advantage Fund II Ltd. 948,641 2,169,532 --
Koch Investment Group, Ltd. 276,923 542,383 --
Mooring Capital Fund 122,951 165,984 --
Reedland Capital Partners -- 25,000 --
For purposes of the foregoing table, it is assumed that all shares owned,
or which may be acquired, by the selling shareholders are sold to the public by
means of this prospectus.
Plan of Distribution
The selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling shareholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
<PAGE>
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account; o an exchange distribution in accordance with the rules of
the applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in securities of CEL-SCI or derivatives of
CEL-SCI securities and may sell or deliver shares in connection with these
trades. The selling shareholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling shareholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
CEL-SCI is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling shareholders. CEL-SCI has agreed to indemnify the selling shareholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
CEL-SCI has advised the selling shareholders that in the event of a
"distribution" of the shares owned by the selling shareholder, such selling
shareholders, any "affiliated purchasers", and any broker/dealer or other person
<PAGE>
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule 102 as an
offering of securities "that is distinguished from ordinary trading transactions
by the magnitude of the offering and the presence of special selling efforts and
selling methods". CEL-SCI has also advised the selling shareholders that Rule
102 under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase"
for the purpose of pegging, fixing or stabilizing the price of the common stock
in connection with this offering. Rule 101 makes it unlawful for any person who
is participating in a distribution to bid for or purchase stock of the same
class as is the subject of the distribution.
CEL-SCI has agreed to indemnify the selling shareholders and any
securities broker/dealers who may be deemed to be underwriters against certain
liabilities, including liabilities under the Securities Act as underwriters or
otherwise.
DESCRIPTION OF SECURITIES
Common Stock
CEL-SCI is authorized to issue 100,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of CEL-SCI's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by CEL-SCI. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock . All of the
outstanding shares of Common stock are fully paid and non-assessable.
Preferred Stock
CEL-SCI is authorized to issue up to 200,000 shares of preferred stock.
CEL-SCI's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Colorado statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of CEL-SCI.
See "Comparative Share Data" for information concerning CEL-SCI's Series D
preferred stock.
<PAGE>
Transfer Agent
American Securities Transfer, Inc., of Denver, Colorado, is the
transfer agent for CEL-SCI's common stock.
EXPERTS
The financial statements as of September 30, 1999 and 1998, and for
each of the three years in the period ended September 30, 1999 incorporated by
reference in this prospectus from CEL-SCI's Annual Report on Form 10-K, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
INDEMNIFICATION
CEL-SCI's bylaws authorize indemnification of a director, officer,
employee or agent of CEL-SCI against expenses incurred by him in connection with
any action, suit, or proceeding to which he is named a party by reason of his
having acted or served in such capacity, except for liabilities arising from his
own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of CEL-SCI who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling CEL-SCI pursuant to the foregoing provisions, CEL-SCI has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ADDITIONAL INFORMATION
CEL-SCI is subject to the requirements of the Securities Exchange Act
of l934 and is required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of any such reports, proxy
statements and other information filed by CEL-SCI can be read and copied at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding CEL-SCI. The address of that site is
http://www.sec.gov.
CEL-SCI will provide, without charge, to each person to whom a copy of
this prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference below (other than
<PAGE>
exhibits to these documents, unless the exhibits are specifically incorporated
by reference into this prospectus). Requests should be directed to:
CEL-SCI Corporation
8229 Boone Blvd., #802
Vienna, Virginia 22182
(703) 506-9460
The following documents filed with the Commission by CEL-SCI
(Commission File No. 0-11503) are incorporated by reference into this
prospectus:
(1) CEL-SCI's Annual Report on Form 10-K for the fiscal year ended September
30, 1999.
(2) CEL-SCI's Proxy Statement relating to the April 12, 1999 shareholders'
meeting.
All documents filed with the Securities and Exchange Commission by
CEL-SCI pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this prospectus and prior to the termination of this
offering shall be deemed to be incorporated by reference into this prospectus
and to be a part of this prospectus from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for the
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
CEL-SCI has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of l933, as amended, with
respect to the securities offered by this prospectus. This prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to CEL-SCI and such securities, reference is
made to the Registration Statement and to the exhibits filed with the
Registration Statement. Statements contained in this prospectus as to the
contents of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement and related exhibits may also be examined at the
Commission's internet site.
<PAGE>
No dealer salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus. Any information or representation not contained in this prospectus
must not be relied upon as having been authorized by CEL-SCI. This prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of CEL-SCI
since the date of this prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary.................................................... 5
Risk Factors.......................................................... 9
Comparative Share Data................................................ 12
Selling shareholders.................................................. 15
Description of Securities............................................. 19
Experts............................................................... 20
Indemnification....................................................... 20
Additional Information................................................ 21
Common stock
CEL-SCI CORPORATION
PROSPECTUS
<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
SEC Filing Fee $ 5,429
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 10,000
Accounting Fees and Expenses 3,000
Miscellaneous Expenses 2,571
---------
TOTAL $25,000
All expenses other than the S.E.C. filing fees are estimated.
Item 25. Indemnification of Officers and Directors.
It is provided by Section 7-109-102 of the Colorado Revised Statutes
and CEL-SCI's Bylaws that CEL-SCI may indemnify any and all of its officers,
directors, employees or agents or former officers, directors, employees or
agents, against expenses actually and necessarily incurred by them, in
connection with the defense of any legal proceeding or threatened legal
proceeding, except as to matters in which such persons shall be determined to
not have acted in good faith and in the best interest of CEL-SCI.
Item 16. Exhibits
3(a)Articles of Incorporation Incorporated by reference to Exhibit 3(a)
of CEL-SCI's combined Registration Statement
on Form S-1 and Post-Effective Amendment
("Registration Statement"), Registration
Nos. 2-85547-D and 33-7531.
(b) Amended Articles Incorporated by
reference to Exhibit 3(a) of CEL-SCI's
Registration Statement on Form S-1,
Registration Nos. 2-85547-D and 33-7531.
(c) Amended Articles Filed as Exhibit 3(c) to CEL-SCI's
(Name change only) Registration Statement on Form S-1
Registration Statement (No. 33-34878).
(d)Bylaws Incorporated by reference to
Exhibit 3(b) of CEL-SCI's Registration
Statement on Form S-1, Registration Nos.
2-85547-D and 33-7531.
II-1
<PAGE>
(a) Specimen copy of Incorporated by reference to Exhibit 4(a) of Stock
Certificate CEL-SCI's Registration Statement on Form S-1,
Registration Nos. 2-85547-D and 33-7531.
5. Opinion of Counsel _____________________________________
10(e) Employment Agreement with Filed with Amendment Number 1 to CEL-SCI's
Geert Kersten Registration Statement on Form S-1
(Commission File Number 33-43281).
10(i) Securities Purchase Agreement ______________________________________
10(j) Form of Callable (Series A) Warrant ______________________________________
10(k) Form of Adjustable (Series B) Warrant _______________________________
10(l) Registration Rights Agreement ______________________________________
23(a) Consent of Hart & Trinen ______________________________________
(b) Consent of Deloitte & Touche, LLP __________________________________
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by Section l0(a)(3) of the
Securities Act of l933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vienna, State of Virginia, on the 12th day of
January, 2000.
CEL-SCI CORPORATION
By: /s/ Maximilian de Clara
MAXIMILIAN DE CLARA, PRESIDENT
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Maximilian de Clara Director and Principal January 12, 2000
Maximilian de Clara Executive Officer
/s/ Geert R. Kersten Director, Principal January 12, 2000
Geert R. Kersten Financial Officer and
Chief Executive Officer
______________________ Director January 12, 2000
Alexander G. Esterhazy
/s/ John M. Jacquemin Director January 12, 2000
- --------------------------
John M. Jacquemin
January 12, 2000
CEL-SCI Corporation
8229 Boone Blvd., #802
Vienna, Virginia 22182
This letter will constitute an opinion upon the legality of the sale by certain
selling shareholders of CEL-SCI Corporation, a Colorado corporation ("CEL-SCI"),
of up to 2,902,899 shares of common stock, all as referred to in the
Registration Statement on Form S-3 filed by CEL-SCI with the Securities and
Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes of
the Board of Directors of CEL-SCI and the applicable laws of the State of
Colorado, and a copy of the Registration Statement. In our opinion, CEL-SCI was
authorized to issue the shares of stock mentioned above and such shares
represent fully paid and non-assessable shares of CEL-SCI's common stock.
Very truly yours,
HART & TRINEN
William T. Hart
SECURITIES PURCHASE AGREEMENT
Between
CEL SCI CORPORATION
and
THE INVESTORS SIGNATORY HERETO
Dated as of December 8, 1999
<PAGE>
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of December 8,
1999, among Cel Sci Corporation, a Colorado corporation (the "Company"), and the
investors signatory hereto (each such investor is a "Purchaser" and all such
investors are, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company, shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), and
certain other securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set forth
in this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase an aggregate of 1,025,641
shares of Common Stock (the "Shares") for an aggregate purchase price of
$2,500,000. The closing of the purchase and sale of the Shares (the "Closing")
shall take place at the offices of Robinson Silverman Pearce Aronsohn & Berman
LLP ("Robinson Silverman"), 1290 Avenue of the Americas, New York, New York
10104, immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) a stock certificate representing the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement, registered in the name
of such Purchaser, (2) a Common Stock purchase warrant, in the form of Exhibit
A, registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire shares of Common Stock upon the terms and in
such number as set forth therein (each an "Adjustable Warrant"), (3) a Common
Stock purchase warrant, in the form of Exhibit B, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire the
number of shares of Common Stock indicated below such Purchaser's name on the
signature page of this Agreement, upon the terms and at the exercise price set
forth therein (each, a "Closing Warrant" and together with the Adjustable
Warrants, the "Warrants"), (4) the legal opinion of Hart & Trinen, outside
counsel to the Company, substantially in the form of Exhibit C, and (5) all
other documents, instruments and writings required to be delivered at or prior
to the Closing by the Company pursuant to this Agreement, including an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
<PAGE>
Purchasers, in the form of Exhibit D (the "Registration Rights Agreement"), and
the Transfer Agent Instructions, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (B) each Purchaser shall deliver to the Company (1) the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated for such purpose prior to the Closing Date in
writing by the Company, and (2) all documents, instruments and writings required
to have been delivered at or prior to the Closing Date by such Purchaser
pursuant to this Agreement, including an executed Registration Rights Agreement.
1.2 Certain Defined Terms. For purposes of this Agreement,"Trading
Day" and "Per Share Market Value" shall have the meanings set forth in Exhibit A
and "Business Day" shall mean any day except Saturday, Sunday, the day following
Christmas, the day following Thanksgiving and any day which shall be a federal
legal holiday or a day on which banking institutions in the State of New York or
the Commonwealth of Virginia generally are authorized or required by law or
other governmental action to close. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Colorado, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is an
entity, duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
defined below) or any of this Agreement, the Registration Rights Agreement, the
Transfer Agent Instructions or the Warrants (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
<PAGE>
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, by-laws or other
charter or organizational documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), the Company owns all of the capital stock of each
Subsidiary. No securities of the Company or any Subsidiary are entitled to
preemptive or similar rights, nor is any holder of securities of the Company or
any Subsidiary entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company or any Subsidiary by virtue of any
of the Transaction Documents. Except as disclosed in Schedule 2.1(c) and except
as a result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, or rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of the
Company, except as specifically disclosed in the SEC Reports (as defined below)
or Schedule 2.1(c), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), or has the right to acquire by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the Common Stock.
(d) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the terms hereof and the
Warrants, shall have been duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has reserved a number of duly
authorized number of shares of Common Stock for issuance hereunder upon exercise
of the Warrants that is not less than the sum of (i) the Shares to be issued
hereunder; (ii) the number of shares of Common Stock issuable upon exercise of
the Adjustable Warrants on the First Vesting Date (as defined in the Adjustable
Warrant), assuming for such purposes that, on the First Vesting Date, each
Purchaser holds the entire number of Shares purchased hereunder and the
Adjustment Price equals 50% of the Per Share Market Value on the Trading Day
immediately preceding the Closing Date, and (iii) the number of shares of Common
Stock as are issuable upon exercise in full of the Closing Warrants (the number
of shares of Common Stock contemplated in (i), (ii) and (iii), the "Initial
Minimum"). The shares of Common Stock issuable upon exercise of the Warrants are
referred to herein as the "Underlying Shares." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "Securities."
<PAGE>
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate of
incorporation, bylaws or other charter documents (each as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Shares and the
Underlying Shares by the Purchasers (the "Underlying Shares Registration
Statement"), (iii) the application(s) to the American Stock Exchange ("AMEX")
for the listing of the Shares and the Underlying Shares with the AMEX (and with
any other national securities exchange of market in which the Common Stock is
then listed) in the time and manner required thereby, (vi) applicable Blue Sky
filings, and (v) in all other cases where the failure to obtain such consent,
waiver, authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (the items described in clauses (i)-(vi) are
collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specified in the SEC Reports,
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an "Action") which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, individually or in the aggregate, have or result in a
Material Adverse Effect.
<PAGE>
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is in violation of any statute, rule or regulation of any governmental
authority, except as could not individually or in the aggregate, have or result
in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on its
behalf has taken or is, to the knowledge of the Company, contemplating taking
any action which could subject the offering, issuance or sale of the Securities
to the registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.
(j) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act, and the Exchange
Act for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Reports" and, together with
the Schedules to this Agreement the "Disclosure Materials") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject which were required under the
Securities Act, the Exchange Act or the rules or regulations promulgated
thereunder to have been filed with the Commission have been filed as exhibits to
the SEC Reports. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Since June 30,
1999, except as specifically disclosed in the SEC Reports, (a) there has been no
event, occurrence or development that has or that could result in a Material
Adverse Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
<PAGE>
be disclosed in filings made with the Commission, (c) the Company has not
altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock or stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except as are payable to Reedland Capital
Partners, no fees or commissions will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person, with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and its respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to register its
Common Stock for resale under Form S-3 promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. The Company has not, in
the two years preceding the date hereof received notice (written or oral) from
the AMEX or any other stock exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange, market or trading facility. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance requirements.
(p) Patents and Trademarks. The Company and its Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective business
as described in the SEC Reports (collectively, the "Intellectual Property
Rights") and which the failure to so have would have a Material Adverse Effect .
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or its Subsidiaries violates or
infringes upon the rights of any Person, to the best knowledge of the Company.
All such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
<PAGE>
(q) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits could not, individually or in the aggregate, have or result in a
Material Adverse Effect ("Material Permits"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(r) Title. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and 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, except for Liens as do not 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 materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.
(s) Registration Rights; Rights of Participation. Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(t) Absence of Certain Proceedings. Except as described in the SEC
Reports, (i) there is no Action pending or, to the knowledge of the Company,
threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding could have or result in a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving (A) a claim of
violation of or liability under federal or state securities laws or (B) a claim
of breach of fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement); and (iv)
there has not been, and to the best of the Company's knowledge there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(u) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(v) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided the Purchasers or their agents or counsel with
any information that constitutes or might constitute material non-public
information. The Company understands and confirms that the Purchasers shall be
relying on the foregoing representations in effecting transactions in securities
<PAGE>
of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Schedules
to this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable federal and state securities laws or under an exemption from such
registration. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under the Warrants, it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such Purchaser
is able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
<PAGE>
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
(i) Trading in the Common Stock. During the thirty (30) Trading Days
immediately preceding the Closing Date, such Purchaser has neither established a
position in the Common Stock nor engaged in any trading activity with respect to
the Common Stock.
The Company acknowledges and agrees that no Purchaser makes or has
made representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company, without requiring a legal opinion as described in the immediately
preceding sentence, hereby consents to and agrees to register on the books of
the Company and with any transfer agent for the securities of the Company any
transfer of Securities by a Purchaser to an Affiliate of such Purchaser or to
one or more funds or managed accounts under common management with such
Purchaser, and any transfer among any such Affiliates or one or more funds or
managed accounts, provided that: (A) the transferee certifies to the Company
that it is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
<PAGE>
purposes (subject to the qualifications hereof) and (B) any such transfer does
not constitute a public distribution of securities. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Neither Shares nor Underlying Shares shall contain the legend set
forth above nor any other legend at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Underlying Shares Registration Statement at such time
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission). The Company shall cause its counsel to issue the legal
opinion included in the Transfer Agent Instructions to the Company's transfer
agent on the day that such Underlying Shares Registration Statement is declared
effective by the Commission (the "Effective Date"). The Company agrees that if
any Shares or Underlying Shares are issued with a legend in accordance with this
Section 3.1(b), it will, within three (3) Trading Days after request therefor by
a Purchaser and the surrender by such Purchaser of the certificate representing
the applicable Shares or Underlying Shares, provide such Purchaser with a
certificate or certificates representing such Shares or Underlying Shares, free
from such legend at such time as such legend would not have been required under
this Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of Underlying Shares upon exercise of the Warrants will result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Underlying Shares upon exercise of the Warrants pursuant to the terms
thereof is unconditional and absolute regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. So long as the
Purchasers own Securities, if the Company is not required to file reports
<PAGE>
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act such information as is required for the Purchasers to sell the
Securities under Rule 144 promulgated under the Securities Act. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of the AMEX.
3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of exercise were to be delivered on such date, precluded from issuing
the sum of (i) 200% of the number of Underlying Shares then issuable upon
exercise in full of the Adjustable Warrants and (ii) the number of Underlying
Shares issuable upon exercise in full of the Closing Warrants (the "Current
Required Minimum") due to the unavailability of a sufficient number of
authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly (and in any case, within 30 Business
Days from such date) prepare and mail to the stockholders of the Company proxy
materials requesting authorization to amend the Company's articles of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as is reasonably
adequate to enable the Company to comply with its issuance, exercise and
reservation of shares obligations as set forth in this Agreement and the
Warrants (the sum of (x) the number of shares of Common Stock then outstanding
plus all shares of Common Stock issuable upon exercise of all outstanding
options, warrants and convertible instruments other than the Warrants, and (y)
the Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the earlier to occur of the
60th day after delivery of the proxy materials relating to such meeting and the
90th day after request by a holder of Warrants to issue the number of Underlying
Shares in accordance with the terms hereof) and (c) within five (5) Business
Days of obtaining such stockholder authorization, file an appropriate amendment
to the Company's articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(i) in the time and manner required by the AMEX and such other national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed for trading, prepare and file with the AMEX (and
such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed for trading) an additional
<PAGE>
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the AMEX (as well as on any
such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon exercise of the then unexercised
portion of the Warrants exceeds 85% of the number of Underlying Shares
previously listed on account thereof with AMEX (and any such other required
exchanges), then the Company shall take the necessary actions to immediately
list a number of Underlying Shares as equals no less than the then Current
Required Minimum with respect thereto.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon exercise in full of the Warrants in accordance with the
Warrants, in such amount as may be required to fulfill its obligations in full
under the Warrants, which reserve shall equal no less than the then Current
Required Minimum.
3.7 Exercise Procedures. The Transfer Agent Instructions and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the exercise of the Warrants, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchasers to exercise the Warrants.
3.8 Notice of Breaches. Each of the Company and the Purchasers shall give
prompt written notice to the other of any breach by it of any representation,
warranty or other agreement contained in any Transaction Document, as well as
any events or occurrences arising after the date hereof which would reasonably
be likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained therein to be incorrect or breached as of
the Closing Date. However, no disclosure by a party pursuant to this Section
shall be deemed to cure any breach of any representation, warranty or other
agreement contained in any Transaction Document.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities including the issuance of any debt or other instrument at any time
over the life thereof convertible into or exchangeable for Common Stock, or any
other transaction intended to be exempt or not subject to registration under the
Securities Act (a "Subsequent Placement") until the 180th Trading Day following
the Effective Date, except (i) the granting of options or warrants to employees,
officers and directors, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by
the Company or the granting of shares of Common Stock pursuant to any stock
bonus plan heretofore or hereinafter duly adopted by the Company, (ii) shares of
<PAGE>
Common Stock issuable upon exercise of currently outstanding options and
warrants and upon conversion of any currently outstanding convertible securities
of the Company, in each case to the extent disclosed in Schedule 2.1(c) but not
with respect to any amendment or modification thereof, and (iii) shares of
Common Stock issuable upon exercise of the Warrants in accordance with the terms
thereof, unless (A) the Company delivers to each Purchaser a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) such Purchaser shall not have notified the Company by
5:30 p.m. (New York City time) on the tenth (10th) Trading Day after its receipt
of the Subsequent Placement Notice of its willingness to cause such Purchaser to
provide (or to cause its sole designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on the same terms
set forth in the Subsequent Placement Notice. If the Purchasers shall fail to
notify the Company of their intention to enter into such negotiations within
such time period, the Company may effect the Subsequent Placement substantially
upon the terms and to the Persons (or Affiliates of such Persons) set forth in
the Subsequent Placement Notice; provided, that the Company shall provide the
Purchasers with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this Section (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro-rata portion of the aggregate number of Shares
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice. The rights of the
Purchasers under this Section shall apply to each Subsequent Placement
contemplated by the Company or such Subsidiary, regardless of any prior waivers
or non-participation.
(b) Except for Shares, Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company as set forth in Schedule 6(b) of the
Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
Common Stock permitted to be issued pursuant to paragraph (a)(i) - (iii) of
Section 3.9 (a), the Company shall not (other than registration statements of
the Company filed on Form S-8 as promulgated under the Securities Act, pursuant
to which the Company is registering securities pursuant to a Company employee
benefit plan), for a period of 90 Trading Days after the Effective Date, without
the prior written consent of the Purchasers (i) issue or sell any of its or any
of its Affiliates' equity or equity-equivalent securities pursuant to Regulation
S promulgated under the Securities Act, or (ii) file a registration statement
for the issuance or resale of any securities of the Company. Any days after the
Effective Date that a Purchaser is not permitted or unable to utilize the
prospectus or otherwise to resell Shares or Underlying Shares under the
Underlying Shares Registration Statement shall be added to such 90 Trading Day
period for the purposes of this Section.
(c) Notwithstanding anything contained in this Agreement or the
other Transaction Documents to the contrary, the Company will be permitted to
sell shares of Common Stock for gross proceeds not exceeding $300,000 to one or
more directors of the Company or to funds controlled by such directors on the
same terms and conditions as are provided in this Agreement (including
provisions relating to the issuance of Warrants), and, prior to the Filing Date
(as defined in the Underlying Shares Registration Statement), to include the
shares of Common Stock issued or issuable as a result of such sale in the
Underlying Shares Registration Statement.
<PAGE>
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Closing Date, issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K or Form 10-Q (as applicable) disclosing the transactions
contemplated hereby within ten (10) Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act and
provide a copy thereof to the Purchasers promptly after the filing thereof. The
Company shall, no less than one (1) Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications pertaining to the transactions
contemplated hereby without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law and such consent
can not reasonably be expected to be received prior to the time required to
complete such filing or make such statement in accordance with such applicable
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of a Purchaser, or include the name of a Purchaser in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law, in which case the Company shall provide such Purchaser with
prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or substantially all of the assets of the Company, the Company
shall not transfer, sell or otherwise dispose of any Intellectual Property
Rights, or allow any of the Intellectual Property Rights to become subject to
any Liens, or fail to renew such Intellectual Property Rights (if renewable and
it would otherwise lapse if not renewed), without the prior written consent of
the Purchasers. Notwithstanding anything contained in this Agreement or the
other Transaction Documents to the contrary, the Company will not be restricted
from selling, transferring or otherwise disposing of: (i) any interest in its
subsidiaries: Viral Technology, Inc. or MaxPharma, (ii) any interest in its
HGP-30 or AIDS technology, (iii) any interest in its L.E.A.P.S. technology, or
(iv) so long as any sale, transfer or disposition is made to a corporation with
gross annual revenues of at least $100,000,000 or a market capitalization of at
least $500,000,000 any interest in its other Intellectual Property Rights. The
restriction provided by this Section 3.11 will expire on the earlier of three
(3) years from the date of this Agreement or the date the Purchasers no longer
own any Shares.
3.12 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (excluding payment of trade
payables in the ordinary course of the Company's business and prior practices),
<PAGE>
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation. Pending application of the proceeds of this placement in
the manner permitted hereby, the Company will invest such proceeds in interest
bearing accounts and/or short-term, investment grade interest bearing securities
3.13 Reimbursement. If any Purchaser, other than by reason of its gross
negligence or willful misconduct or other than in connection with an agreement
between such Purchaser and a Person other than the Company or the formation or
governing documents of such Purchaser, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. In addition, other than with respect to any matter in which any of the
Purchasers is a named party, the Company will pay such Purchaser the charges, as
reasonably determined by such Purchaser, for the time of any officers or
employees of such Purchaser devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearings, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or entity in connection with the transactions contemplated by this
Agreement.
3.14 Redemption at the Option of the Company.
(a) Subject to the provisions of this Section, commencing on the
Effective Date, the Company shall have the right, upon thirty (30) Trading Days'
notice to the Purchasers which may not be given until after the Effective Date
(an "Optional Redemption Notice" and the date such notice is received by the
Purchasers, the "Notice Date"), to redeem all or a portion of the Shares then
held by the Purchasers at a cash price equal to the Optional Redemption Price
(as defined below). The Company may only deliver an Optional Redemption Notice
to the Purchasers if, on the Notice Date: (i) either there is an effective
Underlying Shares Registration Statement pursuant to which the Purchasers are
permitted to utilize the prospectus thereunder to sell Shares or Shares may be
sold without volume restrictions pursuant to Rule 144 promulgated under the
Securities Act, as determined by counsel to the Company pursuant to a written
opinion letter, addressed and delivered prior to the Notice Date to the
<PAGE>
Company's transfer agent in the form and substance acceptable to the Purchasers
and such transfer agent and (ii) the Common Stock is listed for trading on the
AMEX or on a Subsequent Market (as defined in the Adjustable Warrants). If any
of the foregoing conditions shall cease to be in effect during the period
between the Notice Date and the date the Optional Redemption Payment is paid in
full, then the Purchasers subject to such redemption may elect, by written
notice to the Company given at any time after any of the foregoing conditions
shall cease to be in effect, to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. The Purchasers may
sell any portion of the Shares subject to an Optional Redemption Notice prior to
the date that the Optional Redemption Price is due and paid in full.
(b) The Optional Redemption Price is due on the thirtieth (30th)
Trading Day following the Notice Date. If any portion of the Optional Redemption
Price shall not be paid by the Company by expiration of such thirtieth (30th)
Trading Day, interest shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law, whichever is less) until the Optional
Redemption Price plus all such interest is paid in full. In addition, if any
portion of the Optional Redemption Price remains unpaid after such date, the
Purchasers subject to such redemption may elect, by written notice to the
Company given at any time thereafter, to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. If a Purchaser elects
to invalidate such redemption the Company shall promptly, and, in any event, not
later than three (3) Trading Days from receipt of such Purchaser's notice of
such election, return to such Purchaser all of the Shares for which the Optional
Redemption Price shall not have been paid in full.
(c) The "Optional Redemption Price" for each Share to be redeemed
shall equal the sum of (i) 120% multiplied by the greater of (A) the average of
the Per Share Market Values for the five (5) Trading Days immediately preceding
the date the Optional Redemption Price is paid in full, and (B) the most recent
Adjustment Price (as defined in the Adjustable Warrants), or if such optional
redemption occurs prior to the First Vesting Date, the Initial Closing Price (as
defined in the Adjustable Warrants), and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such Shares.
3.15 Redemption at the Option of the Purchasers.
(a) Upon the occurrence of a Triggering Event (as defined below),
each Purchaser shall have the right, exercisable at the sole option of such
Purchaser, to require the Company to redeem all or a portion of the Shares then
held by such Purchaser for a redemption price, in cash, equal to the Mandatory
Redemption Price (as defined below). The Mandatory Redemption Price shall be due
and payable within five (5) Trading Days of the date on which the notice for the
payment therefor is provided by a Purchaser (the date such notice is delivered,
the "Mandatory Redemption Date"). If the Company fails to pay the Mandatory
Redemption Price hereunder in full pursuant to this Section on the date such
amount is due in accordance with this Section, the Company will pay interest
thereon at a rate of 18% per annum (or the lesser amount permitted by applicable
law), accruing daily from such date until the Mandatory Redemption Price, plus
all such interest thereon, is paid in full.
(b) A "Triggering Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
<PAGE>
(i) after the Effective Date, the effectiveness of the
Underlying Shares Registration Statement lapses for any reason or the Purchasers
shall not be permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Underlying Shares Registration
Statement, in either case, for more than an aggregate of thirty (30) days (which
need not be consecutive days);
(ii) for an aggregate of five (5) consecutive days, at the
direction of the Company or due to events or circumstances within the control of
the Company, there shall be no closing bid prices for the Company reported by
Bloomberg Information Services, Inc. (or any successor entity thereto to the
function of reporting stock prices);
(iii) the failure of the Common Stock to be listed for trading
on the AMEX or on a Subsequent Market or the suspension of the Common Stock from
trading on the AMEX or on a Subsequent Market, in either case, at the direction
of the Company or due to events or circumstances within the control of the
Company;
(iv) the Company shall either be a party to any Change of
Control Transaction (as defined below) or agree to sell (in one or a series of
related transactions) all or substantially all of its assets (whether or not
such sale would constitute a Change of Control Transaction). "Change of Control
Transaction" means the occurrence of any of (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company, by
contract or otherwise) of in excess of 33% of the voting securities of the
Company, except as a result of a tender offer to the holders of the Common Stock
that is not approved by the Board, (ii) a replacement at one time or over time
of more than one-half of the members of the Company's board of directors which
is not approved by a majority of those individuals who are members of the board
of directors on the date hereof (or by those individuals who are serving as
members of the board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of directors
who are members on the date hereof), (iii) the merger of the Company with or
into another entity which either is not listed for trading on the AMEX or a
Subsequent Market or in which the holders of the Company's securities prior to
the first such transaction do not own a minimum of 51% of the outstanding
capital stock of the surviving entity, or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i) - (iii); or
(v) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of
the Transaction Documents, and such failure or breach shall not, if subject to
the possibility of a cure by the Company, have been remedied within five (5)
days after the date on which notice of such failure or breach shall have been
given.
<PAGE>
(c) Notwithstanding anything herein to the contrary, in the event
one or more of the Triggering Events would cause the Company's auditors to
characterize the issuance of the Shares as a debt issuance then the Company and
the Purchasers agree to discuss any changes to the Transaction Documents in
order to avoid the characterization of the issuance of the Shares by the
Company's auditors as a debt issuance. The "Mandatory Redemption Price" for each
Share to be redeemed shall equal the sum of (i) 120% multiplied by the greater
of (A) the average of the Per Share Market Values for the five (5) Trading Days
preceding the Mandatory Redemption Date, (B) the average of the Per Share Market
Values for the five (5) Trading Days preceding the date the Mandatory Redemption
Price is paid in full, and (C) the most recent Adjustment Price, or if such
optional redemption occurs prior to the First Vesting Date, the Initial Closing
Price, and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Shares.
3.16 Certain Trading Restrictions. Each Purchaser agrees that from
the period commencing on the Closing Date and ending on the Expiration Date (as
defined in the Adjustable Warrants) it will not, during the 35 Trading Days
preceding each Vesting Date (as defined in the Adjustable Warrants), enter into
any Short Sales (as defined herein). For purposes of this Section 3.16, a "Short
Sale" by a Purchaser shall mean a sale of Common Stock by such Purchaser that is
marked as a short sale and that is made at a time when there is no equivalent
offsetting long position in Common Stock held by the Purchaser. For purposes of
determining whether there is an equivalent offsetting long position in Common
Stock held by a Purchaser, Warrant Shares that have not yet been issued on
exercise of the Warrants held by a Purchaser shall be deemed to be held long by
such Purchaser.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Robinson
Silverman up to $20,000 for the preparation and negotiation of the Transaction
Documents. Other than the amounts contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:00 p.m. (New
<PAGE>
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 5:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service and marked for next Business Day
delivery, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Cel Sci Corporation
8229 Boone Boulevard, Suite 802
Vienna, Virginia 22182
Facsimile No.: (703) 506-9460
Attn: Chief Financial Officer
With copies to: Hart & Trinen
1624 Washington Street
Denver, Colorado
Facsimile No.: (303) 839-5414
Attn: Bill Hart, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
<PAGE>
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. The corporate laws of the State of Colorado shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
exercise of the Warrants.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
<PAGE>
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SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CEL SCI CORPORATION
By:_____________________________________
Name:
Title:
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SIGNATURE PAGES FOR PURCHASERS FOLLOWS]
<PAGE>
ADVANTAGE FUND II LTD.
By:_____________________________________
Name:
Title:
Purchase Price for Shares to be
acquired at Closing: $2,000,000
Number of Shares to be acquired at
Closing: 820,513
Warrant Shares subject to Closing
Warrant: 287,179
Address for Notice:
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
Attention: W.R. Weber
With copies to:
Genesee International Inc.
10500 NE 8th Street
Suite 1920
Bellevue, WA 98004
Facsimile: (425) 462-4645
Attention: Christopher Purrier
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq. and Eric L. Cohen, Esq.
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SIGNATURE PAGE FOR PURCHASER FOLLOWS]
<PAGE>
KOCH INVESTMENT GROUP LTD.
By:_____________________________________
Name:
Title:
Purchase Price for Shares to be
acquired at Closing: $500,000
Number of Shares to be acquired at
Closing: 205,128
Warrant Shares subject to Closing
Warrant: 71,795
Address for Notice:
4111 East 37th Street North
Wichita, Kansas 67270
Facsimile: (316) 828-7947
Attention: Josh Taylor
<PAGE>
CEL-SCI CORPORATION
SCHEDULES
Schedule 2.1 (a) Subsidiaries:
The Company has the following subsidiaries:
Viral Technologies, Inc.
MaxPharma
Schedule 2.1 (c) Capitalization
Number of
Shares
Shares outstanding as of December 7, 1999 17,002,341
Shares issuable upon exercise of Series A and
Series B Warrants 1,100,000
Shares issuable upon exercise of Sales Agent Warrant 50,000
Shares issuable upon exercise of options granted
to financial consultants 305,000
Shares issuable upon exercise of warrants held by
former holders of the Company's Series B Preferred Stock 82,250
Shares issuable upon exercise of options and warrants
granted to Company's officers, directors, employees,
consultants and third parties. 3,153,448
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
CEL-SCI CORPORATION
CALLABLE WARRANT
Warrant No. [ ] Dated: December 8, 1999
Cel-Sci Corporation, a Colorado corporation (the "Company"), hereby
certifies that, for value received, [ ], or its registered assigns ("Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company
a total of [ ]1 shares of common stock, $.01 par value per share (the "Common
Stock"), of the Company (each such share, a "Warrant Share" and all such shares,
the "Warrant Shares") at an exercise price equal to $2.9250 per share (as
adjusted from time to time as provided in Section 9, the "Exercise Price"), at
any time and from time to time from and after the date hereof and through and
including December 8, 2002 (the "Expiration Date"), and subject to the following
terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at the office specified in or pursuant to Section 3(b).
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Exercise and Redemption of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 5:00 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 5:00 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
(b) Subject to Sections 2(b), 5 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 4 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
<PAGE>
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(d) Commencing at any time after the date of the issuance of
this Warrant, if (i) the average closing bid price of the Common Stock on the
American Stock Exchange (or such other national securities exchange on which the
Common Stock is then listed or quoted for trading) for any 20 consecutive
trading days exceeds $7.00 (a "Trigger Period"), and (ii) the Warrant Shares are
either registered for resale pursuant to an effective registration statement
naming the Holder as a selling stockholder thereunder or freely transferable
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act, as determined by counsel to the Company pursuant to a written
opinion letter addressed and in form and substance acceptable to the Holder and
the transfer agent for the Common Stock, then the Company shall have the right,
upon 30 days' notice to the Holder given not later than five (5) Trading Days
after the conclusion of any such Trigger Period (the "Redemption Notice"), to
redeem all of the then issuable Warrant Shares at a price of $.01 per Warrant
Share (the "Redemption Price"), on the date set forth in the Redemption Notice,
but in no event earlier than 30 days following the date of the receipt by the
Holder of the Redemption Notice (the "Redemption Date"). The Holder may exercise
this Warrant at any time prior to the Redemption Date. Any portion of this
Warrant not exercised by 6:30 p.m. (New York City time) on the Redemption Date
shall no longer be exercisable and shall be returned to the Company, and the
Company, upon its receipt of the unexercised portion of this Warrant, shall
issue therefor in full and complete satisfaction of its obligations under such
remaining portion of this Warrant to the Holder an amount equal to the number of
shares of Common Stock then issuable hereunder multiplied by the Redemption
Price. The Redemption Price shall be mailed to such Holder at its address of
record, and the Warrant shall be canceled.
4. Piggyback Registration Rights. During the Effectiveness Period
(as defined in the Registration Rights Agreement, of even date herewith, between
the Company and the original Holder (the "Registration Rights Agreement"), the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act, pursuant to which the
Company is registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including supplements
<PAGE>
thereto, but not additionally filed registration statements in respect of such
securities) at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, unless the Company provides the Holder with not less
than 20 days notice of its intention to file such registration statement and
provides the Holder the option to include any or all of the applicable Warrant
Shares therein. The piggyback registration rights granted to the Holder pursuant
to this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in connection
therewith.
5. Demand Registration Rights. During the Effectiveness Period if
the Warrant Shares are not registered pursuant to an effective registration
statement, the Holder may make a written request for the registration under the
Securities Act (a "Demand Registration"), of all of the Warrant Shares (the
"Registrable Securities"), and the Company shall use its best efforts to effect
such Demand Registration as promptly as possible, but in any case within 90 days
thereafter. Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold and shall also specify the
intended method of disposition thereof. The right to cause a registration of the
Registrable Securities under this Section 5 shall be limited to one such
registration. In any registration initiated as a Demand Registration, the
Company will pay all of its registration expenses in connection therewith. A
Demand Registration shall not be counted as a Demand Registration hereunder
until the registration statement filed pursuant to the Demand Registration has
been declared effective by the Securities and Exchange Commission and maintained
continuously effective for a period of at least 360 days or such shorter period
when all Registrable Securities included therein have been sold in accordance
with such registration statement, provided, however that any days on which such
registration statement is not effective or on which the Holder is not permitted
by the Company or any governmental authority to sell Warrant Shares under such
registration statement shall not count towards such 360 day period.
6. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
<PAGE>
8. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section. Upon each such adjustment of the
Exercise Price pursuant to this Section, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or propert y, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property otherwise payable with respect to the amount of Warrant Shares such
Holder would have been entitled to had such Holder exercised this Warrant
<PAGE>
immediately prior to such reclassification or share exchange. The terms of any
such reclassification or share exchange shall include such terms so as to
continue to give to the Holder the right to receive the securities or property
set forth in this Section 9(b) upon any exercise following any such
reclassification or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examine
the financial statements of the Company (an "Appraiser").
(d) If at any time the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), shall
issue shares of Common Stock or rights, warrants, options or other securities or
debt that is convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents"), entitling any person or entity to acquire shares
of Common Stock at a price per share less than both the market price of the
Common Stock at the time of issuance and the Exercise Price then in effect (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less than either the Exercise Price
prevailing or the market price, such issuance shall be deemed to have occurred
for less than such Exercise Price or market price), then, forthwith upon such
issue or sale, the Exercise Price shall be reduced to the price (calculated to
the nearest cent) determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of (i) the number of shares of Common Stock outstanding immediately prior to
such issuance, and (ii) the number of shares of Common Stock which the aggregate
consideration received (or to be received, assuming exercise or conversion in
full of such Common Stock Equivalents) for the issuance of such additional
shares of Common Stock would purchase at the Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. For purposes hereof,
all shares of Common Stock that are issuable upon conversion, exercise or
exchange of Common Stock Equivalents shall be deemed outstanding immediately
after the issuance of such Common Stock Equivalents. Such adjustment shall be
<PAGE>
made whenever such Common Stock or Common Stock Equivalents are issued. However,
upon the expiration of anyCommon Stock Equivalents the issuance of which
resulted in an adjustment in the Exercise Price pursuant to this Section, the
Exercise Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Exercise Price made
pursuant to the provisions of this Section after the issuance of such Common
Stock Equivalents) had the adjustment of the Exercise Price made upon the
issuance of such Common Stock Equivalents been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such Common Stock Equivalents actually exercised.
Notwithstanding anything herein to the contrary, issuances of any stock or stock
options under any employee benefit plan of the Company, whether now existing or
approved by the Company and its stockholders in the future, shall not be subject
to the provisions of this Section.
(e) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a market value basis) in one or a series of
related transactions, or (3) tender or other offer or exchange (whether by the
Company or another Person) pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, stock, cash
or property of the Company or another Person; then the Holder shall have the
right thereafter to (A) exercise this Warrant for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and the Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the Common Stock for which this Warrant
could have been exercised immediately prior to such merger, consolidation or
sales would have been entitled, (B) in the case of a merger or consolidation,
require the surviving entity to issue to the Holder a warrant entitling the
Holder to acquire shares of such entity's common stock, which warrant shall have
terms identical mutatis mutandis (including with respect to exercise) to the
terms of this Warrant and shall be entitled to all of the rights and privileges
set forth herein and the agreements pursuant to which this Warrant was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon exercise thereof), or (C) in the event of an exchange
or tender offer or other transaction contemplated by clause (3) of this Section,
tender or exchange this Warrant for such securities, stock, cash and other
property receivable upon or deemed to be held by holders of Common Stock that
have tendered or exchanged their shares of Common Stock following such tender or
exchange, and the Holder shall be entitled upon such exchange or tender to
receive such amount of securities, cash and property as the shares of Common
Stock for which this Warrant could have been exercised immediately prior to such
tender or exchange would have been entitled as would have been issued. In the
case of clause (B), the exercise price applicable for the newly issued warrant
shall be based upon the amount of securities, cash and property that each shares
of Common Stock would receive in such transaction and the Exercise Price
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale, consolidation, tender or exchange shall include
such terms so as continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion or
exercise following such event. This provision shall similarly apply to
successive such events.
<PAGE>
(f) For the purposes of this Section 9, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall 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) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to
Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(i) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; or (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, grant of rights or warrants, or if a record is not to
<PAGE>
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds;
or
(b) Cashless Exercise. Except during the 30 days preceding the
Redemption Date, if any, and at any time after the earlier to occur of the
Effectiveness Date (as defined in the Registration Rights Agreement) and the
date the initial registration statement filed pursuant to the Registration
Rights Agreement is declared effective by the Commission, when a registration
statement covering the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective, the Holder may surrender
this Warrant to the Company together with a notice of cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of this Warrant.
<PAGE>
11. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares of Common Stock issuable upon such
exercise and held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of an exercise hereunder, unless the
exercise at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares of Common Stock which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
<PAGE>
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
8229 Boone Boulevard, Suite 802, Vienna, Virginia 22182; facsimile number (703)
506-9471, attention Geert Kersten, or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
14. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
<PAGE>
(b) Subject to Section 15(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) The corporate laws of the State of Colorado shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
CEL-SCI CORPORATION
By:_________________________________
Name:
Title:
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FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cel-Sci Corporation:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of Cel-Sci Corporation (the
"Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________
______________________________
______________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
______________________________
______________________________
(Please print name and address)
Dated:______________ Name of Holder:
____________________________
(Print)
(By:) ______________________
(Name:)_____________________
(Title:)_____________________
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon 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 to which the
within Warrant relates and appoints ____________ attorney to transfer said right
on the books of Cel-Sci Corporation with full power of substitution in the
premises.
Dated:
_____________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
_________________________________
Address of Transferee
_________________________________
_________________________________
In the presence of:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
CEL-SCI CORPORATION
WARRANT
Warrant No.[ ] Dated: December 8, 1999
Cel-Sci Corporation, a Colorado corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered and permitted assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company the total number of shares of Common Stock, $.01 par value per share
(the "Common Stock"), of the Company (each such share, a "Warrant Share" and all
such shares, the "Warrant Shares") calculated pursuant to Section 3 of this
Warrant (subject to adjustment for certain events as set forth herein) at an
exercise price equal to $.001 per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), from the date hereof through and
including the 30th Trading Day following December 8, 2002 (such later date, the
"Expiration Date"), and subject to the following terms and conditions (certain
terms used herein are defined in Exhibit A attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent or to the Company at the address specified in Section 13.
Upon any such registration or transfer, a new warrant to purchase Common Stock,
<PAGE>
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of this Warrant and of the original holder of this Warrant under the Purchase
Agreement (as defined in Exhibit A).
3. Duration, Vesting and Exercise of Warrant.
(a) The vesting of the Warrant Shares which the Holder may acquire
pursuant to this Warrant shall occur on the dates (each a "Vesting Date") set
forth in this Section 3. On each such date, this Warrant shall vest with respect
to a number of Warrant Shares calculated pursuant to Section 3(b). The first
vesting date (the "First Vesting Date") shall be the 360th day following the
Closing Date (as defined in Exhibit A). An additional Vesting Date shall occur
on each sixth month anniversary of the First Vesting Date through and including
December 8, 2002. The Company and the Holder agree that the number of Warrant
Shares that the Holder may acquire hereunder may only be increased, and never
decreased, from and after the First Vesting Date.
(b) Except as otherwise set forth in this Warrant, this Warrant
shall vest and become exercisable on a Vesting Date as described in Section 3(a)
for the number of Warrant Shares calculated in accordance with the following
formula:
[(C x PA) / A] - C
C = Shares (as defined in Exhibit A) held by the Holder on
the Vesting Date less any hedged Shares.
PA = The Adjustment Price from the immediately preceding
Vesting Date or, with respect to the First Vesting Date,
$2.4375 (which number shall be subject to equitable
adjustments for stock splits, recombinations and similar
events) (the "Initial Closing Price").
A = "Adjustment Price," which is equal to the lesser of (y)
the Initial Closing Price, or (z) the average of the 10
lowest Per Share Market Values during the 30 Trading Days
immediately preceding the Vesting Date.
If the number calculated in accordance with the foregoing formula is
zero or a negative number, no Warrant Shares shall vest (in the case of the
First Vesting Date) or no additional Warrant Shares will vest (in the case of
any subsequent Vesting Dates) for such Vesting Date. In addition, the Holder
shall not be obligated to transfer any shares of Common Stock to the Company and
the number Warrant Shares exercisable hereunder which shall have previously
vested will not decrease.
(c) The occurrence of any of the following events shall also be deemed
a Vesting Date under this Warrant. The calculation set forth in Section 3(b)
shall be made on the date of the occurrence of such events and "Adjustment
Price" shall be deemed to mean the average of the 10 lowest Per Share Market
Values during the 30 Trading Days immediately preceding the date of such
occurrence:
<PAGE>
(i) upon the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of in excess of 1/3 of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's board of directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least 2/3 of the
securities of the surviving entity or acquirer of such assets or (iv) the
execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i), (ii)
or (iii);
(ii) immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under Title 11 of the
United States Code, or an entering into of an order for relief in an involuntary
case under Title 11 of the United States Code, or adoption by the Company of a
plan of liquidation or dissolution;
(iii) five (5) Business Days prior to the proposed consummation
with respect to the Company of a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Exchange Act (or, if necessary, such earlier date as the Company
shall determine in good faith to be required in order for the Holder to be able
to participate in such transaction), it being agreed that the Holder will
receive actual notice of the 13e-3 Statement filed with the Commission on the
date filed and actual notice of the date of acceleration hereunder no later than
such date;
(iv) The Common Stock fails to be listed or quoted for trading
on the AMEX or a Subsequent Market for a period of five (5) Trading Days (which
need not be consecutive Trading Days);
(v) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell Registrable Securities
under the Underlying Shares Registration Statement for any reason for five (5)
or more Trading Days (whether or not consecutive); or
(vi) The Company shall fail or default in the timely performance
of any material obligation under the Transaction Documents and such failure or
default shall continue uncured for a period of five (5) Business Days after the
date on which notice of such failure or default is first given to the Company
(it being understood that no prior notice need be provided in the case of
defaults which cannot reasonably be cured within a 5-day period).
<PAGE>
(d) Additional Vesting Dates shall also occur on such dates, if any,
on which the Company or any subsidiary thereof, shall, except in connection with
(A) the granting of shares of Common Stock or stock options to employees,
officers and directors pursuant to any stock bonus plan or employee benefit plan
heretofore or hereinafter duly adopted by the Company and (B) a Strategic
Transaction (as defined below), issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into or
exchangeable for shares of Common Stock ("Common Stock Equivalents"), entitling
any person or entity to acquire shares of Common Stock at a price per share less
than the Initial Closing Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such issuance, be entitled to receive shares of Common Stock at a price
less than the Initial Closing Price, such issuance shall be deemed to have
occurred for less than the Initial Closing Price), either in one transaction
resulting in gross proceeds to the Company in excess of $1,000,000 or a series
of transactions resulting in aggregate gross proceeds to the Company in excess
of $1,000,000 (any such transaction or series of transactions, a "Discounted
Offering" and the date of a Discounted Offering, a "Discounted Offering Date"),
then in addition to any other vesting of Warrant Shares pursuant to the terms
hereof, on a Discounted Offering Date, this Warrant shall vest with respect to
the number of Warrant Shares calculated in accordance with the formula set forth
below:
[(C x I) / DOAP] - C
C = Shares held by the Holder on the Vesting Date less an
hedged Shares
I = Initial Closing Price
DOAP = "Discounted Offering Adjustment Price," equal to the lesser of (x)
the Initial Closing Price, (y) the average of the Per Share Market
Values for the 10 trading days immediately preceding the Discounted
Offering Date, or (z) the price per share of Common Stock or Common
Stock Equivalent (as the case may be) issued pursuant to the
Discounted Offering (taking into account all actual or implied
discounts).
If the number calculated in accordance with the foregoing formula is
zero or a negative number, no Warrant Shares shall vest pursuant to the terms
hereof and the Holder shall not be obligated to transfer any shares of Common
Stock to the Company. For purposes of this Section, a "Strategic Transaction"
shall mean a transaction or relationship in which the Company issues shares of
Common Stock to an entity which is, itself or through its subsidiaries, an
operating company in a business related to the business of the Company and in
which the Company receives material benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital.
(e) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 5:00 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 5:00 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
<PAGE>
(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
4. Delivery of Warrant Shares.
(a) Upon surrender of this Warrant, with the Form of Election to
Purchase attached hereto duly completed and signed, to the Company at its
address for notice set forth in Section 13 and upon payment of the Exercise
Price multiplied by the number of Warrant Shares that the Holder intends to
purchase hereunder, in the manner provided hereunder, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly (but in
no event later than four (4) Trading Days after the Date of Exercise (as defined
herein)) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends, except when an Underlying Shares Registration
Statement is not then effective and the Warrant Shares are not freely
transferable pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"). Any person so designated by the Holder to
receive Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant. The Company shall,
upon request of the Holder, if available, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions. A
"Date of Exercise" means the date on which the Company shall have received (i)
this Warrant (or any New Warrant, as applicable), with the Form of Election to
Purchase attached hereto (or attached to such New Warrant) appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the number
of Warrant Shares to be purchased so indicated by the Holder hereof.
(b) If the Company fails to deliver to the Holder to an address in
the United States certificate or certificates representing the Warrant Shares
pursuant to Section 4(a) by the fourth (4th) Trading Day after the Date of
Exercise, the Company shall pay to such Holder, in cash, as liquidated damages
and not as a penalty, the lesser of (A) $5,000 and (B) $0.10 per Warrant Share
for which a certificate was not timely delivered pursuant to the terms hereof,
for each day after such fourth (4th) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the fourth (4th) Trading Day
after the Date of Exercise, and if after such fourth (4th) Trading Day the
Holder purchases (in an open market transaction or otherwise) shares of Common
<PAGE>
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the
Company shall pay (1) in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver pursuant to
Section 4(b) to deliver to the Holder in connection with the exercise at issue
by (B) the Per Share Market Value on the Date of Exercise and (2) deliver to the
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations under Section
4(b). For example, if the Holder purchases Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted exercise of
shares of Common Stock with a market price on the date of exercise which totaled
$10,000, under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. If the
Company breaches its obligations under this Warrant, then, in addition to any
other liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
<PAGE>
7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant notwithstanding such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(i) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate) or
otherwise make a distribution or distributions on shares of its Common Stock or
on any other class of capital stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock into a larger number of shares, or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
(ii) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately prior
to such reclassification, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 8(b) upon any exercise following any such
reclassification, transfer or share exchange.
<PAGE>
(iii) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
8(i), (ii) and (iv)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(iv) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a market value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of
the Company or another Person; then the Holder shall have the right thereafter
to (A) exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the Common Stock for which this Warrant could
have been exercised immediately prior to such merger, consolidation or sales
would have been entitled, (B) in the case of a merger or consolidation, require
the surviving entity to issue to the Holder a warrant entitling the Holder to
acquire shares of such entity's common stock, which warrant shall have terms
identical mutatis mutandis (including with respect to exercise) to the terms of
this Warrant and shall be entitled to all of the rights and privileges set forth
herein and the agreements pursuant to which this Warrant was issued (including,
without limitation, as such rights relate to the acquisition, transferability,
registration and listing of such shares of stock other securities issuable upon
exercise thereof), or (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and the Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such tender or exchange
would have been entitled as would have been issued. In the case of clause (B),
the exercise price applicable for the newly issued warrant shall be based upon
the amount of securities, cash and property that each share of Common Stock
would receive in such transaction and the Exercise Price immediately prior to
the effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
<PAGE>
(v) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall 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) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(vi) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Exercise Price is adjusted pursuant to Section
8(iii) above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser and
such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(viii) If (i)the Company shall declare a dividend (or any other
distribution) on its Common Stock; (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least twenty calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, grant of rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
<PAGE>
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the AMEX or a Subsequent Market for the five
(5) trading days immediately prior to (but not
including) the Date of Exercise as reported by Bloomberg
Information Systems, Inc. (or any successor to its
function of reporting stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of this Warrant.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
<PAGE>
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days' prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days' prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(c) If the Company Stock is then listed for trading on the AMEX and the
Company has not obtained the Shareholder Approval (as defined below), then the
Company may not issue in excess of the Issuable Maximum (as defined herein)
Warrant Shares upon exercise of this Warrant. The Issuable Maximum equals
3,400,297 (which number shall be subject to adjustment pursuant to the
anti-dilution provisions hereof multiplied by the quotient obtained by dividing
<PAGE>
(x) the number of Shares issued and sold to the original Holder on the Closing
Date by (y) the number of Shares issued and sold by the Company on the Closing
Date. If on any Date of Exercise (such date, the "Trigger Date"): (A) the
Company Stock is listed for trading on the AMEX, (B) the aggregate number of
shares of Common Stock that would then be issuable upon exercise in full of this
Warrant, together with any shares of Common Stock previously issued upon
exercise of this Warrant, would equal or exceed the Issuable Maximum, and (C)
the Company shall not have previously obtained the vote of shareholders, if any,
as may be required by the applicable rules and regulations of the American Stock
Exchange to approve the issuance of shares of Common Stock in excess of the
Issuable Maximum pursuant to the terms hereof (the "Shareholder Approval"), then
the Company shall issue to the Holder a number of shares of Common Stock equal
to the Issuable Maximum and, with respect to the shares whose issuance would
result in an issuance of shares of Common Stock in excess of the Issuable
Maximum, (the "Excess Warrant Shares"), the Company shall, within three (3)
Trading Days of the Trigger Date, provide the Holder with written notice of its
intention to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as possible, but in any event no later than
60 days (or 90 days in case the Commission provides the Company with comments to
its proxy material) after the Trigger Date (such 60th day or 90th day, if
applicable, the "Target Date") or (2) pay to the Holder, within three (3)
Trading Days from the Trigger Date, an amount in cash equal to the product of
(x) the Excess Warrant Shares multiplied by (y) the closing sales price of the
Common Stock on (a) the Target Date or (b) the Trigger Date, whichever is
greater (the "Cash Payment"). A failure by the Company to timely provide the
Holder with a written notice pursuant to the immediately preceding sentence,
shall entail an automatic election by the Company to pay the Cash Payment to the
Holder pursuant to clause (2) of the immediately preceding sentence. In the
event the Company has elected to seek the Shareholder Approval pursuant to the
terms hereof and the Company does not obtain the Shareholder Approval on or
prior to the Target Date, then, on the Target Date, the Company shall pay the
Cash Payment to the Holder. If the Company fails to pay the Cash Payment in full
pursuant to this Section within seven (7) days after the date payable, the
Company will pay interest on such amount at a rate of 18% per annum, or such
lesser maximum amount that is permitted to be paid by applicable law, to the
Holder, accruing daily from the date payable until such amount, plus all such
interest thereon, is paid in full. The Company and the Holder understand and
agree that shares of Common Stock issued upon exercise of this Warrant and then
held by the Holder or an affiliate thereof may not be used to cast votes or be
deemed outstanding for purposes of any vote to obtain the Shareholder Approval.
In the event the Company has elected to seek the Shareholder Approval pursuant
to the terms hereof, the Company shall not be required to make any payments
pursuant to Section 4(b) hereof prior to the date the Company has obtained the
Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
<PAGE>
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:00 p.m. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 5:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
with next day delivery specified thereon, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 8229 Boone Boulevard, Suite
802, Vienna, Virginia 22182; facsimile number (703) 506-9471, attention Geert
Kersten, or (ii) if to the Holder, to the Holder at the address or facsimile
number appearing on the Warrant Register or such other address or facsimile
number as the Holder may provide to the Company in accordance with this Section
13.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant.
Upon thirty (30) days' notice to the Holder, the Company may appoint a new
warrant agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall
be construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) The corporate laws of the State of Colorado shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.
<PAGE>
(d) The headings herein are for convenience only, do not constitute
a part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
CEL-SCI CORPORATION
By:
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cel-Sci Corporation:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Cel-Sci
Corporation and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________
_____________________________
_____________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
_____________________________
_____________________________
(Please print name and address)
<PAGE>
Dated: _____________ , Name of Holder:
(Print) __________________________
(By:) __________________________
(Name:) __________________________
(Title:)(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon 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
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Cel-Sci Corporation with full power of
substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<PAGE>
EXHIBIT A
For purposes of this Warrant:
(i) "AMEX" shall mean the American Stock Exchange.
(ii) "Business Day" means any day except Saturday, Sunday, the day
following Christmas, the day following Thanksgiving and any day which shall be a
federal legal holiday or a day on which banking institutions in the State of New
York and the Commonwealth of Virginia generally are authorized or required by
law or other governmental action to close.
(iii) "Closing Date" shall have the meaning set forth in the Purchase
Agreement.
(iv) "Commission" means the Securities and Exchange Commission.
(v) "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the AMEX or on any
Subsequent Market, or if there is no such price on such date, then the closing
bid price on the AMEX or on such Subsequent Market on the date nearest preceding
such date, or (b) if the Common Stock is not then listed or quoted on the AMEX
or a Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a majority
of the applicable Warrant Shares.
(vi) "Purchase Agreement" means the Securities Purchase Agreement, dated
the date hereof to which the Company and the original Holder are parties and
pursuant to which this Warrant was issued.
(vii) "Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof to which the Company and the original Holder
are parties.
(viii) "Shares" shall have the meaning set forth in the Purchase Agreement.
(ix) "Subsequent Market" shall mean any of the New York Stock Exchange,
Inc., Nasdaq Stock Market or Nasdaq SmallCap Market.
<PAGE>
(x) "Trading Day" means a day on which the Common Stock is traded on AMEX
or any Subsequent Market, as the case may be, or (b) if the Common Stock is not
listed on the AMEX or on a Subsequent Market, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(c) if the Common Stock is not quoted on the OTC Bulletin Board a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting price); provided, however, that in the
event that the Common Stock is not listed or quoted, as set forth in (a), (b) or
(c) hereof, the Trading Day shall mean a Business Day.
(xi) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xii) "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement dated as of the date hereof between the Company and the original
Holder hereof and covering the resale of the Registrable Securities by the
selling stockholders thereunder.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 8, 1999, among Cel-Sci Corporation, a Colorado corporation
(the "Company"), and the investors signatory hereto (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, among the Company and the Purchasers (the "Purchase
Agreement").
In consideration of the mutual covenants contained in the Purchase
Agreement and in this Agreement, the Company and the Purchasers hereby agree as
follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are defined
in the Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following terms shall have
the following meanings:
"Adjustable Warrants" shall have the meaning set forth in the Purchase
Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday, the day following
Christmas, the date following Thanksgiving and any day which shall be a federal
legal holiday or a day on which banking institutions in the state of New York
and the Commonwealth of Virginia generally are authorized or required by law or
other governmental action to close.
"Closing Date" shall have the meaning set forth in the Purchase Agreement.
"Closing Warrants" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par value per share
and any other securities into which such stock shall hereafter be redistributed
or recapitalized.
<PAGE>
"Effectiveness Date" means March 31, 2000.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means January 14, 2000.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the Shares and (ii) the shares of
Common Stock issuable upon exercise of the Warrants.
"Registration Statement" means the registration statement and any
additional registration statement contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any rule or
regulation hereafter adopted by the Commission to replace such Rule.
<PAGE>
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any rule or
regulation hereafter adopted by the Commission to replace such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any rule or
regulation hereafter adopted by the Commission to replace such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock issued to the Purchasers on the
Closing Date pursuant to the Purchase Agreement.
"Special Counsel" means one special counsel to the Holders for which the
Holders will be reimbursed by the Company pursuant to Section 4.
"Transaction Documents" shall have the meaning set forth in the Purchase
Agreement.
"Underwritten Registration or Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
"Vesting Date" shall have the meaning set forth in the Adjustable Warrants.
"Warrants" means the Closing Warrants and the Adjustable Warrants.
2. Shelf Registration
a. On or prior to the Filing Date, the Company shall prepare and file with
the Commission a "Shelf" Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith as the Holders may consent). The Company shall use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the Effectiveness Date, and shall use its best efforts to
keep such Registration Statement continuously effective under the Securities Act
until the date which is two (2) years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the affected
Holders (the "Effectiveness Period"), provided, that the Company shall not be
<PAGE>
deemed to have used its best efforts to keep the Registration Statement
effective during the Effectiveness Period if it voluntarily takes any action
that would result in the Holders not being able to sell the Registrable
Securities covered by such Registration Statement during the Effectiveness
Period, unless such action is required under applicable law or the Company has
filed a post-effective amendment to the Registration Statement and the
Commission has not declared it effective.
b. In order to account for the fact that the number of shares of Common
Stock that are issuable upon exercise of the Adjustable Warrants is determined
in part upon the market price of the Common Stock on a Vesting Date, the initial
Registration Statement to be filed hereunder shall include (but not be limited
to) a number of shares of Common Stock equal to no less than the sum of (i) the
number of shares issuable upon exercise of the Adjustable Warrants on the First
Vesting Date assuming, for the purposes of this subsection that, on the First
Vesting Period, the Adjustment Price is 50% of the Per Share Market Value for
the Trading Day immediately preceding the Closing Date and that each Holder
holds the entire number of Shares purchased under the Purchase Agreement and
(ii) the number of shares issuable upon exercise in full of the Closing Warrants
and (iii) the number of Shares (the sum of (i), (ii) and (iii), the "Initial
Minimum").
c. If the Holders of a majority of the Registrable Securities then
outstanding so elect, an offering of Registrable Securities pursuant to a
Registration Statement may, after the Effectiveness Date, be effected in the
form of an Underwritten Offering. In such event, and, if the managing
underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
among the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
d. If any of the Registrable Securities are to be sold in an Underwritten
Offering, the investment banker that will administer the offering will be
selected by the Holders of a majority of the Registrable Securities included in
such offering upon consultation with the Company. No Holder may participate in
any Underwritten Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
e. If (i) the initial Registration Statement is not filed on or before the
Filing Date (if the Company files such Registration Statement without affording
the Holder the opportunity to review and comment on the same as required by
Section 3(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a request to
accelerate in accordance with Rule 461 promulgated under the Securities Act
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed" or is not subject to further review, or (iii) the initial
Registration Statement filed hereunder is not declared effective by the
Commission on or before the Effectiveness Date, or (iv) after a Registration
Statement has been declared effective by the Commission, such Registration
Statement is either not effective as to all Registrable Securities required to
be covered thereby throughout the Effectiveness Period or the Holders are not
<PAGE>
permitted for any reason to make sales of all Registrable Securities (which
shall be reduced by the Excess Warrant Shares (as defined in the Adjustable
Warrants) during the period, if any, between the time the Company has elected to
obtain the Shareholder Approval (as defined in the Adjustable Warrants) and the
Target Date) thereunder during such period, (v) other than in the case of an
Underwritten Offering, an amendment to the Registration Statement is not filed
by the Company with the Commission within ten (10) days (or thirty (30) days in
case the amendment includes responses to comments received from the Commission
which relate to the financial statements of the Company) of the Commission's
notifying the Company that such amendment is required in order for a
Registration Statement to be declared effective, or (vi) trading in the Common
Stock shall be suspended from the AMEX (as defined herein) or a Subsequent
Market (as defined herein) for more than three (3) Business Days (which need not
be consecutive days) (any such failure or breach being referred to as an
"Event," and for purposes of clauses (i), (iii) and (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five (5) day
period is exceeded, or for purposes of clause (v) the date on which such ten
(10) day period or thirty (30) day period, as applicable, is exceeded, or for
purposes of clause (vi) the date on which such three (3) Business Day period is
exceeded being referred to as "Event Date"), then, in any such case, as partial
relief for the damages suffered therefrom by the Holder (which remedy shall not
be exclusive of any other remedies available at law or in equity), the Company
shall on the Event Date and on each monthly anniversary thereof until the
triggering Event is cured, pay to each Holder an amount in cash, as liquidated
damages for the estimated cost to such Holder of not having liquid securities in
the time contemplated by the Transaction Documents and not as a penalty, equal
to the product of (A) $37,500 and (B) the quotient obtained by dividing (x) the
number of Shares issued and sold to such Holder on the Closing Date by (y) the
number of Shares issued and sold by the Company on the Closing Date (and the
pro-rata portion for partial months until such event is cured). The payments to
which the Holders shall be entitled pursuant to this Section are referred to
herein as "Registration Delay Payments." Registration Delay Payments shall be
calculated on a cumulative basis and paid within five (5) Business Days of the
Event Date and each monthly anniversary thereof. If the Company fails to make
Registration Delay Payments in a timely manner, such Registration Delay Payments
shall bear interest at the rate of 2% per month (or the maximum rate permitted
by law), pro-rated for partial months, until paid in full.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
a. Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith, or, in connection
with an Underwritten Offering hereunder, such other form agreed to by the
Company and the Holders) which shall contain the "Plan of Distribution" attached
hereto as Annex A (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of a Registration Statement or any related Prospectus or any
<PAGE>
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities, their Special Counsel, or
any managing underwriters, shall reasonably object.
b. (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within ten (10) days, to any
comments received from the Commission with respect to the Registration Statement
or any amendment thereto and as promptly as reasonably possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement, provided, that in the case of
comments received from the Commission relating to the financial statements of
the Company, the Company shall have up to thirty (30) days to respond to such
comments; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
c. (i) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares of Common
Stock then registered in a Registration Statement. The Company shall have twenty
(20) days to file such additional Registration Statements after its receipt of
notice of the requirement thereof which the Holders may give at any time when
the number of Registrable Securities exceeds 85% of the number of shares of
Common Stock then registered in a Registration Statement hereunder. In such
event, the Registration Statement required to be filed by the Company shall
include a number of shares of Common Stock equal to no less than 200% of the
number of shares of Common Stock then issuable upon exchange of the Adjustable
Warrants and any other Registrable Securities not then registered in a
Registration Statement.
(ii) File such supplements or attach "stickers" to the Registration
Statement or Prospectus as and when required by the Commission to evidence a
material amount of resales by a Holder pursuant to a Prospectus. In connection
therewith, if such supplements or "stickers" are periodically required by the
Commission, the Company shall, within four (4) Business Days, file such
supplements or attach such "stickers" whenever a Holder has sold 50% of the
Registrable Securities covered by the then outstanding Prospectus (as last
supplemented or "stickered") in order to cover 100% of the number of the
outstanding Registrable Securities.
<PAGE>
d. Notify the Holders of Registrable Securities to be sold, their Special
Counsel and any managing underwriters as promptly as reasonably possible (and,
in the case of (i)(A) below, not less than five (5) Business Days (or, in the
case of a supplement or "sticker" required to be filed or attached pursuant to
Section 3(c)(ii), within one (1) Business Day) prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement has been
filed; (B) when the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission comments in
writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event or passage
of time that makes the financial statements included in the Registration
Statement ineligible for inclusion therein or any statement made in the
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
e. Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
f. If requested by any managing underwriter or the Holders of a majority
in interest of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 3(f) that
would, in the opinion of counsel for the Company, violate applicable law or be
materially detrimental to the business prospects of the Company.
<PAGE>
g. Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
h. Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
i. Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to any material tax in any such
jurisdiction where it is not then so subject.
j. Cooperate with the Holders and any managing underwriters to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration Statement,
which certificates shall be free, to the extent permitted by the Purchase
Agreement, of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such managing
underwriters or Holders may reasonably request.
k. Upon the occurrence of any event contemplated by Section 3(d)(vi), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
l. Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed on the American Stock Exchange ("AMEX")
or on any other stock market or trading facility on which the shares of Common
Stock are traded, listed or quoted (each a "Subsequent Market") as and when
required pursuant to the Purchase Agreement.
<PAGE>
m. Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to each Holder and the managing underwriters, if any, of opinions of counsel to
the Company and updates thereof addressed to each Holder and each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten Offerings and
such other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, use its best reasonable
efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Underwritten Offering); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and any
managing underwriters to evidence the continued validity of the representations
and warranties made pursuant to Section 3(m)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
n. In case of an Underwritten Offering, make available for inspection by
the selling Holders, any representative of such Holders, any underwriter
participating in any disposition of Registrable Securities, and any attorney or
accountant retained by such selling Holders or underwriters, at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries other than confidential technological information of the Company
and its subsidiaries, and cause the officers, directors, agents and employees of
the Company and its subsidiaries to supply all information in each case
reasonably requested by any such Holder, representative, underwriter, attorney
or accountant in connection with the Registration Statement; provided, however,
that any information that is determined in good faith by the Company in writing
to be of a confidential nature at the time of delivery of such information shall
be kept confidential by such Persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond to
<PAGE>
inquiries of regulatory authorities; (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
o. Comply with all applicable rules and regulations of the Commission.
p. The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities and
the beneficial ownership of Common Stock held by such Holder as is required by
law to be disclosed in the Registration Statement, and the Company may exclude
from such registration the Registrable Securities of any such Holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request. If the Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (if such reference to such Holder by name
or otherwise is not required by the Securities Act or any similar Federal
statute then in force) the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
4. Registration Expenses
a. All fees and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent specified in Section
4(b), shall be borne by the Company whether or not pursuant to an Underwritten
Offering and whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the AMEX and any Subsequent Market on which the Common
Stock is then listed for trading, and (B) in addition to the terms of the
Purchase Agreement, in compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications or exemptions of the
Registrable Securities under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) other than in the case of an Underwritten Offering, printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses of the Company, (iv) fees and disbursements of counsel for
the Company and Special Counsel for the Holders (in the case of Special Counsel
for the Holders, up to a maximum of $5,000), (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
<PAGE>
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder.
b. If the Holders require an Underwritten Offering pursuant to the terms
hereof, the Company shall be responsible for all costs, fees and expenses in
connection therewith, except for the fees and disbursements of the Underwriters
(including any underwriting commissions and discounts) and their legal counsel
and accountants. By way of illustration which is not intended to diminish from
the provisions of Section 4(a), the Holders shall not be responsible for, and
the Company shall be required to pay the fees or disbursements incurred by the
Company (including by its legal counsel and accountants) in connection with, the
preparation and filing of a Registration Statement and related Prospectus for
such offering, the maintenance of such Registration Statement in accordance with
the terms hereof and the listing of the Registrable Securities in accordance
with the requirements hereof.
5. Indemnification
a. Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(e). The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement.
b. Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
<PAGE>
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus, or in
any amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
c. Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). In the case of an event pursuant to clause (1) or (2)
of the immediately preceding sentence, the Indemnifying Party shall only be
responsible for the fees and expenses of one additional counsel for all
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
<PAGE>
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
d. Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder 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.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
<PAGE>
6. Miscellaneous
a. Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
b. No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in Schedule 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted will not conflict with the rights of
the Holders set forth herein and are not otherwise in conflict or inconsistent
with the provisions of this Agreement.
c. No Piggyback on Registrations. Except as and to the extent specified in
Schedule 6(b) hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders.
d. Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.
e. Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Sections 3(d)(ii), 3(d)(iii),
3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(k), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
<PAGE>
f. Piggy-Back Registrations. If at any time when there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered.
g. Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least two-thirds of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
h. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 5:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Cel Sci Corporation
8229 Boone Boulevard, Suite 802
Vienna, Virginia 22182
Facsimile No.: (703) 506-9471
Attn: Chief Financial Officer
With copies to: Hart & Trinen
1624 Washington Street
Denver, Colorado
Facsimile No.: (303) 839-5414
Attn: Bill Hart, Esq.
<PAGE>
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in
the Purchase Agreement or the stock transfer
books of the Company or such other address as
may be designated in writing hereafter, in the
same manner, by such Person.
i. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under this Agreement and the Purchase Agreement.
j. Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
k. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
l. Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
m. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
n. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
o. Shares Held by the Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
<PAGE>
p. Independent Nature of Holders' Obligations and Rights. The obligations
of each Holder hereunder is several and not joint with the obligations of any
other Holder hereunder, and neither Holder shall be responsible in any way for
the performance of the obligations of any other Holder hereunder. Nothing
contained herein or in any other agreement or document delivered at any closing,
and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
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SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CEL SCI CORPORATION
By:_____________________________________
Name:
Title:
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SIGNATURE PAGES FOR PURCHASERS FOLLOW]
<PAGE>
ADVANTAGE FUND II LTD.
By:_____________________________________
Name:
Title:
Address for Notice:
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
Attention: W.R. Weber
With copies to:
Genesee International Inc.
10500 NE 8th Street
Suite 1920
Bellevue, WA 98004
Facsimile: (425) 462-4645
Attention: Christopher Purrier
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson and Eric L. Cohen
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SIGNATURE PAGE FOR PURCHASER FOLLOWS]
<PAGE>
KOCH INVESTMENT GROUP LTD.
By:_____________________________________
Name:
Title:
Address for Notice:
4111 East 37th Street North
Wichita, Kansas 67270
Facsimile: (316) 828-7947
Attention: Josh Taylor
<PAGE>
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
<PAGE>
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of CEL-SCI, whereby certain
selling shareholders propose to sell up to 2,902,899 shares of CEL-SCI's common
stock. Reference is also made to Exhibit 5 included in the Registration
Statement relating to the validity of the securities proposed to be sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN
William T. Hart
Denver, Colorado
January 12, 2000
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of CEL-SCI Corporation on Form S-3 of our report dated December 6, 1999
appearing in the Annual Report on Form 10-K of CEL-SCI Corporation for the year
ended September 30, 1999. We also consent to the reference to us under the
heading "Experts" in the Prospectus which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Washington, DC
January 14, 2000
