EXHIBIT 1.1
4,761,905 SHARES OF COMMON STOCK AND
4,761,905 WARRANTS OF
CEL-SCI CORPORATION
UNDERWRITING AGREEMENT
December 19, 2013
▇▇▇▇▇▇▇ & Company (UK) Ltd.
As the Representative of the
several underwriters, if any, named in Schedule I hereto
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned, CEL-SCI Corporation, a company incorporated under the
laws of the State of Colorado (collectively with its subsidiaries and
affiliates, including, without limitation, all entities disclosed or described
in the Registration Statement as being subsidiaries or affiliates of CEL-SCI
Corporation, the "Company"), hereby confirms its agreement (this "Agreement")
with the several underwriters (such underwriters, including the Representative
(as defined below), the "Underwriters" and each an "Underwriter") named in
Schedule I hereto for which ▇▇▇▇▇▇▇ & Company (UK) Ltd. is acting as
representative to the several Underwriters (the "Representative" and if there
are no Underwriters other than the Representative, references to multiple
Underwriters shall be disregarded and the term Representative as used herein
shall have the same meaning as Underwriter) on the terms and conditions set
forth herein.
It is understood that the several Underwriters are to make a public
offering of the Public Securities as soon as the Representative deems it
advisable to do so. The Public Securities are to be initially offered to the
public at the public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms.
It is further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Closing Securities and, if any, the
Option Securities in accordance with this Agreement.
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(k).
"Affiliate" means with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person as such terms are used
in and construed under Rule 405 under the Securities Act.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except any Saturday, any Sunday, any day
which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.
"Closing" means the closing of the purchase and sale of the Closing
Securities pursuant to Section 2.1.
"Closing Date" means the hour and the date on the Trading Day on which all
conditions precedent to (i) the Underwriters' obligations to pay the Closing
Purchase Price and (ii) the Company's obligations to deliver the Closing
Securities, in each case, have been satisfied or waived, but in no event later
than 10:00 a.m. Eastern time on the third Trading Day following the date hereof
or at such earlier time as shall be agreed upon by the Representative and the
Company.
"Closing Purchase Price" shall have the meaning ascribed to such term in
Section 2.1(b), which aggregate purchase price shall be net of underwriting
discounts and commissions.
"Closing Securities" shall have the meaning ascribed to such term in
Section 2.1(a)(ii).
"Closing Shares" shall have the meaning ascribed to such term in Section
2.1(a)(i).
"Closing Warrants" shall have the meaning ascribed to such term in Section
2.1(a)(ii).
"Combined Purchase Price" shall have the meaning ascribed to such term in
Section 2.1(b).
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.01 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
"Company Auditor" means BDO USA LLP, with offices located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
"Company Counsel" means ▇▇▇▇ & ▇▇▇▇ LLC, with offices located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Contributing Party" shall have the meaning ascribed to such term in
Section 6.4(b).
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
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"Effective Date" shall have the meaning ascribed to such term in Section
3.1(f).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Execution Date" shall mean the date on which the parties execute and
enter into this Agreement.
"Exempt Issuance" means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equity holders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.
"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended.
"FINRA" means the Financial Industry Regulatory Authority.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(i).
"Indebtedness" means (a) any liabilities for borrowed money or amounts
owed in excess of $50,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others, whether or not the
same are or should be reflected in the Company's consolidated balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, and (c) the present value of any lease payments in excess of $50,000
due under leases required to be capitalized in accordance with GAAP.
"Intellectual Property Rights" shall have the meaning ascribed to such
term in Section 3.1(p).
"IP Company Counsel" means ▇▇▇▇ & ▇▇▇▇▇▇ PLLC, with offices located at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
"Liens" means a lien, charge, pledge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Lock-Up Agreements" shall mean the lock-up agreements, in the form of
Exhibit E attached hereto, delivered at the Closing by each of the Company's
officers, directors and each of their respective Affiliates and associated
partners.
"Material Adverse Effect" means (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
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Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document.
"Material Permit" shall have the meaning ascribed to such term in Section
3.1(n).
"Offering" shall have the meaning ascribed to such term in Section 2.1(c).
"Option Closing Date" shall have the meaning ascribed to such term in
Section 2.2(c).
"Option Closing Purchase Price" shall have the meaning ascribed to such
term in Section 2.2(b), which aggregate purchase price shall be net of discounts
and commissions.
"Option Securities" shall have the meaning ascribed to such term in
Section 2.2(a).
"Option Shares" shall have the meaning ascribed to such term in Section
2.2(a).
"Option Warrants" shall have the meaning ascribed to such term in Section
2.2(a).
"Over-Allotment Option" shall have the meaning ascribed to such term in
Section 2.2(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.
"Preliminary Prospectus" means, if any, any preliminary prospectus
relating to the Securities included in the Registration Statement or filed with
the Commission pursuant to Rule 424(b).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the final prospectus filed for the Registration
Statement with respect to the Securities.
"Prospectus Supplement" means, if any, any supplement to the Prospectus
complying with Rule 424(b) of the Securities Act that is filed with the
Commission.
"Public Securities" means, collectively, the Closing Securities and, if
any, the Option Securities.
"Registration Statement" means the registration statement prepared by the
Company on Form S-3 (File No. 333-186103) with respect to the Securities, as
amended as of the date hereof, including the Prospectus and Prospectus
Supplement, if any, the Preliminary Prospectus, if any, and all exhibits filed
with or incorporated by reference into such registration statement.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Road Show Materials" shall have the meaning ascribed to such term in
Section 6.1.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
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any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(i).
"Securities" means the Closing Securities, the Option Securities and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Share Purchase Price" shall have the meaning ascribed to such term in
Section 2.1(b).
"Shares" means, collectively, the shares of Common Stock delivered to the
Underwriters in accordance with Section 2.1(a)(i) and Section 2.2(a).
"SRFF" means Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, with offices located at
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Subsidiary" means any subsidiary of the Company and shall, where
applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date hereof.
"Trading Day" means a day on which the principal Trading Market is open
for trading.
"Trading Market" means any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).
"Transaction Documents" means this Agreement, the Warrants and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent" means Computershare Investor Services, the current
transfer agent of the Company, with a mailing address of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and a facsimile number of (▇▇▇) ▇▇▇-▇▇▇▇, and
any successor transfer agent of the Company.
"Underwriter Free Writing Prospectus" shall have the meaning ascribed to
such term in Section 4.22(a).
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if the Common Stock is not then listed or quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then reported in the
"Pink Sheets" published by Pink OTC Markets, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Representative and reasonably acceptable
to the Company, the fees and expenses of which shall be paid by the Company.
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"Warrant Purchase Price" shall have the meaning ascribed to such term in
Section 2.1(b).
"Warrants" means, collectively, the Common Stock purchase warrants
delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section
2.2(a), which shall be exercisable immediately, have a term of exercise equal to
five (5) years, and have an exercise price of $1.25, subject to adjustment as
provided therein, in the form of Exhibit A attached hereto.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Closing Warrants and the Option Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, in the aggregate, 4,761,905 shares of Common Stock and
Warrants to purchase up to 4,761,905 shares of Common Stock, and each
Underwriter agrees to purchase, severally and not jointly, at the Closing, the
following securities of the Company:
(i) the number of shares of Common Stock (the "Closing Shares") set
forth opposite the name of such Underwriter on Schedule I hereof; and
(ii) Warrants to purchase up to the number of shares of Common
Stock set forth opposite the name of such Underwriter on Schedule I hereof
(the "Closing Warrants" and, collectively with the Closing Shares, the
"Closing Securities").
(b) The aggregate purchase price for the Closing Securities shall equal
the amount set forth opposite the name of such Underwriter on Schedule I hereto
(the "Closing Purchase Price"). The combined purchase price for one (1) Share
and one Warrant to purchase one (1) Share shall be $0.5859 (the "Combined
Purchase Price") which shall be allocated as $0.52731 per share (the "Share
Purchase Price") and $0.05859 per Warrant (the "Warrant Purchase Price").
(c) On the Closing Date, each Underwriter shall deliver or cause to be
delivered to the Company, via wire transfer, immediately available funds equal
to such Underwriter's Closing Purchase Price and the Company shall deliver to,
or as directed by, such Underwriter its respective Closing Securities and the
Company shall deliver the other items required pursuant to Section 2.3
deliverable at the Closing. Upon satisfaction of the covenants and conditions
set forth in Sections 2.3 and 2.4, the Closing shall occur at the offices of
SRFF or such other location as the Company and Representative shall mutually
agree. The Closing Securities are to be offered to the public at the offering
price set forth on the cover page of the Prospectus Supplement (the "Offering").
2.2 Over-Allotment Option.
(a) For the purposes of covering any over-allotments in connection with
the distribution and sale of the Closing Securities, the Representative is
hereby granted an option (the "Over-Allotment Option") to purchase, in the
aggregate, up to 476,190 shares of Common Stock (the "Option Shares") and
Warrants to purchase up to 476,190 shares of Common Stock (the "Option Warrants"
and, collectively with the Option Shares, the "Option Securities") which may be
purchased in any combination of Option Shares and/or Option Warrants at the
Share Purchase Price and/or Warrant Purchase Price, respectively.
(b) In connection with an exercise of the Over-Allotment Option, (a) the
purchase price to be paid for the Option Shares is equal to the product of the
Share Purchase Price multiplied by the number of Option Shares to be purchased
and (b) the purchase price to be paid for the Option Warrants is equal to the
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product of the Warrant Purchase Price multiplied by the number of Option
Warrants (the aggregate purchase price to be paid on an Option Closing Date, the
"Option Closing Purchase Price").
(c) The Over-Allotment Option granted pursuant to this Section 2.2 may be
exercised by the Representative as to all (at any time) or any part (from time
to time) of the Option Securities within 45 days after the Execution Date. An
Underwriter will not be under any obligation to purchase any Option Securities
prior to the exercise of the Over-Allotment Option by the Representative. The
Over-Allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from the Representative, which must be confirmed in
writing by overnight mail or facsimile or other electronic transmission setting
forth the number of Option Shares and/or Option Warrants to be purchased and the
date and time for delivery of and payment for the Option Securities (each, an
"Option Closing Date"), which will not be later than three (3) full Business
Days after the date of the notice or such other time as shall be agreed upon by
the Company and the Representative, at the offices of SRFF or at such other
place (including remotely by facsimile or other electronic transmission) as
shall be agreed upon by the Company and the Representative. If such delivery and
payment for the Option Securities does not occur on the Closing Date, each
Option Closing Date will be as set forth in the notice. Upon exercise of the
Over-Allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option Shares
and/or Option Warrants specified in such notice. The Representative may cancel
the Over-Allotment Option at any time prior to the expiration of the
Over-Allotment Option by written notice to the Company.
2.3 Deliveries. The Company shall deliver or cause to be delivered to each
Underwriter (if applicable) the following:
(i) At the Closing Date, the Closing Shares and, as to each Option
Closing Date, if any, the applicable Option Shares, which shares shall be
delivered via The Depository Trust Company Deposit or Withdrawal at
Custodian system for the accounts of the several Underwriters;
(ii) At the Closing Date, the Closing Warrants and, as to each
Option Closing Date, if any, the applicable Option Warrants in
certificated form registered in the name or names, and in such authorized
denominations, as the applicable Underwriter may request in writing at
least one Business Day prior to the Closing Date and, if any, each Option
Closing Date
(iii) Contemporaneously herewith, a legal opinion of Company Counsel
addressed to the Underwriters, including, without limitation, a negative
assurance letter, substantially in the form of Exhibit B attached hereto,
and as to the Closing Date and as to each Option Closing Date, if any, a
bring-down opinion from Company Counsel addressed to the Underwriters and
in form and substance reasonably satisfactory to the Representative;
(iv) Contemporaneously herewith, a cold comfort letter from the
Company Auditor, addressed to the Underwriters and in form and substance
satisfactory in all respects to the Representative, dated as of the date
of this Agreement, and a bring-down letter dated as of the Closing Date
and each Option Closing Date, if any, from the Company Auditor, addressed
to the Underwriters and in form and substance satisfactory in all respects
to the Representative;
(v) Contemporaneously herewith, a legal opinion of IP Company
Counsel addressed to the Underwriters, including, without limitation, a
negative assurance letter, substantially in the form of Exhibit C attached
hereto and as to the Closing Date and as to each Option Closing Date, if
any, a bring-down opinion from IP Company Counsel addressed to the
Underwriters and in form and substance reasonably satisfactory to the
Representatives;
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(vi) Contemporaneously herewith, on the Closing Date and on each
Option Closing Date, if any, the duly executed and delivered Officer's
Certificate, substantially in the form required by Exhibit D attached
hereto;
(vii) Contemporaneously herewith, the duly executed and delivered
Lock-Up Agreements; and
(viii) Contemporaneously herewith, on the Closing Date and on each
Option Closing Date, if any, the duly executed and delivered Secretary's
Certificate, substantially in the form required by Exhibit E attached
hereto.
2.4 Closing Conditions. The respective obligations of each Underwriter
hereunder in connection with the Closing and each Option Closing Date, if any,
are subject to the following conditions being met (or being waived by the
Representative):
(i) the accuracy in all material respects (other than
representations and warranties of the Company already qualified by
materiality, which shall be true and correct in all respects), when made
and on the Closing Date and on each Option Closing Date, if any (unless as
of a specific date therein), of the representations and warranties of the
Company contained herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date and each Option
Closing Date, if any, shall have been performed;
(iii) the delivery by the Company of the items set forth in Section
2.3 of this Agreement;
(iv) the Registration Statement shall be effective on the date of
this Agreement and at each of the Closing Date and each Option Closing
Date, if any, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and, to the Company's
knowledge, no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of the Representative;
(v) by the Execution Date, if required by FINRA, the Underwriters
shall have received clearance from FINRA as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement;
(vi) the Closing Shares, the Option Shares and the Warrant Shares
have been approved for listing on the Trading Market; and
(vii) prior to and on each of the Closing Date and each Option
Closing Date, if any: (i) there shall have been no material adverse change
or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is set
forth in the Registration Statement and Prospectus; (ii) no action, suit
or proceeding, at law or in equity, shall have been pending or threatened
against the Company or any Affiliate of the Company before or by any court
or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; (iii) no stop order shall have been
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issued under the Securities Act and no proceedings therefor shall have
been initiated or threatened by the Commission; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto
shall contain all material statements which are required to be stated
therein in accordance with the Securities Act and the rules and
regulations thereunder and shall conform in all material respects to the
requirements of the Securities Act and the rules and regulations
thereunder, and neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto shall 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in
the Registration Statement, the Preliminary Prospectus, the SEC Reports or the
Disclosure Schedules, the Company represents and warrants to the Underwriters as
of the Execution Date, as of the Closing Date and as of each Option Closing
Date, if any, as follows:
(a) Subsidiaries. All of the direct and indirect Subsidiaries of the
Company are set forth in the Company's most recent Annual Report on Form 10-K,
as modified by any subsequent SEC Report. The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no Subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, except where the failure of a Subsidiary to be in
good standing could not reasonably be expected to result in a Material Adverse
Effect. The Company and each of the Subsidiaries has the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in a Material Adverse Effect and, to the knowledge of the Company, no Proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations 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 its stockholders and no further action is required by
the Company or its stockholders in connection therewith other than in connection
with the Required Approvals (as defined below). Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
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general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities at
the Closing and the consummation by the Company of the other transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, violate or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any
Subsidiary pursuant to, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement (written or oral), credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization, approval 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 having jurisdiction over the Company or its
Subsidiaries, its stockholders or the Trading Market in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
including the issuance and listing or quotation (as applicable) of the
Securities on the Trading Market, other than: (i) the filing with the Commission
of the Prospectus Supplement, (ii) filings with the Trading Market and (iii)
such filings as are required to be made under applicable state securities laws
(collectively, the "Required Approvals").
(f) Registration Statement. The Company has filed with the Commission the
Registration Statement under the Securities Act, which became effective on
February 28, 2013 (the "Effective Date"), for the registration under the
Securities Act of the Securities. At the time of such filing, the Company met
the requirements of Form S-3 under the Securities Act. The Registration
Statement meets the requirements set forth in Rule 415(a)(1)(x) under the
Securities Act and complies with said Rule and the Prospectus Supplement will
meet the requirements set forth in Rule 424(b). The Company has advised the
Representative of all further information (financial and other) with respect to
the Company required to be set forth therein in the Registration Statement and
Prospectus Supplement. If the Company has filed an abbreviated registration
statement to register additional securities pursuant to Rule 462(b) under the
Securities Act (the "462(b) Registration Statement"), then any reference herein
to the Registration Statement shall also be deemed to include such 462(b)
Registration Statement. Any reference in this Agreement to the Registration
Statement, the Prospectus or the Prospectus Supplement shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 which were filed under the Exchange Act, on or before the date of
this Agreement, or the issue date of the Prospectus or the Prospectus
Supplement, as the case may be; and any reference in this Agreement to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement,
the Prospectus or the Prospectus Supplement shall be deemed to refer to and
include the filing of any document under the Exchange Act after the date of this
Agreement, or the issue date of the Prospectus or the Prospectus Supplement, as
the case may be, deemed to be incorporated therein by reference. All references
in this Agreement to financial statements and schedules and other information
which is "contained," "included," "described," "referenced," "set forth" or
"stated" in the Registration Statement, the Prospectus or the Prospectus
Supplement (and all other references of like import) shall be deemed to mean and
10
include all such financial statements and schedules and other information which
is or is deemed to be incorporated by reference in the Registration Statement,
the Prospectus or the Prospectus Supplement, as the case may be. No stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or the Prospectus Supplement has been issued, and no proceeding for
any such purpose is pending or has been initiated or, to the Company's
knowledge, is threatened by the Commission. For purposes of this Agreement,
"free writing prospectus" has the meaning set forth in Rule 405 under the
Securities Act. The Company will not, without the prior consent of the
Representative, prepare, use or refer to, any free writing prospectus.
(g) Issuance of Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company. The Warrant Shares, when issued in accordance
with the terms of the Warrants, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The Company
has reserved from its duly authorized capital stock the maximum number of shares
of Common Stock issuable pursuant to the Transaction Documents. The holder of
the Securities will not be subject to personal liability by reason of being such
holders. The Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement.
(h) Capitalization. The capitalization of the Company is as set forth in
the Registration Statement. 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. Except as set forth in
the Amended Base Prospectus dated December 17, 2013 and except as a result of
the purchase and sale of the Securities, there are no outstanding options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock
Equivalents. Except as set forth on Schedule 3.1(h), the issuance and sale of
the Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Underwriters) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and have been issued in compliance with all
federal and state securities laws and the requirements of the Trading Market,
and none of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. The authorized
shares of the Company conform in all material respects to all statements
relating thereto contained in the Registration Statement and the Prospectus. The
offers and sales of the Company's securities were, at the time effected, either
registered under the Securities Act and the applicable state securities or Blue
Sky laws or, based in part on the representations and warranties of the
purchasers, exempt from such registration requirements. No further approval or
authorization of any stockholder or the Board of Directors is required for the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company's
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company's stockholders.
11
(i) SEC Reports; Financial Statements. The Company has filed or furnished
all reports, schedules, forms, statements and other documents (and exhibits
thereto) required to be filed or furnished by the Company under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof
(the foregoing materials, as the same may be amended, including the exhibits
thereto and documents incorporated by reference therein, being collectively
referred to herein as the "SEC Reports") and any notices, reports or other
filings pursuant to applicable requirements of the Trading Market for a period
of 12 months preceding the date hereof (or such shorter period as the Company
was required by law to file or furnish such material) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports and notices, reports or other filings pursuant to applicable
requirements of the Trading Market prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the rules and regulations of the Commission
promulgated thereunder. 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. 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 (i) have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and (ii)
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.
The agreements and documents described in the Registration Statement, the
Prospectus, the Prospectus Supplement and the SEC Reports conform to the
descriptions thereof contained therein and there are no agreements or other
documents required by the Securities Act and the rules and regulations
thereunder to be described in the Registration Statement, the Prospectus, the
Prospectus Supplement or the SEC Reports or to be filed with the Commission as
exhibits to the Registration Statement, that have not been so described or
filed. Each agreement or other instrument (however characterized or described)
to which the Company is a party or by which it is or may be bound or affected
and (i) that is referred to in the Registration Statement, the Prospectus, the
Prospectus Supplement or the SEC Reports, or (ii) is material to the Company's
business, has been duly authorized and validly executed by the Company, is in
full force and effect in all material respects and is enforceable against the
Company and, to the Company's knowledge, the other parties thereto, in
accordance with its terms, except (x) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (y) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (z)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefore may be brought. None of such
agreements or instruments has been assigned by the Company, and neither the
Company nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. To the best of the Company's knowledge,
performance by the Company of the material provisions of such agreements or
instruments will not result in a violation of any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its assets
or businesses, including, without limitation, those relating to environmental
laws and regulations.
12
(j) Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) that are material to the Company or its Subsidiaries other than (A)
trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting in any material respect except as otherwise required
pursuant to GAAP, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans,
and (vi) no officer or director of the Company has resigned from any position
with the Company. The Company does not have pending before the Commission any
request for confidential treatment of information. Other than the issuance of
the Securities as contemplated by this Agreement, there is no event, liability,
fact, circumstance, occurrence or development that has occurred or which exists
or is reasonably expected to occur or exist with respect to the Company or its
Subsidiaries or their respective businesses, prospects, properties, operations,
assets or financial condition that is required to be disclosed by the Company
under applicable securities laws on the date that this representation is made or
deemed to be made that has not already been publicly disclosed at least 1
Trading Day prior to the date that this representation is made or deemed to be
made. Unless otherwise disclosed in an SEC Report filed prior to the date
hereof, the Company has not: (i) issued any securities or incurred any liability
or obligation, direct or contingent, for borrowed money; or (ii) declared or
paid any dividend or made any other distribution on or in respect to its capital
stock.
(k) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective officers or directors (in any such officer's or director's capacity
as such) or their 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, (ii) could, if there were an unfavorable decision, ruling or
finding, have or reasonably be expected to result in a Material Adverse Effect
or (iii) involves a claim or violation of, or liability under, any federal or
state securities law or which involves a claim of breach of fiduciary duty.
There has not been and, to the knowledge of the Company, there is not currently
pending or contemplated, any investigation by the Commission involving the
Company or any Subsidiary or any current or former director or officer of the
Company or any Subsidiary (in his or her capacity as such). The Commission has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act and, to the Company's knowledge, no proceeding for
such purpose is pending before or threatened by the Commission.
(l) Labor Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company's or its Subsidiaries' employees is a member of a union that relates to
such employee's relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
13
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(m) Compliance. Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, could reasonably be expected to
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment, decree or order of any court, arbitrator
or other governmental authority or (iii) is in violation of any statute, rule,
ordinance or regulation of any governmental authority or the Trading Market,
including without limitation all foreign, federal, state and local laws
applicable to its business, including without limitation, in connection with
taxes, environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case as would not
have or reasonably be expected to result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to own or lease their
respective properties and to conduct their respective businesses as described in
the SEC Reports, except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect (each, a "Material
Permit"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the limitation, revocation, cancellation, suspension,
modification or non-renewal of any Material Permit. The disclosures in the
Registration Statement concerning the effects of federal, state, local and all
foreign regulation on the Company's business as currently conducted and
contemplated are correct in all material respects.
(o) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to, or have valid and marketable rights to lease
or otherwise use, all real property and all personal property that is material
to the business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and (ii) Liens for the
payment of federal, state or other taxes, for which appropriate reserves have
been made in accordance with GAAP, and the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.
(p) Intellectual Property. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, know-how,
copyrights, licenses and other intellectual property rights and similar rights
necessary or required for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the "Intellectual Property Rights"). None
of, and neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of, the Intellectual Property Rights has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned, within
two (2) years from the date of this Agreement. Neither the Company nor any
Subsidiary has received, since the date of the latest audited financial
statements included within the SEC Reports, a written notice of a claim or
otherwise has any knowledge that the Intellectual Property Rights violate or
14
infringe upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement or misappropriation by another Person of any of the Intellectual
Property Rights. To the Company's knowledge, it has not infringed or
misappropriated the Intellectual Property Rights of any third parties, which
infringement or misappropriation would, if the subject of an unfavorable
decision, ruling or finding, have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights, except
where failure to do so could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(q) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as shown on
Schedule 3.1(r), none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the employees of the
Company or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, providing for the borrowing of money from or lending of
money to or otherwise requiring payments to or from, any officer, director or
such employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, stockholder, member or partner, in each case in
excess of $100,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The Company and the Subsidiaries are in material
compliance with any and all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the Commission thereunder that are effective as
of the date hereof and as of the Closing Date.
(t) Certain Fees. Except as set forth in the Prospectus Supplement, no
brokerage or finder's fees or commissions are or will be payable by the Company,
any Subsidiary or Affiliate of the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents. To
the Company's knowledge, there are no other arrangements, agreements or
understandings of the Company or, to the Company's knowledge, any of its
stockholders that may affect the Underwriters' compensation, as determined by
FINRA. The Company has not made any direct or indirect payments (in cash,
securities or otherwise) to: (i) any person, as a finder's fee, consulting fee
or otherwise, in consideration of such person raising capital for the Company or
introducing to the Company persons who raised or provided capital to the
Company; (ii) any FINRA member; or (iii) other than to the Representative or as
set forth on Schedule 3.1(t) hereto, any person or entity that has any direct or
indirect affiliation or association with any FINRA member, within the twelve
months prior to the Execution Date. None of the net proceeds of the Offering
will be paid by the Company to any participating FINRA member or its affiliates,
15
except as specifically authorized herein. The Underwriters shall have no
obligation or liability 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 or become due in connection with the transactions
contemplated by the Transaction Documents.
(u) Investment Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Securities will not be or be an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become an "investment company" subject to
registration under the Investment Company Act of 1940, as amended.
(v) Registration Rights. No Person has any right to cause the Company or
any Subsidiary to effect the registration under the Securities Act of any
securities of the Company or any Subsidiary.
(w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and the Company has taken no
action designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration. Except as set forth on Schedule 3.1(w), the
Company has not, in the 12 months preceding the date hereof or the Closing Date,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted (as applicable) to the effect that the Company is not in
compliance with the listing or quotation (as applicable) or maintenance
requirements of such Trading Market.
(x) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable as a result of the Underwriters and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, the Company's issuance of the
Securities and the Underwriters' ownership of the Securities.
(y) Disclosure; 10b-5. The Company confirms that, as of the date hereof
and as of the Closing Date, neither the Company nor any officer, director or
employee of the Company acting on its behalf (as such term is used in Regulation
FD) has provided or will provide the Underwriters or their agents or counsel
with any information that the Company believes may constitute material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Underwriters will rely on the foregoing representations
and covenants in effecting transactions in securities of the Company. The
Registration Statement (and any further documents to be filed with the
Commission) contains all exhibits and schedules as required by the Securities
Act. Each of the Registration Statement and any post-effective amendment
thereto, if any, at the time it became effective, complied in all material
respects with the Securities Act and the Exchange Act and the applicable rules
and regulations under the Securities Act and did not and, as amended or
supplemented, if applicable, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus and the
Prospectus Supplement, each as of its respective date, comply in all material
respects with the Securities Act and the Exchange Act and the applicable rules
and regulations. Each of the Prospectus and the Prospectus Supplement, as
amended or supplemented, did not and will not contain as of the date thereof any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The SEC Reports, when they were filed with
16
the Commission, conformed in all material respects to the requirements of the
Exchange Act and the applicable rules and regulations, and none of such
documents, when they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein (with respect to the SEC Reports incorporated by
reference in the Prospectus or Prospectus Supplement), in light of the
circumstances under which they were made not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or Prospectus
Supplement, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act and the applicable
rules and regulations, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made not
misleading. No post-effective amendment to the Registration Statement reflecting
any facts or events arising after the date thereof which represent, individually
or in the aggregate, a fundamental change in the information set forth therein
is required to be filed with the Commission. There are no documents required to
be filed with the Commission in connection with the transaction contemplated
hereby that (x) have not been filed as required pursuant to the Securities Act
or (y) will not be filed within the requisite time period. There are no
contracts or other documents required to be described in the Prospectus or
Prospectus Supplement, or to be filed as exhibits or schedules to the
Registration Statement, which have not been described or filed as required. The
press releases disseminated by the Company during the twelve months preceding
the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made and when made, not misleading.
(z) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable shareholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.
(aa) Solvency. Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair
saleable value of the Company's assets exceeds the amount that will be required
to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
The SEC Reports sets forth as of the date of such reports all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments.
(bb) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state,
local and foreign income and franchise tax returns and has paid or accrued all
taxes shown as due thereon. The Company has no knowledge of a tax deficiency
which has been asserted or threatened against the Company or any Subsidiary.
17
(cc) Foreign Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or other person
acting on behalf of the Company or any Subsidiary, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any
material respect any provision of FCPA. The Company has taken reasonable steps
to ensure that its accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the FCPA.
(dd) Accountants. To the knowledge and belief of the Company, the Company
Auditor (i) is an independent registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company's Annual Report for the
fiscal year ending September 30, 2013. Except as disclosed in the SEC Reports,
the Company Auditor has not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any non-audit
services, as such term is used in Section 10A(g) of the Exchange Act.
(ee) FDA. As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration ("FDA") under the Federal Food, Drug and Cosmetic Act,
as amended, and the regulations thereunder ("FDCA") that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company or
any of its Subsidiaries (each such product, a "Pharmaceutical Product"), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect. There is no pending,
completed or, to the Company's knowledge, threatened, action (including any
lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received
any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse Effect.
The properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws, rules
and regulations of the FDA. The Company has not been informed by the FDA that
the FDA will prohibit the marketing, sale, license or use in the United States
of any product proposed to be developed, produced or marketed by the Company nor
has the FDA expressed any concern as to approving or clearing for marketing any
product being developed or proposed to be developed by the Company.
(ff) FINRA Affiliation. No officer, director or any beneficial owner of 5%
or more of the Company's unregistered securities has any direct or indirect
affiliation or association with any FINRA member (as determined in accordance
with the rules and regulations of FINRA).
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(gg) Officers' Certificate. Any certificate signed by any duly authorized
officer of the Company and delivered to the Representative or to SRFF shall be
deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
(hh) Board of Directors. The Board of Directors is comprised of the
persons set forth in the SEC Reports. The qualifications of the persons serving
as board members and the overall composition of the Board of Directors comply
with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated thereunder
applicable to the Company and the rules of the Trading Market. At least one
member of the Board of Directors qualifies as a "financial expert" as such term
is defined under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated
thereunder and the rules of the Trading Market. In addition, at least a majority
of the persons serving on the Board of Directors qualify as "independent" as
defined under the rules of the Trading Market.
(ii) Regulation M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased or paid any compensation for
soliciting purchases of any of the Securities or (iii) paid or agreed to pay to
any Person any compensation for soliciting another to purchase any other
securities of the Company.
(jj) Minute Book. The minute books of the Company and each Subsidiary have
been made available to the Underwriters and counsel for the Underwriters, and
such books (i) contain a complete summary of all meetings and actions of the
board of directors (including each board committee) and stockholders of the
Company and each Subsidiary since the time of its respective incorporation or
organization through the date of the latest meeting and action, and (ii)
accurately in all material respects reflect all transactions referred to in such
minutes.
(kk) Forward looking Statements; Market Data. No forward-looking statement
(within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the Prospectus Supplement or the Prospectus
has been made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith. The statistical and market related data included or
incorporated by reference in the Registration Statement, the Prospectus
Supplement and the Prospectus are based on or derived from sources that the
Company believes to be reliable and accurate, and such data agree with the
sources from which they are derived.
(ll) Clinical Trials. All preclinical and clinical studies conducted by or
on behalf of the Company that are material to the Company and the Subsidiaries,
taken as a whole, are or have been adequately described in the Registration
Statement, the Prospectus Supplement and the Prospectus in all material
respects. To the Company's knowledge, after reasonable inquiry, the clinical and
preclinical studies conducted by or on behalf of the Company and its
Subsidiaries that are described in the Registration Statement, the Prospectus
Supplement and the Prospectus or the results of which are referred to in the
Registration Statement, the Prospectus Supplement and the Prospectus were and,
if still ongoing, are being conducted in material compliance with all laws and
regulations applicable thereto in the jurisdictions in which they are being
conducted and with all laws and regulations applicable to preclinical and
clinical studies from which data will be submitted to support marketing
approval. The descriptions in the Registration Statement, the Prospectus
Supplement and the Prospectus of the results of such studies are accurate and
complete in all material respects and fairly present the data derived from such
studies, and the Company has no knowledge of any large well-controlled clinical
study the aggregate results of which are inconsistent with or otherwise call
into question the results of any clinical study conducted by or on behalf of the
19
Company that are described in the Registration Statement, the Prospectus
Supplement and the Prospectus or the results of which are referred to in the
Registration Statement, the Prospectus Supplement and the Prospectus. Except as
disclosed in the Registration Statement, the Prospectus Supplement and the
Prospectus, the Company has not received any written notices or statements from
the FDA, the European Medicines Agency ("EMEA") or any other governmental agency
or authority imposing, requiring, requesting or suggesting a clinical hold,
termination, suspension or material modification for or of any clinical or
preclinical studies that are described in the Registration Statement, the
Prospectus Supplement and the Prospectus or the results of which are referred to
in the Registration Statement, the Prospectus Supplement and the Prospectus and
the Prospectus.
(mm) Integration. Neither the Company, nor any of its affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause the Offering of the Units to be integrated
with prior offerings by the Company for purposes of the Securities Act which
would require the registration of any such securities under the Securities Act.
(nn) NYSE MKT Compliance. The Company is in compliance with all applicable
corporate governance requirements set forth in the NYSE Rules that are now in
effect and is actively taking steps to ensure that it will be in compliance with
other applicable corporate governance requirements set forth in the NYSE Rules
not currently in effect upon and all times after the effectiveness of such
requirements.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Amendments to Registration Statement. The Company has delivered, or
will as promptly as practicable deliver, to the Underwriters complete conformed
copies of the Registration Statement and of each consent and certificate of
experts, as applicable, filed as a part thereof, and conformed copies of the
Registration Statement (without exhibits), the Prospectus and any Prospectus
Supplement, as amended or supplemented, in such quantities and at such places as
an Underwriter reasonably requests. Neither the Company nor any of its directors
and officers has distributed and none of them will distribute, prior to the
Closing Date, any offering material in connection with the offering and sale of
the Securities other than the Prospectus, the Preliminary Prospectus, the
Registration Statement, and copies of the documents incorporated by reference
therein. The Company shall not file any such amendment or supplement to which
the Representative shall reasonably object in writing.
4.2 Federal Securities Laws.
(a) Compliance. During the time when a Prospectus is required to be
delivered under the Securities Act, the Company will use its commercially
reasonable efforts to comply with all requirements imposed upon it by the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and the Prospectus. If at any time when a
Prospectus relating to the Securities is required to be delivered under the
Securities Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriters, the
Prospectus, as then amended or supplemented, includes an untrue statement of a
material fact or omits 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, or if it is necessary at any time to amend
the Prospectus to comply with the Securities Act, the Company will notify the
Underwriters promptly and prepare and file with the Commission, subject to
Section 4.1 hereof, an appropriate amendment or supplement in accordance with
Section 10 of the Securities Act.
20
(b) Filing of Final Prospectus. The Company will file the Prospectus (in
form and substance satisfactory to the Representative) with the Commission
pursuant to the requirements of Rule 424.
(c) Exchange Act Registration. For a period of three years from the
Execution Date, the Company will use its commercially reasonable efforts to
maintain the registration of the Common Stock under the Exchange Act. The
Company will not deregister the Common Stock under the Exchange Act without the
prior written consent of the Representative.
(d) Free Writing Prospectuses. The Company represents and agrees that it
has not made and will not make any offer relating to the Securities that would
constitute an issuer free writing prospectus, as defined in Rule 433 of the
rules and regulations under the Securities Act, without the prior consent of the
Representative. Any such free writing prospectus consented to by the
Representative is hereinafter referred to as a "Permitted Free Writing
Prospectus." The Company represents that it will treat each Permitted Free
Writing Prospectus as an "issuer free writing prospectus" as defined in the
rules and regulations under the Securities Act, and has complied and will comply
with the applicable requirements of Rule 433 of the Securities Act, including
timely Commission filing where required, legending and record keeping.
4.3 Delivery to the Underwriters of Prospectuses. The Company will deliver
to the Underwriters, without charge, from time to time during the period when
the Prospectus is required to be delivered under the Securities Act or the
Exchange Act such number of copies of each Prospectus as the Underwriters may
reasonably request.
4.4 Effectiveness and Events Requiring Notice to the Underwriters. The
Company will use its commercially reasonable efforts to cause the Registration
Statement to remain effective with a current prospectus until the later of nine
(9) months from the Execution Date and the date on which the Warrants are no
longer outstanding and will notify the Underwriters and holders of the Warrants
immediately and confirm the notice in writing: (i) of the issuance by the
Commission of any stop order or of the initiation, or the threatening, of any
proceeding for that purpose; (ii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the mailing and
delivery to the Commission for filing of any amendment or supplement to the
Registration Statement or Prospectus under the Securities Act in respect of the
Securities; (iv) of the receipt of any comments or request for any additional
information from the Commission; and (v) of the happening of any event during
the period described in this Section 4.4 that, in the judgment of the Company,
makes any statement of a material fact made in the Registration Statement, the
Prospectus or any Prospectus Supplement untrue or that requires the making of
any changes in the Registration Statement, the Prospectus or any Prospectus
Supplement in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make commercially reasonable efforts
to obtain promptly the lifting of such order.
4.5 Review of Financial Statements. For a period of five (5) years from
the Execution Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information.
4.6 Reports to the Underwriters.
(a) Periodic Reports, etc. For a period of three years from the Execution
Date, the Company will furnish to the Underwriters copies of such financial
statements and other periodic and special reports as the Company from time to
21
time furnishes generally to holders of any class of its securities and also
promptly furnish to the Underwriters: (i) a copy of each periodic report the
Company has filed with the Commission; (ii) a copy of each Form 8-K prepared and
filed by the Company; and (iii) a copy of each registration statement filed by
the Company under the Securities Act, provided that documents filed with the
Commission pursuant to its ▇▇▇▇▇ system shall be deemed to have been delivered
to the Underwriters pursuant to this Section.
(b) General Expenses Related to the Offering. The Company hereby agrees to
pay on each of the Closing Date and each Option Closing Date, if any (to the
extent not paid on the Closing Date), all expenses incident to the performance
of the obligations of the Company under this Agreement, including, but not
limited to: (a) all filing fees and communication expenses relating to the
registration of the Closing Shares, Option Shares and Warrant Shares to be sold
in the Offering with the Commission; (b) all actual FINRA filing fees associated
with the review of the Offering by FINRA; (c) all fees and expenses relating to
the listing of the Closing Shares, Option Shares and Warrant Shares on the NYSE
MKT; (d) all actual fees, expenses and disbursements relating to background
checks of the Company's officers and directors in an amount not to exceed $2,000
per individual and $6,000 in the aggregate such expenses to be documented prior
to being reimbursed; (e) all fees, expenses and disbursements relating to the
registration or qualification of such securities to be sold hereunder under the
"blue sky" securities laws of such states and other jurisdictions as the
Representative may reasonably designate (including, without limitation, all
filing and registration fees)); (f) all fees, expenses and disbursements
relating to the registration, qualification or exemption of such securities to
be sold hereunder under the securities laws of such foreign jurisdictions as the
Representative may reasonably designate; (g) the costs of all mailing and
printing of the underwriting documents (including, without limitation, this
Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement
Among Underwriters, Selected Dealers' Agreement, Underwriters' Questionnaire and
Power of Attorney), Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final Prospectuses
as ▇▇▇▇▇▇▇ may reasonably deem necessary; (h) the costs of preparing, printing
and delivering certificates representing any of the securities to be sold
hereunder; (i) fees and expenses of the transfer agent for the Common Stock and
Warrants; (j) stock transfer and/or stamp taxes, if any, payable upon the
transfer of securities from the Company to the Representative; (k) the fees and
expenses of the Company's accountants; (l) the fees and expenses of the
Company's legal counsel and other agents and representatives; and (m) the fees
and expenses associated with obtaining a regulatory (FDA) compliance letter from
appropriate FDA counsel. The Underwriters may also deduct from the net proceeds
of the Offering payable to the Company on the Closing Date or each Option
Closing Date, if any, the expenses set forth herein to be paid by the Company to
the Underwriters.
(c) Non-accountable Expenses. The Company further agrees that, in addition
to the expenses payable pursuant to Section 4.6(b), on the Closing Date it shall
pay to the Representative, by deduction from the net proceeds of the Offering
contemplated herein, a non-accountable expense allowance equal to one percent
(1.0%) of the gross proceeds received by the Company from the sale of the
Closing Securities (excluding the Option Securities).
4.7 Application of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the application
described under the caption "Use Of Proceeds" in the Prospectus.
4.8 Delivery of Earnings Statements to Security Holders. The Company will
make generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Execution Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Securities Act or the rules and regulations under the Securities Act, but
22
which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the
Securities Act) covering a period of at least twelve consecutive months
beginning after the Execution Date. Such earnings statement filed with the
Commission pursuant to its ▇▇▇▇▇ system shall be deemed to have been made
available to the security holders pursuant to this Section.
4.9 Stabilization. Neither the Company, nor, to its knowledge, any of its
employees, directors or shareholders (without the consent of the Representative)
has taken or will take, directly or indirectly, any action designed to or that
has constituted or that might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Securities.
4.10 Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4.11 Accountants. For a period of three (3) years following the Execution
Date, the Company shall continue to retain a nationally recognized independent
certified public accounting firm. The Underwriters acknowledge that the Company
Auditor is acceptable to the Underwriters.
4.12 FINRA. The Company shall advise the Underwriters (who shall make an
appropriate filing with FINRA) if it is aware that any 5% or greater shareholder
of the Company becomes an affiliate or associated person of a FINRA member firm.
4.13 No Fiduciary Duties. The Company acknowledges and agrees that the
Underwriters' responsibility to the Company is solely contractual and commercial
in nature, based on arms-length negotiations and that neither the Underwriters
nor their affiliates or any Selected Dealer shall be deemed to be acting in a
fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any
of its affiliates in connection with the Offering and the other transactions
contemplated by this Agreement. Notwithstanding anything in this Agreement to
the contrary, the Company acknowledges that the Underwriters may have financial
interests in the success of the Offering that are not limited to the difference
between the price to the public and the purchase price paid to the Company by
the Underwriters for the shares and the Underwriters have no obligation to
disclose, or account to the Company for, any of such additional financial
interests. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the Underwriters
with respect to any breach or alleged breach of fiduciary duty.
4.14 Warrant Shares. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance of
the Warrant Shares or if the Warrant is exercised via cashless exercise at a
time when such Warrant Shares would be eligible for resale under Rule 144 by a
non-affiliate of the Company, the Warrant Shares issued pursuant to any such
exercise shall be issued free of all restrictive legends. If at any time
following the date hereof the Registration Statement (or any subsequent
registration statement registering the sale or resale of the Warrant Shares) is
not effective or is not otherwise available for the sale of the Warrant Shares,
the Company shall immediately notify the holders of the Warrants in writing that
such registration statement is not then effective and thereafter shall promptly
notify such holders when the registration statement is effective again and
available for the sale of the Warrant Shares (it being understood and agreed
that the foregoing shall not limit the ability of the Company to issue, or any
holder thereof to sell, any of the Warrant Shares in compliance with applicable
federal and state securities laws).
23
4.15 Board Composition and Board Designations. The Company shall ensure
that: (i) the qualifications of the persons serving as board members and the
overall composition of the Board of Directors comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 and the rules promulgated thereunder and with the listing requirements
of the Trading Market and (ii) if applicable, at least one member of the Board
of Directors qualifies as a "financial expert" as such term is defined under the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated thereunder.
4.16 Securities Laws Disclosure; Publicity. At the request of the
Representative, at 9:00 a.m. Eastern time on the date hereof, the Company shall
issue a press release disclosing the material terms of the Offering. The Company
and the Representative shall consult with each other in issuing any other press
releases with respect to the Offering, and neither the Company nor any
Underwriter shall issue any such press release nor otherwise make any such
public statement without the prior consent of the Company, with respect to any
press release of such Underwriter, or without the prior consent of such
Underwriter, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
4.17 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, by any other Person, that any
Underwriter of the Securities is an "Acquiring Person" under any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or similar anti-takeover plan or arrangement in effect or
hereafter adopted by the Company, or that any Underwriter of Securities could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities.
4.18 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Option Shares pursuant to the
Over-Allotment Option and Warrant Shares pursuant to any exercise of the
Warrants.
4.19 Listing of Common Stock. For a period of three (3) years from the
Execution Date, the Company hereby agrees to use commercially reasonable efforts
to maintain the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed and, concurrently with the Closing, the Company
shall apply to list or quote all of the Closing Shares, Option Shares and
Warrant Shares on such Trading Market and promptly secure the listing or
quotation of all of the Closing Shares, Option Shares and Warrant Shares on such
Trading Market. The Company further agrees that, if the Company applies to have
the Common Stock listed or quoted on any other Trading Market, it will then
include in such application all of the Closing Shares, Option Shares and Warrant
Shares, and will take such other action as is necessary to cause all of the
Closing Shares, Option Shares and Warrant Shares to be listed or quoted on such
other Trading Market as promptly as possible.
4.20 Subsequent Equity Sales. From the date hereof until 60 days following
the Closing Date, neither the Company nor any Subsidiary shall issue, enter into
any agreement to issue or announce the issuance or proposed issuance of any
shares of Common Stock or Common Stock Equivalents, provided that this Section
4.20 shall not apply in respect of an Exempt Issuance and shall not apply
commencing on the date after the VWAP equals or exceeds $4.00 (subject to
adjustment for reverse and forward stock splits, recapitalizations and other
similar transactions after the date hereof) on 5 consecutive Trading Days.
4.21 Research Independence. In addition, the Company acknowledges that each
Underwriter's research analysts and research departments, if any, are required
24
to be independent from their respective investment banking divisions and are
subject to certain regulations and internal policies, and that such
Underwriter's research analysts may hold and make statements or investment
recommendations and/or publish research reports with respect to the Company
and/or the offering that differ from the views of its investment bankers. The
Company acknowledges that the Representative is a full service securities firm
and as such from time to time, subject to applicable securities laws, may effect
transactions for its own account or the account of its customers and hold long
or short position in debt or equity securities of the Company.
4.22 Certain Agreements of the Underwriters. The Underwriters hereby
represent and agree that:
(a) They have not used, authorized use of, referred to or participated in
the planning for use of, and will not use, authorize use of, refer to or
participate in the planning for use of, any "free writing prospectus", as
defined in Rule 405 under the Securities Act (which term includes use of any
written information furnished to the Commission by the Company and not
incorporated by reference into the Registration Statement and any press release
issued by the Company) other than (i) a free writing prospectus that contains no
"issuer information" (as defined in Rule 433(h)(2) under the Securities Act)
that was not included (including through incorporation by reference) in the
Preliminary Prospectus or a previously filed issuer free writing prospectus, as
defined in Rule 433 of the rules and regulations under the Securities Act, or
(ii) any Permitted Free Writing Prospectus prepared pursuant to Section 4.2(d)
above (including any electronic road show), or (iii) any free writing prospectus
prepared by an Underwriter and approved by the Company in advance in writing
(each such free writing prospectus referred to in clauses (i) or (iii), an
"Underwriter Free Writing Prospectus");
(b) They have not and will not, without the prior written consent of the
Company, use any free writing prospectus that contains the final terms of the
Securities unless such terms have previously been included in a free writing
prospectus filed with the Commission, provided that the Underwriters may use a
term sheet substantially in the form of Annex A hereto without the consent of
the Company; provided, further, that the Underwriters using such term sheet
shall notify the Company, and provide a copy of such term sheet to the Company,
prior to, or substantially concurrently with, the first use of such term sheet;
and
(c) They are not subject to any pending proceeding under Section 8A of the
Securities Act with respect to the Offering (and will promptly notify the
Company if any such proceeding against them is initiated during the period when
the Prospectus is required to be delivered under the Securities Act or the
Exchange Act).
ARTICLE V
DEFAULT BY UNDERWRITERS
If, on the Closing Date or any Option Closing Date of the Over-Allotment
Option, if any, any Underwriter shall fail to purchase and pay for the portion
of the Closing Securities or Option Securities, as the case may be, which such
Underwriter has agreed to purchase and pay for on such date (otherwise than by
reason of any default on the part of the Company), the Representative, or if the
Representative is the defaulting Underwriter, the non-defaulting Underwriters,
shall use their commercially reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company such amounts as may be agreed upon and upon the terms set forth
herein, the Closing Securities or Option Securities, as the case may be, which
the defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours the Representative shall not have procured such other Underwriters, or any
others, to purchase the Closing Securities or Option Securities, as the case may
be, agreed to be purchased by the defaulting Underwriter or Underwriters, then
(a) if the aggregate number of Closing Securities or Option Securities, as the
case may be, with respect to which such default shall occur does not exceed 10%
25
of the Closing Securities or Option Securities, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Closing Securities or Option Securities, as the case
may be, which they are obligated to purchase hereunder, to purchase the Closing
Securities or Option Securities, as the case may be, which such defaulting
Underwriter or Underwriters failed to purchase, or (b) if the aggregate number
of Closing Securities or Option Securities, as the case may be, with respect
towhich such default shall occur exceeds 10% of the Closing Securities or Option
Securities, as the case may be, covered hereby, the Company or the
Representative will have the right to terminate this Agreement without liability
on the part of the non-defaulting Underwriters or of the Company, except to the
extent provided in Article VI hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Article V, the applicable
Closing Date may be postponed for such period, not exceeding seven (7) days, as
the Representative, or if the Representative is the defaulting Underwriter, the
non-defaulting Underwriters, may determine in order that the required changes in
the Prospectus or in any other documents or arrangements may be effected. The
term "Underwriter" includes any Person substituted for a defaulting Underwriter.
Any action taken under this Section shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of the Underwriters. Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless the Underwriters,
and each dealer selected by each Underwriter that participates in the offer and
sale of the Securities (each a "Selected Dealer") and each of their respective
directors, officers and employees and each person, if any, who controls such
Underwriter or any Selected Dealer ("Controlling Person") within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
and all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any action between
such Underwriter and the Company or between such Underwriter and any third party
or otherwise) to which they or any of them may become subject under the
Securities Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) any Preliminary Prospectus, if any, the Registration Statement or the
Prospectus (as from time to time each may be amended and supplemented); or (ii)
any materials or information provided to investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Securities,
including any "road show" or investor presentations made to investors by the
Company (whether in person or electronically) (collectively, the "Road Show
Materials"); or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company by any Underwriter expressly
for use in any Preliminary Prospectus, if any, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any Road Show
Materials, as the case may be. With respect to any untrue statement or omission
or alleged untrue statement or omission made in the Preliminary Prospectus, if
any, the indemnity agreement contained in this Section 6.1 shall not inure to
the benefit of an Underwriter to the extent that any loss, liability, claim,
damage or expense of such Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the Person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Securities to such Person as required by the Securities Act and the rules
and regulations thereunder, and if the untrue statement or omission has been
26
corrected in the Prospectus, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with its obligations under this
Agreement. The Company agrees promptly to notify each Underwriter of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or Controlling Persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
6.2 Procedure. If any action is brought against an Underwriter, a Selected
Dealer or a Controlling Person in respect of which indemnity may be sought
against the Company pursuant to Section 6.1, such Underwriter, such Selected
Dealer or Controlling Person, as the case may be, shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of such Underwriter or such Selected Dealer,
as the case may be) and payment of actual expenses. Such Underwriter, such
Selected Dealer or Controlling Person shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Underwriter, such Selected Dealer or Controlling
Person unless (i) the employment of such counsel at the expense of the Company
shall have been authorized in writing by the Company in connection with the
defense of such action, or (ii) the Company shall not have employed counsel to
have charge of the defense of such action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the reasonable fees and expenses of not more than one additional
firm of attorneys selected by such Underwriter (in addition to local counsel),
Selected Dealer and/or Controlling Person, taken together as a group, shall be
borne by the Company. In no event shall the Company be liable for fees and
expenses of more than one firm of attorneys (in additional to any local counsel)
separate from its own counsel for all indemnified parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. Notwithstanding
anything to the contrary contained herein, if any Underwriter, Selected Dealer
or Controlling Person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
6.3 Indemnification of the Company. Each Underwriter severally and not
jointly agrees to indemnify and hold harmless the Company, its directors,
officers and employees and agents who control the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
and all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to such Underwriter, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions made in any Preliminary Prospectus, if any, the Registration Statement
or Prospectus or any amendment or supplement thereto or in any Road Show
Materials, in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to such Underwriter by or on behalf of
such Underwriter expressly for use in such Preliminary Prospectus, if any, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any such Road Show Materials. In case any action shall be brought against the
Company or any other Person so indemnified based on any Preliminary Prospectus,
if any, the Registration Statement or Prospectus or any amendment or supplement
hereto or any Road Show Materials, and in respect of which indemnity may be
sought against such Underwriter, such Underwriter shall have the rights and
duties given to the Company, and the Company and each other Person so
indemnified shall have the rights and duties given to such Underwriter by the
provisions of this Article VI. Notwithstanding the provisions of this Section
6.3, no Underwriter shall be required to indemnify the Company for any amount in
excess of the underwriting discounts and commissions applicable to the
Securities purchased by such Underwriter. The Underwriters' obligations in this
Section 6.3 to indemnify the Company are several in proportion to their
respective underwriting obligations and not joint.
27
6.4 Contribution.
(a) Contribution Rights. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) any Person
entitled to indemnification under this Article VI makes a claim for
indemnification pursuant hereto but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Article VI provides for indemnification in such case, or (ii)
contribution under the Securities Act, the Exchange Act or otherwise may be
required on the part of any such Person in circumstances for which
indemnification is provided under this Article VI, then, and in each such case,
the Company and each Underwriter, severally and not jointly, shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the Company and such
Underwriter, as incurred, in such proportions that such Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance,
provided that no Person guilty of a 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. For purposes of this Section, each director, officer and
employee of such Underwriter or the Company, as applicable, and each Person, if
any, who controls such Underwriter or the Company, as applicable, within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such Underwriter or the Company, as applicable. Notwithstanding
the provisions of this Section 6.4, no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Securities purchased by such Underwriter. The Underwriters'
obligations in this Section 6.4 to contribute are several in proportion to their
respective underwriting obligations and not joint.
(b) Contribution Procedure. Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the commencement of
any action, suit or Proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party ("Contributing Party"),
notify the Contributing Party of the commencement thereof, but the failure to so
notify the Contributing Party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or Proceeding is brought against any party, and such party
notifies a Contributing Party or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the Contributing Party will be entitled
to participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution without the written
consent of such Contributing Party. The contribution provisions contained in
this Section 6.4 are intended to supersede, to the extent permitted by law, any
right to contribution under the Securities Act, the Exchange Act or otherwise
available.
ARTICLE VII
MISCELLANEOUS
7.1 Termination.
(a) Termination Right. The Representative shall have the right to
terminate this Agreement at any time prior to any Closing Date, (i) if any
domestic or international event or act or occurrence has materially disrupted,
or in its opinion will in the immediate future materially disrupt, general
securities markets in the United States, or (ii) if trading on any Trading
Market shall have been suspended or materially limited, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
28
securities shall have been required by FINRA or by order of the Commission or
any other government authority having jurisdiction, or (iii) if the United
States shall have become involved in a new war or an increase in major
hostilities, or (iv) if a banking moratorium has been declared by a New York
State or federal authority, or (v) if a moratorium on foreign exchange trading
has been declared which materially adversely impacts the United States
securities markets, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, which will, in the Representative's opinion, make it inadvisable to
proceed with the delivery of the Securities, or (vii) if the Company is in
material breach of any of its representations, warranties or covenants
hereunder, or (viii) if the Representative shall have become aware after the
date hereof of such a material adverse change in the conditions or prospects of
the Company, or such adverse material change in general market conditions, as in
the Representative's judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Securities or to enforce contracts made by
the Underwriters for the sale of the Securities.
(b) Expenses. In the event this Agreement shall be terminated pursuant to
Section 7.1(a), within the time specified herein or any extensions thereof
pursuant to the terms herein, the Company shall be obligated to pay to the
Representative its actual and accountable out of pocket expenses related to the
transactions contemplated herein then due and payable (including the fees and
disbursements of SRFF) up to $25,000.
(c) Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Article VI shall not be in any way effected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
7.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, the Preliminary Prospectus and the Prospectus,
contain the entire understanding of the parties with respect to the subject
matter hereof and thereof 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.
7.3 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: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
7.4 Amendments; Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Representative. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
29
7.5 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.
7.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns.
7.7 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any action, suit or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then, in addition to the obligations of the Company
under Article VI, the prevailing party in such action, suit or proceeding shall
be reimbursed by the other party for its reasonable attorneys' fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
7.8 Survival. The representations and warranties contained herein shall
survive the Closing and the Option Closing, if any, and the delivery of the
Securities.
7.9 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 each other party, it being understood that the parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf" signature page were an original thereof.
7.10 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
commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
30
7.11 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Underwriters and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
7.12 Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
7.13 Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.
7.14 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE FOREVER
ANY RIGHT TO TRIAL BY JURY.
(Signature Pages Follow)
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and the several Underwriters in accordance with its terms.
Very truly yours,
CEL-SCI CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:Chief Executive Officer
Address for Notice:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇ & ▇▇▇▇ LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
ACCEPTED ON THE DATE FIRST ABOVE WRITTEN.
▇▇▇▇▇▇▇ & COMPANY (UK) LTD.
As the Representative of the several
Underwriters listed on Schedule I
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Naional Branch Manager
Address for Notice:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
Facsimile:
Copy to:
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Closing
Purchase
Underwriter Closing Shares Closing Warrants Price
----------- -------------- ---------------- ---------
▇▇▇▇▇▇▇ & Company (UK) Ltd. 793,651 793,651 $ 465,000.12
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc. 3,968,254 3,968,254 $2,325,000.02
Total: 4,761,905 4,761,905 $2,790,000.14
35
CEL-SCI CORPORATION
UNDERWRITER'S AGREEMENT
SCHEDULES
Schedule 3.1(h): If CEL-SCI were to sell any additional shares of common
stock below $0.9108, it will have to issue more shares
to Eastern Biotech (EB) to make the investment price on
EB's $1 m investment equal to the lower purchase price,
and CEL-SCI will have to lower the current warrant exercise
price issued to Eastern Biotech and ▇▇▇▇▇▇▇▇ Investment
Master Fund Ltd. and issue additional warrants to reflect
the lower purchase price.
Schedule 3.1(r): Between December 2008 and June 2009, the Company's
President, and a director, Maximilian de ▇▇▇▇▇, loaned the
Company $1,104,057. The loan from Mr. de ▇▇▇▇▇ bears
interest at 15% per year and is secured by a lien on
substantially all of the Company's assets. The Company does
not have the right to prepay the loan without Mr. de Clara's
consent. The loan was initially payable at the end of March
2009, but was extended. At the time the loan was originally
due, and in accordance with the loan agreement, the Company
issued Mr. de ▇▇▇▇▇ warrants to purchase 164,824 shares of
the Company's common stock at a price of $4.00 per share.
The warrants are exercisable at any time prior to December
24, 2014. In June 2009, the loan with Mr. de ▇▇▇▇▇ was
extended for the second time to July 6, 2014, but, at Mr. de
Clara's option, the loan may be converted into shares of the
Company's common stock. The number of shares which will be
issued upon any conversion will be determined by dividing
the amount to be converted by $4.00. As further
consideration for the second extension, Mr. de ▇▇▇▇▇
received warrants to purchase 184,930 shares of the
Company's common stock at a price of $5.00 per share at any
time prior to January 6, 2015. On May 13, 2011, to recognize
Mr. de Clara's willingness to agree to subordinate his note
to the convertible preferred shares and convertible debt as
part of the settlement agreement, the Company extended the
maturity date of the note to July 6, 2015.
Schedule 3.1(t): None
Schedule 3.1(w): The Company received a noncompliance notice with listing
requirements on July 18, 2013 from the NYSE MKT
exchange. Based on the Company's quarterly report on Form
10-Q for the period ended March 31, 2013, noncompliance was
noted with respect to the requirement of Section 1003(a)(iv)
of the Company Guide for NYSE MKT. The Company was afforded
the opportunity to submit a plan to regain compliance, and
on August 19, 2013 the Company submitted its plan to the
Exchange. On August 30, 2013, the Exchange notified the
Company that it accepted the Company's plan of compliance
and granted the Company an extension until September 30,
2013 to regain compliance with the continued listing
standards. On October 3, 2013, the NYSE MKT granted the
Company an extension until October 31, 2013 to regain
compliance with the Exchange's continued listing standards.
On October 17, 2013, the Company received notification from
NYSE Regulation that the Company was now considered to have
regained compliance with the listing requirements.
EXHIBIT A
COMMON STOCK PURCHASE WARRANT
CEL-SCI CORPORATION
Warrant Shares: _____ Initial Exercise Date: December 19, 2013
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________, or its assigns (the "Holder") is entitled, upon
the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the "Initial
Exercise Date") and on or prior to the close of business on October 11, 2018
(the "Termination Date") but not thereafter, to subscribe for and purchase from
CEL-SCI Corporation, a Colorado corporation (the "Company"), up to ______ shares
(as subject to adjustment hereunder, the "Warrant Shares") of Common Stock. The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this
Warrant, the following terms have the meanings indicated in this Section 1:
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except any Saturday, any Sunday, any
day which is a federal legal holiday in the United States or any day on
which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock of the Company, par value
$0.01 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including, without limitation, any debt, preferred
stock, right, option, warrant or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1
"Liens" means a lien, charge pledge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"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.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" means any subsidiary of the Company and shall, where
applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"Trading Market" means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange or
the OTC Bulletin Board (or any successors to any of the foregoing).
"Transfer Agent" means Computershare Investor Services, the current
transfer agent of the Company, with a mailing address of ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and a facsimile number of (303)
262-0700, and any successor transfer agent of the Company.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time)
to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a
Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board, (c)
if the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the
"Pink Sheets" published by Pink OTC Markets, Inc. (or a similar
2
organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or
(d) in all other cases, the fair market value of a share of Common Stock
as determined by an independent appraiser selected in good faith by the
Holder and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
Section 2. Exercise.
a) Exercise of the Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise in the form annexed hereto. Within three (3) Trading Days
following the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier's check drawn on a United States bank
unless the cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise form be required.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within three (3) Trading Days of the date the
final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of
such purchases. The Company shall deliver any objection to any Notice of
Exercise within one (1) Business Day of receipt of such notice. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.
b) Exercise Price. The exercise price per share of the Common Stock under
this Warrant shall be $1.25, subject to adjustment hereunder (the "Exercise
Price").
c) Cashless Exercise. If at the time of exercise hereof there is no
effective registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to the Holder,
then this Warrant may only be exercised, in whole or in part, at such time by
3
means of a "cashless exercise" in which the Holder shall be entitled to receive
a number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:
(A)= the VWAP on the Trading Day immediately preceding the date on
which Holder elects to exercise this Warrant by means of a
"cashless exercise," as set forth in the applicable Notice of
Exercise;
(B)= the Exercise Price of this Warrant, as adjusted hereunder;
and
(X)= the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this
Warrant if such exercise were by means of a cash exercise
rather than a cashless exercise.
Notwithstanding anything herein to the contrary, on the Termination Date,
this Warrant shall be automatically exercised via cashless exercise pursuant to
this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company
shall use best efforts to cause the Warrant Shares purchased
hereunder to be transmitted by the Transfer Agent to the Holder
by crediting the account of the Holder's prime broker with The
Depository Trust Company through its Deposit or Withdrawal at
Custodian system ("DWAC") if the Company is then a participant in
such system and either (A) there is an effective registration
statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by Holder or (B) this Warrant is
being exercised via cashless exercise, and otherwise by physical
delivery to the address specified by the Holder in the Notice of
Exercise by the date that is three (3) Trading Days after the
latest of (A) the delivery to the Company of the Notice of
Exercise and (B) surrender of this Warrant (if required) (such
date, the "Warrant Share Delivery Date"). The Warrant Shares
shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of
the date the Warrant has been exercised, with payment to the
Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(d)(vi) prior to the issuance of such
shares, having been paid. If the Company fails for any reason to
deliver to the Holder the Warrant Shares subject to a Notice of
Exercise by the Warrant Share Delivery Date, the Company shall
pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of
the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after
such liquidated damages begin to accrue) for each Trading Day
4
after such Warrant Share Delivery Date until such Warrant Shares
are delivered or Holder rescinds such exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant
shall have been exercised in part, the Company shall, at the
request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the
Transfer Agent to transmit to the Holder the Warrant Shares
pursuant to Section 2(d)(i) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver
Warrant Shares Upon Exercise. In addition to any other rights
available to the Holder, if the Company fails to cause the
Transfer Agent to transmit to the Holder the Warrant Shares
pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the
Holder's brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (A) pay in cash to
the Holder the amount, if any, by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with
the exercise at issue times (2) the price at which the sell order
giving rise to such purchase obligation was executed, and (B) at
the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such
exercise was not honored (in which case such exercise shall be
deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation
of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity
5
including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company's failure to
timely deliver shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such
exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal
to such fraction multiplied by the Exercise Price or round up to
the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares
shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the
issuance of such Warrant Shares, all of which taxes and expenses
shall be paid by the Company, and such Warrant Shares shall be
issued in the name of the Holder or in such name or names as may
be directed by the Holder; provided, however, that in the event
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed
by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all
Transfer Agent fees required for same-day processing of any
Notice of Exercise.
vii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder's Exercise Limitations. The Company shall not effect any exercise
of this Warrant, and a Holder shall not have the right to exercise any portion
of this Warrant, pursuant to Section 2 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder's Affiliates, and any
other Persons acting as a group together with the Holder or any of the Holder's
Affiliates), would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Warrant
6
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section
2(e), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2(e), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (A) the
Company's most recent periodic or annual report filed with the Commission, as
the case may be, (B) a more recent public announcement by the Company or (C) a
more recent written notice by the Company or the Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The "Beneficial Ownership Limitation" shall be 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon
not less than 61 days' prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to apply. Any such
increase or decrease will not be effective until the 61st day after such notice
is delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 2(e) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.
7
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) [RESERVED]
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "Purchase Rights"), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder's right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding,
if the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
8
arrangement or other similar transaction) (a "Distribution"), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of which a record
is taken for such Distribution, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in the
Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Distribution to such extent (or in the
beneficial ownership of any shares of Common Stock as a result of such
Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
e) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires
more than 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a
"Fundamental Transaction"), then, upon any subsequent exercise of this Warrant,
the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of
such Fundamental Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the "Alternate Consideration") receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise of this
9
Warrant). For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, including, but not limited to, the NYSE MKT, the Nasdaq
Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market,
the Company or any Successor Entity (as defined below) shall, at the Holder's
option, exercisable at any time concurrently with, or within 30 days after, the
consummation of the Fundamental Transaction, purchase this Warrant from the
Holder by paying to the Holder an amount of cash equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction. "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg, L.P. ("Bloomberg") determined as
of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable Fundamental
Transaction, (C) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value
of any non-cash consideration, if any, being offered in such Fundamental
Transaction and (D) a remaining option time equal to the time between the date
of the public announcement of the applicable Fundamental Transaction and the
Termination Date. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the "Successor Entity") to
assume in writing all of the obligations of the Company under this Warrant and
the other Transaction Documents in accordance with the provisions of this
Section 3(e) pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without unreasonable
delay) prior to such Fundamental Transaction and shall, at the option of the
Holder, deliver to the Holder in exchange for this Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant which is exercisable for a corresponding number of
shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) prior to such Fundamental Transaction, and with an exercise price which
10
applies the exercise price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for , the Company (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the "Company" shall refer instead to the
Successor Entity), and the Successor Entity may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
f) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price
is adjusted pursuant to any provision of this Section 3, the
Company shall promptly mail to the Holder a notice setting forth
the Exercise Price after such adjustment and any resulting
adjustment to the number of Warrant Shares and setting forth a
brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company
shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the
Common Stock, (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any
rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to
11
be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to
be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the
Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to exercise this Warrant during the period commencing on
the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set
forth herein.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company unless the Holder has assigned this Warrant in full, in
which case, the Holder shall surrender this Warrant to the Company within three
(3) Trading Days of the date the Holder delivers an assignment form to the
Company assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or
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exchanges shall be dated the initial issuance date set forth on the first page
of this Warrant and shall be identical with this Warrant except as to the number
of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the "Warrant Register"), in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section 2(d)(i), except
as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such right may be
exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of
the Warrant Shares upon the exercise of any purchase rights under
this Warrant. The Company further covenants that its issuance of
this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and
issue the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the purchase
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rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant and payment for such
Warrant Shares in accordance herewith, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens
and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue).
Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such
increase in par value, (ii) take all such action as may be necessary
or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant and (iii) use commercially reasonable efforts to
obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under
this Warrant.
Before taking any action which would result in an adjustment
in the number of Warrant Shares for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as
may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such New York Courts, or such New York Courts are improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
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mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Warrant or the transactions contemplated hereby. If any
party shall commence an action or proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys' fees and other costs and
expenses incurred in the investigation, preparation and prosecution of such
action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, and the Holder does not
utilize cashless exercise, will have restrictions upon resale imposed by state
and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice the Holder's rights, powers or remedies.
Without limiting any other provision of this Warrant or the Purchase Agreement,
if the Company willfully and knowingly fails to comply with any provision of
this Warrant, which results in any material damages to the Holder, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific performance that
a remedy at law would be adequate.
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k) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Company and the successors and permitted assigns of Holder. The provisions of
this Warrant are intended to be for the benefit of any Holder from time to time
of this Warrant and shall be enforceable by the Holder or holder of Warrant
Shares.
l) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date first above indicated.
CEL-SCI CORPORATION
By:
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
17
NOTICE OF EXERCISE
TO: CEL-SCI CORPORATION
(1)___The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2)___Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted, the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in
subsection 2(c).
(3)___Please issue said Warrant Shares in the name of the undersigned or in
such other name as is specified below:
-------------------------------------
The Warrant Shares shall be delivered to the following DWAC Account Number:
-------------------------------------
-------------------------------------
-------------------------------------
[SIGNATURE OF HOLDER]
------
Name of Investing Entity:
Signature of Authorized Signatory of Investing Entity:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, all of or _____ shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
Name: --------------------------------
(Please Print)
Address: --------------------------------
(Please Print)
Dated: _______________ __, ______
Holder's Signature:
Holder's Address: