THE IMMUNE RESPONSE CORPORATION SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 9, 2006 with respect to 8% SECURED CONVERTIBLE PROMISSORY NOTE AND WARRANT
Exhibit 10.190
THE IMMUNE RESPONSE CORPORATION
DATED AS OF
FEBRUARY 9, 2006
with respect to
8% SECURED CONVERTIBLE PROMISSORY NOTE
AND WARRANT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 9, 2006, by and
between THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the “Company”) and QUBIT HOLDINGS,
LLC (the “Purchaser”);
WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser desires to purchase
from the Company, for $250,000 in cash an 8% senior secured convertible promissory note
substantially in the form of Exhibit A hereto (the “Note”) in the principal amount of
$250,000;
WHEREAS, the Company desires to have the right to sell to the Purchaser for $250,000 in cash
an 8% senior secured convertible promissory note of like tenor to the Note (the “Second Note”) in
the principal amount of $250,000 and the Purchaser desires to grant the Company the right to cause
the Purchaser to purchase for $250,000 in cash the Second Note;
WHEREAS, to induce the Purchaser to purchase the Note, the Company will issue to the Purchaser
a warrant substantially in the form of Exhibit B hereto (the “Warrant”) to purchase
37,500,000 shares of common stock, par value $0.0025 per share, of the Company (the “Common Stock”)
with an initial exercise price of $0.02 per share; and
WHEREAS, to induce the Purchaser to grant the put right for the Second Note, the Company
agrees that upon exercise of such put right it will also issue to the Purchaser a warrant of like
tenor to the Warrant (the “Second Warrant”) to purchase 37,500,000 shares of Common Stock with an
initial exercise price of $0.02 per share.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchaser hereby agree as follows:
1. Authorization; Sale of Notes and Warrants.
1.1 Authorization. The Company has, or before the Closing (as defined in Section 2.3)
will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of the
Note, the Second Note, the Warrant and the Second Warrant.
1.2 Sale of Note and Warrant. Subject to the terms and conditions of this Agreement,
at the Closing, the Company will sell, and the Purchaser will purchase, the Note and the Warrant.
1.3 Sale and Purchase the Second Note and Second Warrant. Subject to the terms and
conditions of this Agreement, the Purchaser hereby agrees to purchase the Second Note and the
Second Warrant as soon as is commercially reasonable after the date on which the Company gives
written notice (the “Company Notice”) to the Purchaser of its desire to sell the Second Note and
the Second Warrant; provided, that the Company gives such notice prior to the
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date that is six (6) months after the date hereof. For avoidance of doubt, the Purchaser shall not
be obligated to purchase the Second Note and the Second Warrant if the Company fails to give such
written notice to the Purchaser prior to the date that is six (6) months after the date hereof.
2. Purchase Price; Closings.
2.1 Purchase Price of Note and Warrant. The purchase price (the “Purchase Price”) to
be paid by the Purchaser to the Company to acquire the Note and Warrant shall be $250,000.
2.2 Purchase Price of Second Note and Warrant. The purchase price (the “Second
Purchase Price”) to be paid by the Purchaser to the Company to acquire the Second Note and the
Second Warrant shall be $250,000.
2.3 The Closing. Subject to the terms and conditions of this Agreement, the closing
(the “Closing”) of the sale and purchase of the Note and Warrant shall take place at the offices of
Xxxxxxx Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx XX 00000 (or remotely via the exchange of documents
and signatures) on the date of this Agreement (the “Closing Date”). At the Closing:
(a) the Company shall deliver to the Purchaser a Certificate of the Secretary of the Company
attesting as to resolutions of the Board of Directors of the Company, authorizing and approving all
matters in connection with this Agreement and the transactions contemplated hereby;
(b) the Company shall deliver to the Purchaser, the Note in the principal amount of $250,000
and the Warrant exercisable for 37,500,000 shares of Common Stock;
(c) the Purchaser shall pay directly to the Company, by wire transfer of immediately available
funds, the Purchase Price for the Note and Warrant being purchased by the Purchaser hereunder;
(d) The Company shall execute and deliver that certain Security Agreement in the form attached
as Exhibit C hereto (the “Security Agreement”) entered into by the Company in favor of
Xxxxxx Asset Partners, LLC, as agent for the Purchaser; and
(e) The Company shall execute and deliver that certain Intercreditor Agreement in the form
attached as Exhibit D hereto (the “Intercreditor Agreement”) by and among the Company,
Cheshire Associates, LLC and Cornell Capital Partners, L.P. in favor of Xxxxxx Asset Partners, LLC,
as agent for the Purchaser.
2.4 The Second Closing. Subject to the terms and conditions of this Agreement, the
closing (the “Second Closing”) of the sale and purchase of the Second Note and the Second Warrant
shall take place at the offices of Xxxxxxx Krooks LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx XX 00000 (or
remotely via the exchange of documents and signatures) on the date,
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after the date of the Company Notice provided for in Section 1.3 of this Agreement, that is
mutually agreed upon between the Company and the Purchaser (the “Second Closing Date”). At the
Second Closing:
(a) the Company shall deliver to the Purchaser, the Second Note in the principal amount of
$250,000 and the Second Warrant exercisable for 37,500,000 shares of Common Stock;
(b) the Purchaser shall pay directly to the Company, by wire transfer of immediately available
funds, the Second Purchase Price for the Second Note and the Second Warrant being purchased by the
Purchaser hereunder;
(c) The Company shall deliver a certificate executed by its Chief Executive Officer certifying
that each of the representations and warranties of the Company contained in this Agreement shall be
true and correct and all covenants shall have been complied with by the Company, in all material
respects, when made on the date hereof and on and as of the Second Closing Date as though made on
and as of the Second Closing Date; and
(d) The Purchaser shall execute and deliver to the Company a certificate certifying that each
of the representations, warranties and covenants of the Purchaser contained in this Agreement shall
be true and correct, in all material respects, when made on the date hereof and on and as of the
Second Closing Date as though made on and as of the Second Closing Date.
3. Representations of the Company. The Company hereby represents and warrants to the
Purchaser as follows:
3.1 Organization and Standing. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has requisite corporate
power and authority to conduct its business as presently conducted and as proposed to be conducted
by it and to enter into and perform this Agreement, as well as the Note, Warrant, Second Note,
Second Warrant the Security Agreement and the Intercreditor Agreement (collectively, the “Ancillary
Agreements”) and to carry out the transactions contemplated by this Agreement and the Ancillary
Agreements. The Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the failure so to qualify would have a material adverse
effect on the business, assets or liabilities or condition (financial or otherwise) of the Company
or its business (a “Company Material Adverse Effect”). The Company has furnished, to the extent
requested by any Purchaser in writing, complete and accurate copies of its certificate of
incorporation (the “Articles”) and By-laws, each as amended to date and presently in effect.
3.2 Subsidiaries, Etc. The Company has no subsidiaries and does not own or control,
directly or indirectly, any shares of capital stock of any other corporation or any interest in any
partnership, limited liability company, joint venture or other non-corporate business enterprise.
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3.3 Capitalization.
(a) The capitalization of the Company as of the date of this Agreement, including its
authorized capital stock, the number of shares issued and outstanding, the number of shares
issuable and reserved for issuance pursuant to the Company’s stock option plans and agreements, the
number of shares issuable and reserved for issuance pursuant to securities (other than the Note and
Warrant) exercisable for, or convertible into or exchangeable for any shares of Common Stock and
the number of shares initially to be reserved for issuance upon conversion of the Note and exercise
of the Warrant, is set forth in the SEC Documents (as defined below) or has otherwise been made
known to the Purchaser. All issued and outstanding shares of capital stock of the Company have
been validly issued, fully paid and non-assessable.
(b) Except as set forth in the SEC Documents or has otherwise been made known to the
Purchaser, (i) no subscription, warrant, option, convertible security or other right (contingent or
otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right, or to issue or distribute
to holders of any shares of its capital stock any evidences of indebtedness or assets of the
Company, (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or
to make any other distribution in respect thereof, and (iv) there are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to the Company.
(c) Except for the Ancillary Agreements and as disclosed in the SEC Documents, there is no
agreement, written or oral, between the Company and any holders of its securities, or, to the best
of the Company’s knowledge, among any holder of its securities, relating to the sale or transfer
(including without limitation agreements relating to rights of first refusal, co-sale rights or
“drag-along” rights), registration under the Securities Act of 1933, as amended (the “Securities
Act”), or voting, of the capital stock of the Company.
3.4 Issuance of Note and Warrant. The issuance, sale and delivery of the Note,
Warrant, Second Note and Second Warrant in accordance with this Agreement, and the issuance and
delivery of the shares of Common Stock issuable upon (i) conversion of the Note and Second Note
(the “Note Shares”) and (ii) exercise of the Warrant and Second Warrant (the “Warrant Shares,” and
together with the Note Shares, the “Securities”), have been duly authorized by all necessary
corporate action on the part of the Company, and all such shares have been, or will be prior to the
Closing or Second Closing, as applicable, duly reserved for issuance. The Securities when so
issued, sold and delivered against payment therefor in accordance with the provisions of this
Agreement, when issued upon such conversion, will be duly and validly issued, fully paid and
nonassessable. This Section 3.4, and all other provisions of Article 3 of this Agreement, are
expressly subject to the fact that due to a shortage of authorized but unissued shares of Common
Stock, the Securities are not yet authorized and the Note, Second Note, Warrant and Second Warrant
cannot be converted or exercised unless and until the Company amends the Articles to increase its
authorized number of shares of Common Stock.
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3.5 Corporate Power; Authority for Agreement; No Conflict. The Company will have, at
the Closing, all requisite corporate power to execute and deliver this Agreement and the Ancillary
Agreements, to sell and issue the Note and Warrant hereunder, to issue the Securities, to
consummate the other transactions contemplated by the terms of this Agreement and carry out and
perform its obligations under the terms of this Agreement. The execution, delivery and performance
by the Company of this Agreement and the Ancillary Agreements, and the consummation by the Company
of the transactions contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement has been, and the Ancillary Agreements when executed at the
Closing will be, duly executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s
discretionary authority with respect to the granting of a decree ordering specific performance or
other equitable remedies. The execution and delivery of this Agreement and the Ancillary
Agreements, the consummation of the transactions contemplated hereby and thereby and the compliance
with their respective provisions by the Company will not (a) conflict with or violate any provision
of the Articles or By-laws of the Company, (b) require on the part of the Company any filing with,
or any permit, order, authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory authority or agency (each
of the foregoing is hereafter referred to as a “Governmental Entity”), (c) conflict with, result in
a breach of, constitute (with or without due notice or lapse of time or both) a default under,
result in the acceleration of obligations under, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below) or other arrangement to
which the Company is a party or by which the Company is bound or to which its assets are subject,
other than any of the foregoing events listed in this clause (c) that do not and will not,
individually or in the aggregate, have a Company Material Adverse Effect, or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its
properties or assets. For purposes of this Agreement, “Security Interest” means any mortgage,
pledge, security interest, encumbrance, charge, or other lien (whether arising by contract or by
operation of law).
3.6 Governmental Consents. No consent, approval, order or authorization of,
qualification, declaration or filing with, any Governmental Entity is required on the part of the
Company in connection with the offer, issuance, sale and delivery of the Note and Warrant, the
issuance and delivery of the Securities or the other transactions to be consummated at the Closing,
as contemplated by this Agreement and the Ancillary Agreements, except such filings as shall have
been made prior to and shall be effective on and as of the Closing and such filings required to be
made after the Closing under applicable federal and state securities laws. Based on the
representations made by the Purchaser in Section 4 of this Agreement, the offer and sale of the
Note and Warrant to the Purchaser will be in compliance with applicable Federal and state
securities laws.
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3.7 Litigation. Except as set forth in the SEC Documents, there is no claim, action,
suit or proceeding, or governmental inquiry or investigation, pending, or, to the Company’s
knowledge, any threat thereof, against the Company, before any court, agency or tribunal which
questions the validity of this Agreement, the Ancillary Agreements or the right of the Company to
enter into any such agreements, or which could reasonably be expected to result in a Company
Material Adverse Effect; there is no litigation pending or to the Company’s knowledge, any threat
thereof, against the Company or any of its employees by reason of the past employment relationships
of any of the Company’s employees, their use in connection with the Company’s business of any
proprietary information or techniques or their obligations under any agreements with former
employers, the proposed activities of the Company, or negotiations by the Company with possible
investors in the Company; and the Company is not subject to any outstanding judgment, order or
decree.
3.8 Financial Statements. The Company has filed with the Securities and Exchange
Commission (“Commission”) all periodic reports, schedules, registration statements and definitive
proxy and information statements that the Company was required to file with Commission on or after
December 31, 2004 (collectively, the “SEC Documents”). The Company is not aware of any event
occurring on or before the date of this Agreement (other than the transactions effected hereby)
that would require the filing of, or with respect to which the Company intends to file, a Form 8-K
after the date of this Agreement, except as has otherwise been made known to the Purchaser. Each
SEC Document, as of the date of the filing thereof with the Commission (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such amending or superseding
filing), complied in all material respects with the requirements of the Securities Act or
Securities Exchange Act of 1934, as amended (“Exchange Act”), as applicable, and the rules and
regulations promulgated thereunder and, as of the date of such filing (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such filing), such SEC
Document (including all exhibits and schedules thereto and documents incorporated by reference
therein) did not contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents that are required to be
filed as exhibits to the SEC Documents have been filed as required. The Company has no
liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of
business, liabilities in connection with the transactions contemplated by this Agreement and
liabilities that, under GAAP, are not required to be reflected in the financial statements included
in the SEC Documents. As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the Commission with respect
thereto. The financial statements included in the SEC Documents have been and will be prepared in
accordance with GAAP consistently applied at the times and during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto, (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements, or (iii) as set forth in the SEC Documents), and fairly present in all material
respects the financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end adjustments).
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3.9 Absence of Undisclosed Liabilities. Except as disclosed in the SEC Documents, the
Company does not have any known liability (whether absolute or contingent), except for (a)
liabilities shown on the balance sheet as of December 31, 2005 (the “Balance Sheet Date”), (b)
liabilities that have arisen since the Balance Sheet Date in the ordinary course of business and
which are similar in nature and amount to the liabilities that arose during the comparable period
of time in the immediately preceding fiscal period, (c) contractual and other liabilities incurred
in the ordinary course of business that are not required by generally accepted accounting
principles and practices consistently applied in the United States to be reflected on a balance
sheet and that would not, either individually or in the aggregate, have or result in a Company
Material Adverse Effect and (d) liabilities incurred in connection with the transactions
contemplated hereunder.
3.10 Intellectual Property. Except as set forth in the SEC Documents or which would
not reasonably be expected to result in a Company Material Adverse Effect, there is no pending nor,
to the Company’s knowledge, threatened claim, suit or action, nor have there been any written
communications, contesting or challenging the rights of the Company in or to any item of
intellectual property owned or used by Company in the conduct of its business (the “Intellectual
Property”) or the validity of any of the Intellectual Property. To the Company’s knowledge, there
is no infringement upon or authorized use of any of the Intellectual Property by any third party or
which would not reasonably be expected to result in a Company Material Adverse Effect. No officer,
director, equity holder or affiliate of the Company’s nor any of their respective associates has
any right to or interest in any of the Intellectual Property, including, without limitation, any
right to payments (by royalty or otherwise) in respect of any use or transfer thereof.
3.11 Compliance. The Company has, in all material respects, complied with all laws,
regulations and orders applicable to its business and has all material permits and licenses
required thereby. There is no term or provision of any mortgage, indenture, contract, agreement or
instrument to which the Company is a party or by which it is bound, or, to the Company’s knowledge,
of any provision of any state or Federal judgment, decree, order, statute, rule or regulation
applicable to or binding upon the Company, which materially adversely affects or, so far as the
Company may now reasonably foresee, in the future is reasonably likely to result in or have a
Company Material Adverse Effect.
3.12 Foreign Assets Control Legislation. Neither the sale of the Note and the Warrant
by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto. Without limiting the foregoing, neither the Company nor any of
its subsidiaries (a) is a person whose property or interests in property are blocked pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079
(2001)) or (b) engages in any dealings or transactions, or be otherwise associated, with any such
person. The Company is in compliance with the USA Patriot Act of 2001 (signed into law October 26,
2001).
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3.13 Permits. The Company has all material franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties, prospects, or financial
condition of the Company and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The Company is not in
default in any material respect under any of such franchises, permits, licenses, or other similar
authority.
3.14 Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s
fees or similar fees or commissions payable by the Company in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with the Company or any
action taken by any entity or individual on behalf of the Company.
4. Representations of the Purchaser. The Purchaser represents and warrants to the
Company as follows:
4.1 Existence and Power. The Purchaser (a) is a duly organized legal entity, validly
existing and in good standing under the laws of the state of its organization, and has the
requisite power and authority to own, lease and operate its assets and properties and to carry on
its business as presently conducted and (b) has the requisite power and authority to execute,
deliver and perform its obligations under this Agreement and each Ancillary Agreement to which the
Purchaser is a party.
4.2 Authorization; No Contravention. The execution delivery and performance by the
Purchaser of this Agreement and each of the Ancillary Agreements to which the Purchaser is a party
and the transactions contemplated hereby and thereby, (a) have been duly authorized by all
necessary action, (b) do not contravene the terms of such Purchaser’s organizational documents, or
any amendment thereof and (c) do not violate, conflict with or result in any breach or
contravention of, or the creation of any lien under, any material contractual obligation of the
Purchaser or any requirement of law applicable to the Purchaser.
4.3 Governmental Authorization; Third Party Consents. No approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing with, any
Governmental Entity or any other person, and no lapse of a waiting period under any requirement of
law, is necessary or required in connection with the execution, delivery or performance (including,
without limitation, the purchase of the Note and Warrant) by, or enforcement against, the Purchaser
of this Agreement and each of the Ancillary Agreements to which it is a party or the transactions
contemplated hereby and thereby.
4.4 Binding Effect. This Agreement and the related documents to which the Purchaser
is a party have been duly executed and delivered by the Purchaser and constitute the legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with
their respective terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting generally the
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enforcement of creditors’ rights and subject to a court’s discretionary authority with respect
to granting a decree ordering specific performance or other equitable remedies.
4.5 Purchase for Own Account. The Note, Warrant and Securities hereby acquired by the
Purchaser pursuant to this Agreement, and any capital stock issuable upon conversion or exercise
thereof, are being, and any corresponding securities issued at the Second Closing or underlying
such securities would be, acquired for the Purchaser’s own account for investment and not with a
view to the resale or distribution of any part thereof, and the Purchaser has no present intention
of selling, granting any participation in, or otherwise distributing (as such term is defined in
the Securities Act) the same. If the Purchaser should in the future decide to dispose of any of
the Note, Warrant or Securities, or any capital stock issuable upon conversion or exercise thereof,
the Purchaser understands and agrees that it may do so only in compliance with the Securities Act
and applicable state securities laws, as then in effect. Each Purchaser agrees to the imprinting,
so long as required by law, of legends on certificates representing any of its Note, the Warrant
and Securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
4.6 Restricted Securities. The Purchaser understands the Note, Warrant and Securities
will not be registered at the time of their issuance under the Securities Act since the Note,
Warrant and Securities are being acquired from the Company in a transaction exempt from the
registration requirements of the Securities Act, which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Purchaser’s representations as
expressed herein.
4.7 Investment Representations.
(a) The Purchaser acknowledges that the offer and sale of the Note, Warrant and Securities
were not accomplished by the publication of any advertisement.
(b) The Purchaser is an “accredited investor” as that term is defined in Regulation D under
the Securities Act.
(c) The Purchaser acknowledges that (i) an investment in the Note, Warrant and Securities is
highly speculative, and that the Purchaser may suffer the loss of all or part of its investment and
that (ii) the Company, its officers, directors, members and their successors and
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assigns make no representation or warranty hereunder or otherwise regarding the fair market
value or future value of the Securities;
(d) The Purchaser has examined the Note, Warrant and Securities sold pursuant to this
Agreement and is familiar with and understands the terms of this Agreement;
(e) In making the decision to purchase the Note, Warrant and Securities the Purchaser has
relied solely on independent investigation made by the Purchaser. The Purchaser confirms that the
Purchaser has had the opportunity to ask questions of, and receive answers from, the Company
concerning the sale of the Note, Warrant and Securities, the financial condition, outlook and
business operations of the Company and has otherwise had an opportunity to obtain any additional
information, to the extent that the Company possess such information or could acquire it without
unreasonable effort or expense;
(f) The Purchaser’s overall commitment to investments which are not readily marketable is not
disproportionate to the Purchaser’s purchase of the Note, Warrant and Securities, will not cause
such overall commitment to become excessive and the Purchaser can afford to bear the loss of the
Purchase Price paid for the securities sold pursuant to this Agreement;
(g) The Purchaser satisfied any special suitability or other applicable requirements of the
Purchaser’s current needs and personal contingencies and has no need for liquidity in its
investment in the Note, Warrant and Securities; and
(h) The Purchaser acknowledges that this transaction has not been reviewed or scrutinized by
the Securities and Exchange Commission or by any administrative agency charged with the
administration of the securities laws of any state, and that no such agency has passed on or made
any recommendation or endorsement of the shares constituting the Securities.
4.8 Experience. The Purchaser has carefully reviewed the representations concerning
the Company contained in this Agreement and has made detailed inquiry concerning the Company, its
business and its personnel; the officers of the Company have made available to the Purchaser any
and all written information which it has requested and have answered to such Purchaser’s
satisfaction all inquiries made by the Purchaser; and the Purchaser has sufficient knowledge and
experience in finance and business that it is capable of evaluating the risks and merits of its
investment in the Company and the Purchaser is able financially to bear the risks thereof.
4.9 Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s
fees or similar fees or commissions payable by the Purchaser in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with the Company or any
action taken by any entity or individual.
5. Indemnification.
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(a) The Company agrees to indemnify and hold harmless the Purchaser and its general partners,
employees, officers, directors, members, agents and other representatives (collectively, the
“Purchaser Indemnitees”), against any expenses, damages, liabilities or losses (joint or several)
arising out of such investigations, proceedings, claims or actions, to which the Purchaser
Indemnitees may become subject, whether under the Act or any rules or regulations promulgated
thereunder, the Exchange Act or any rules or regulations promulgated thereunder, or any other
federal or state law or regulation, or common law, arising or out of or based upon any breach of
any representation, warranty, agreement, obligation or covenant of the Company contained herein.
The Company also agrees to reimburse the Purchaser Indemnitees for any legal or other expenses
reasonably incurred in connection with investigating or defending any such investigations,
proceedings, claims or actions, as such expenses or other costs are incurred. The Indemnitees may
select their own counsel; and
(b) The Purchaser agrees to indemnify and hold harmless the Company and any of the Company’s
employees, officers, directors, members, agents and other representatives (collectively, the
“Company Indemnitees”), against any expenses, damages, liabilities or losses (joint or several)
arising out of such investigations, proceedings, claims or actions, to which the Company
Indemnitees may become subject, whether under the Act or any rules or regulations promulgated
thereunder, or any other federal or state law or regulation, or common law, arising or out of or
based upon any breach of any representation, warranty, agreement, obligation or covenant of the
Purchaser contained herein. The Purchaser also agrees to reimburse the Company Indemnitees for any
legal or other expenses reasonably incurred in connection with investigating or defending any such
investigations, proceedings, claims or actions, as such expenses or other costs are incurred. The
Company Indemnitees may select their own counsel.
6. Further Agreement. The parties hereto acknowledge and agree that the Purchaser
shall become a party to, and the Securities shall be considered Registrable Securities under, the
Registration Rights Agreement to be entered into by the Company in connection with in its next
offering of up to an aggregate principal amount of $5,000,000 senior secured convertible promissory
notes (the “Bridge Notes”) consummated by the Company after the date hereof and pursuant to a
confidential private placement memorandum.
7. Miscellaneous.
7.1 Successors and Assigns. Subject to securities laws restrictions of general
applicability, this Agreement, and the rights and obligations of the Purchaser hereunder, may be
assigned by the Purchaser to (a) any person or entity to which the Note and/or Warrant are
transferred by such Purchaser, or (b) to any Affiliated Party (as hereinafter defined), and, in
each case, such transferee shall be deemed a “Purchaser” for purposes of this Agreement;
provided that such assignment of rights shall be contingent upon the transferee providing a
written instrument to the Company notifying the Company of such transfer and assignment and
agreeing in writing to be bound by the terms of this Agreement. Without prior written consent of
the Agent, the Company may not assign its rights under this Agreement for twelve (12) months from
the date hereof. For purposes of this Agreement, “Affiliated Party” shall mean, with respect to
11
the Purchaser, any person or entity which, directly or indirectly, controls, is controlled by
or is under common control with such Purchaser, including, without limitation, any general partner,
officer or director of the Purchaser and any venture capital fund now or hereafter existing which
is controlled by one or more general partners of, or shares the same management company as, the
Purchaser.
7.2 Survival of Representations and Warranties. All of the representations and
warranties made herein shall survive for twelve (12) months following the Closing or the Second
Closing, as the case may be. The Purchaser is entitled to rely, and the parties hereby acknowledge
that the Purchaser has so relied, upon the truth, accuracy and completeness of each of the
representations and warranties of the Company contained herein, irrespective of any independent
investigation made by the Purchaser. The Company is entitled to rely, and the parties hereby
acknowledge that the Company has so relied, upon the truth, accuracy and completeness of each of
the representations and warranties of the Purchaser contained herein, irrespective of any
independent investigation made by the Company.
7.3 Expenses. Each party hereto shall pay its own expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the fees and expenses
of their respective counsel, financial advisors and accountants.
7.4 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
7.5 Specific Performance. In addition to any and all other remedies that may be
available at law in the event of any breach of this Agreement, the Purchaser shall be entitled to
specific performance of the agreements and obligations of the Company hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent jurisdiction.
7.6 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York. The Company and the Purchaser hereby irrevocably
consent to the jurisdiction of the Courts of the State of New York and of any Federal Court located
in the county of New York, State of New York in connection with any action or proceeding arising
out of or relating to this Agreement. In any such litigation the Company waives personal service
of any summons, complaint or other process and agrees that the service thereof may be made by
certified or registered mail directed to the Chief Executive Officer of the Company at its address
set forth below.
7.7 Notices. All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be deemed delivered (i) three business days after being
sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one
business day after being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth below:
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If to the Company, to The Immune Response Corporation, 0000 Xxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx
00000, Attention: Xxxxxx X. X’Xxxxx, CEO and President, telefax number (000) 000-0000, or at such
other address as may have been furnished in writing by the Company to the other parties hereto,
with a copy to Xxxxxx Xxxxxx LLP, 4350 La Jolla Xxxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Esq., telefax number (000) 000-0000; or
If to the Purchaser, to Qubit Holdings, LLC, , Attention: Xxxx Xxxxxxxx,
Non-Member Manager, telefax number ( ) , or at such other address as may have been
furnished in writing by the Purchaser to the other parties hereto, with a copy to Xxxxxxx Krooks
LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx, Esq., telefax
number (000) 000-0000.
Any party may give any notice, request, consent or other communication under this Agreement
using any other means (including, without limitation, personal delivery, messenger service,
telecopy, first class mail or electronic mail), but no such notice, request, consent or other
communication shall be deemed to have been duly given unless and until it is actually received by
the party for whom it is intended. Any party may change the address to which notices, requests,
consents or other communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Section.
7.8 Complete Agreement. This Agreement (including its exhibits) constitutes the
entire agreement and understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject matter and except
as specifically set forth herein or therein, no party makes any representation, warranty, covenant
or undertaking with respect to any such matters.
7.9 Amendments and Waivers. This Agreement may be amended or terminated and the
observance of any term of this Agreement may be waived with respect to all parties to this
Agreement (either generally or in a particular instance and either retroactively or prospectively),
with the written consent of the Company and the Purchaser. No waivers of or exceptions to any
term, condition or provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition or provision.
7.9 Pronouns. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns
and pronouns shall include the plural, and vice versa.
7.10 Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of which shall constitute
one and the same document. This Agreement may be executed by facsimile signatures.
7.11 Section Headings and References. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit or restrict the contractual
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obligations of the parties. Any reference in this agreement to a particular section or
subsection shall refer to a section or subsection of this Agreement, unless specified otherwise.
8. Agent Appointment.
8.1 The Purchaser hereby authorizes Xxxxxx Asset Partners, LLC, a Delaware limited liability
company (“Xxxxxx”), to act as collateral agent (the “Agent”) on behalf of the Purchaser, and in
such capacity to enter into the Security Agreement, the Intercreditor Agreement, and to exercise
for the benefit of the Purchaser all rights, powers and remedies provided to it, under or pursuant
to the Security Agreement and the Intercreditor Agreement, including, without limitation, those
available upon an Event of Default (as defined in the Note), subject always to the terms,
conditions, limitations and restrictions provided in the Note, the Warrant, the Security Agreement
and the Intercreditor Agreement. Except with respect to actions as to which the Agent is expressly
required to act under the terms of the Security Agreement and/or, the Intercreditor Agreement, the
Purchaser hereby agrees that the Agent may act or refrain from acting thereunder with the consent,
in writing of holders of a majority of the aggregate principal amount of Bridge Notes and the Note
outstanding as of the date of such consent (“Requisite Holders”), and that the Requisite Holders
shall have the right to direct the time, method and place of conducting any proceeding for any
right or remedy available to the Agent; provided, however, that such direction
shall not be in conflict with any rule of law or expose the Agent to personal liability, such
direction shall not be unduly prejudicial to the rights of any non-consenting holder, and the Agent
may take any action deemed proper by the Agent, in its discretion, that is not inconsistent with
such direction or the terms of the Security Agreement and/or the Intercreditor Agreement. The
Purchaser agrees that the duties of the Agent are only such as are specifically provided in the
Security Agreement and/or the Intercreditor Agreement, and the Agent shall have no other duties,
implied or otherwise. The appointment of Xxxxxx as Agent shall be deemed accepted by Xxxxxx, and
it shall be and become obligated to the extent provided in the Security Agreement and the
Intercreditor Agreement, only upon the execution and delivery of the Security Agreement and the
Intercreditor Agreement by Xxxxxx and the other parties to the Security Agreement and the
Intercreditor Agreement, respectively.
8.2 The Purchaser agrees that the Agent may consult with counsel of its choice and shall not
be responsible or liable for any action taken, suffered or omitted to be taken by it in good faith
in accordance with the advice of such counsel (subject to the exceptions set forth in the next two
sentences). The Purchaser further agrees that the Agent shall not incur liability for any action or
omission to act by it unless the Agent’s conduct constitutes willful misconduct or gross
negligence. During the continuance of an Event of Default, the Agent shall be required to use the
same degree of care and skill in its exercise of its powers and performance of its duties as a
prudent person would exercise under the circumstances in the conduct of such person’s own affairs.
8.3 None of the provisions of this Agreement, the Security Agreement or the Intercreditor
Agreement shall be construed to require the Agent to expend or risk its own funds or otherwise to
incur any liability (financial or otherwise) in the performance of any of its duties
14
hereunder or thereunder, or in the exercise of any of its rights or powers unless it shall be
satisfied that one or both of the Company and/or the Purchaser are at the time obligated and in a
financial position to pay the Agent’s reasonably anticipated fees for its services and its
out-of-pocket expenses (including fees of its counsel) in the performance of such duties or the
exercise of any of such rights or powers and to indemnify it against such risk or liability. In no
event shall the Agent be liable for (i) any consequential, punitive or special damages or (ii) the
acts or omissions of its nominees, correspondents, designees, subagents or subcustodians. The
Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation
or responsibility hereunder or thereunder by reason of any occurrence beyond the control of the
Agent (including, but not limited to, any act or provision of any present or future law or
regulation or governmental authority, any act of God or war, or the unavailability of the Federal
Reserve Bank wire or telex or other wire or communication facility).
8.4 The Purchaser agrees that the Agent shall not be required or bound to make any
investigation into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, entitlement order, approval or other paper
or document. The Agent may execute any of the powers under this Agreement, the Security Agreement
or the Intercreditor Agreement or perform any duties hereunder or thereunder either directly or by
or through agents, attorneys, custodians or nominees appointed with due care, and shall not be
responsible or liable for the acts or omissions, including any willful misconduct or gross
negligence, on the part of any agent, attorney, custodian or nominee so appointed.
8.5 The Company covenants and agrees, for the benefit of the Purchaser, and as an additional
obligation secured under the Security Agreement, to be responsible to pay to the Agent from time to
time, and the Agent shall be entitled to, fees and expenses as provided in the Security Agreement.
8.6 The Company agrees, for the benefit of the Purchaser, and as an additional obligation
secured under the Security Agreement, to indemnify and hold the Agent and its directors, employees,
officers, agents, successors and assigns harmless from and against any and all losses, claims,
damages, liabilities and expenses, including, without limitation, reasonable costs of investigation
and reasonable counsel fees and expenses that may be imposed on the Agent or incurred by it in
connection with its acceptance of its appointment as the Agent hereunder or under the Security
Agreement or the Intercreditor Agreement or the performance of its duties thereunder, except as a
result of the Agent’s gross negligence or willful misconduct. Such indemnity includes, without
limitation, all losses, damages, liabilities and expenses (including reasonable counsel fees and
expenses) incurred in connection with any litigation (whether at the trial or appellate levels)
arising from this Agreement, the Security Agreement or the Intercreditor Agreement or involving the
subject matter hereof or thereof.
8.7 The Purchaser agrees that Xxxxxx or any successor may at any time resign as Agent by
giving written notice thereof to the Company at least 20 business days prior to the date of such
proposed resignation. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor collateral agent by written instrument executed by authority of its manager a
copy of which shall be delivered to the resigning Agent and a copy to the successor
15
collateral agent. If an instrument of acceptance by a successor collateral agent shall not have
been delivered to the Agent within 20 business days after giving such notice of resignation, the
resigning Agent may petition any court of competent jurisdiction for the appointment of a successor
collateral agent. Such court may thereupon, after such notice, if any, as it may deem proper,
appoint a successor collateral agent. The Agent may be removed at any time by written action by
Requisite Holders, delivered to the Agent and to the Company. If the Agent shall be so removed,
the Company shall promptly appoint a successor collateral agent in accordance with the procedures
set forth in this Section 8.7.
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IN WITNESS WHEREOF, Executed as of the date first written above.
| COMPANY: | ||||||
| THE IMMUNE RESPONSE CORPORATION | ||||||
| By: | ||||||
| Name: Xxxxxx X. X’Xxxxx | ||||||
| Title: Chief Executive Officer and President | ||||||
| PURCHASER: | ||||||
| QUBIT HOLDINGS, LLC | ||||||
| By: | ||||||
| Name: Xxxx Xxxxxxxx | ||||||
| Title: Non-Member Manager | ||||||
17
EXHIBIT A
FORM OF
8% SECURED CONVERTIBLE PROMISSORY NOTE
18
EXHIBIT B
FORM OF WARRANT
19
EXHIBIT C
FORM OF SECURITY AGREEMENT
20
EXHIBIT D
FORM OF INTERCREDITOR AGREEMENT
21
