SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of April 24,
1998, by and among The Immune Response Corporation, a Delaware corporation, with
headquarters located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("REGULATION D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. The Company has authorized the following new series of its Preferred
Stock, par value $.001 per share (the "PREFERRED STOCK"): the Company's Series
F Convertible Preferred Stock (the "PREFERRED SHARES"), which shall be
convertible into shares of the Company's Common Stock, par value $.0025 per
share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Preferred Shares, substantially in the form
attached hereto as EXHIBIT A (the "CERTIFICATE OF DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially an aggregate of 200 of the Preferred Shares (the
"INITIAL PREFERRED SHARES") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers;
D. Subject to the terms and conditions set forth in this Agreement, the
Company may have the right to cause the Buyers to purchase up to an aggregate of
200 Preferred Shares (pro rata based on the number of Initial Preferred Shares
each Buyer purchased in relation to the total number of Initial Preferred
Shares) (the "PUT PREFERRED SHARES") (the Initial Preferred Shares and the Put
Preferred Shares collectively are referred to in this Agreement as the
"PREFERRED SHARES");
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. PURCHASE OF PREFERRED SHARES. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a), the Company shall
issue and sell to the Buyers and the Buyers severally shall purchase from the
Company an aggregate of 200 Initial Preferred Shares, in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers (the "INITIAL
CLOSING"). Subject to satisfaction (or waiver) of the conditions set forth in
Sections 1(c), 1(d), 6(b) and 7(b), the Company may require that each Buyer
purchase, at multiple closings, if applicable, that number of additional
Preferred Shares equal to such Buyer's pro rata portion of up to 200 Preferred
Shares (based on the number of Initial Preferred Shares each Buyer purchased in
relation to the total number of Initial Preferred Shares purchased by the
Buyers) (the "PUT CLOSINGS"). The Initial Closing and the Put Closings
collectively are referred to in this Agreement as the "CLOSINGS." The purchase
price (the "PURCHASE PRICE") of each Preferred Share at each of the Closings
shall be $50,000.
b. THE INITIAL CLOSING DATE. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time, within
three (3) business days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
c. THE PUT CLOSING DATES. The date and time of each of the Put
Closings (the "PUT CLOSING DATES") shall be 10:00 a.m. Central Time, on the date
specified in the Company's Put Share Notice (as defined below), subject to
satisfaction (or waiver) of the conditions to each of the Put Closings set forth
in Sections 6(b) and 7(b) and the conditions set forth in Section 1(d), (or such
later date as is mutually agreed to by the Company and the Buyers). During the
period (the "COMPANY PUT RIGHT PERIOD") beginning on the Initial Closing Date
and ending on the date which is one year after the Initial Closing Date, but
subject to the requirements of Sections 6(b) and 7(b) and satisfaction of the
Put Notice Conditions (as defined in Section 1(d)), the Company may require each
Buyer to purchase Put Preferred Shares by delivering written notice to each of
the Buyers (a "PUT SHARE NOTICE") at least five business days but not more than
ten business days (the "PUT SHARE NOTICE DATE") prior to the Put Closing Date
set forth in the Put Share Notice. The Put Share Notice shall set forth (i)
each Buyer's pro rata portion (based on the number of Initial Preferred Shares
each Buyer purchased in relation to the total number of Initial Preferred Shares
purchased by the Buyers) of the aggregate number of Put Preferred Shares (which
aggregate number shall not exceed 200 Preferred Shares, less any Put Preferred
Shares previously purchased) which the Company is requiring each Buyer to
purchase at such Put Closing, (ii) the aggregate Purchase Price for each such
Buyer's Put Preferred Shares and (iii) the date selected by the Company for the
Put Closing Date, which Put Closing Date shall be not later than the date which
is one year after the Initial Closing Date. The Put Closing shall
-2-
occur on the Put Closing Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Initial Closing
Date and the Put Closing Dates collectively are referred to in this Agreement as
the "CLOSING DATES."
d. THE PUT NOTICE CONDITIONS. Notwithstanding anything in this
agreement to the contrary, the Company shall not be entitled to deliver a Put
Share Notice and require the Buyers to purchase the Put Preferred Shares unless,
in addition to the satisfaction of the requirements of Sections 6(b) and 7(b),
all of the following conditions (the "PUT NOTICE CONDITIONS") are satisfied:
(i) during the period beginning 60 business days prior to the Put Closing Date
and ending on and including the Put Closing Date, the registration statement
(the "REGISTRATION STATEMENT") covering the resale of the Conversion Shares has
been declared effective by the SEC and at all times has been effective and
available for the sale of no less than 125% of the sum of (A) the number of
Conversion Shares then issuable upon the conversion of all outstanding Preferred
Shares and the Put Preferred Shares to be issued by the Company and (B) the
number of Conversion Shares that are then held by the Buyers and (C) any shares
of Common Stock issued with respect to Preferred Shares as a result of a stock
dividend or otherwise; (ii) during the period beginning on the Initial Closing
Date and ending on and including the Put Closing Date, the Common Stock is
listed on The Nasdaq National Market and has not been suspended from trading at
any time during such period, has not been voluntarily delisted at any time
during such period, nor is there any pending or threatened delisting or
suspension; (iii) no event constituting a Major Transaction (as defined in
Section 3(c) of the Certificate of Designations), including an agreement to
consummate a Major Transaction, or a Triggering Event (as defined in Section
3(d) of the Certificate of Designations) shall have occurred nor shall any
pending event which would constitute a Major Transaction have been publicly
disclosed from the period beginning on and including the Initial Issuance Date
and ending on and including the Put Closing Date; (iv) on each day during the
period beginning 15 business days prior to the Put Shares Notice Date and ending
on the Put Closing Date, the Closing Bid Price (as defined in the Certificate of
Designations) of the Common Stock is not less than $8.00 per share (subject to
appropriate adjustments for any stock dividends, stock splits or other similar
transactions with respect to the Common Stock); (v) during the period beginning
on the Initial Closing Date and ending on and including the Put Closing Date,
the Company shall have delivered Conversion Shares upon conversion of the
Preferred Shares to the Buyers on a timely basis as set forth in Section
2(f)(ii) of the Certificate of Designations; (vi) there shall not have been more
than one prior Put Closing Date; and (vii) the number of Put Preferred Shares to
be sold by the Company at such Put Closing is not less than 50 Preferred Shares.
Each Buyer agrees, so long as the Put Notice Conditions are satisfied and a Put
Closing has not been cancelled or otherwise terminated, that during the period
beginning immediately following its receipt of a Put Share Notice and ending at
the time of the applicable Put Closing, neither such Buyer nor its affiliates
shall sell or agree to sell any shares of Common Stock.
e. FORM OF PAYMENT. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares to be
issued and sold to such Buyer at the respective Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, stock
-3-
certificates (in the denominations as such Buyer shall request) (the "STOCK
CERTIFICATES") representing such number of the Preferred Shares which such Buyer
is then purchasing (as indicated opposite such Buyer's name on the Schedule of
Buyers), duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the Preferred
Shares and (ii) upon conversion of the Preferred Shares, will acquire the
Conversion Shares then issuable (the Preferred Shares, the Conversion Shares and
any shares of Common Stock issued by the Company as a dividend on the Preferred
Shares (the "DIVIDEND SHARES") collectively are referred to herein as the
"SECURITIES"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made
-4-
any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto)("RULE 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
g. LEGENDS. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and, until such time as the sale
of the Conversion Shares and the Dividend Shares, have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Dividend Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are
-5-
registered for sale under the 1933 Act, (ii) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the 1933
Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of that country specified on
the Schedule of Buyers.
j. SHORT SALE LIMITATION. During the 30 days immediately preceding
the Initial Closing Date, neither such Buyer nor its affiliates has engaged,
directly or indirectly, in any transaction constituting a "short sale" (as
defined in Rule 3b-3 of the Securities Exchange Act of 1934, as amended (the
"1934 ACT")) or similar hedge of the Common Stock.
k. SECTION 9 OF THE SECURITIES EXCHANGE ACT. So long as a Buyer
holds any Preferred Shares, such Buyer will comply with the provisions of
Section 9 of the 1934 Act, and the rules promulgated thereunder with respect to
transactions involving the securities of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in SCHEDULE 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary,
-6-
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below) or the Certificate of Designations.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, and the
Irrevocable Transfer Agent Instructions (as defined in Section 5) and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents and the
Certificate of Designations by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, any Dividend
Shares with respect thereto and any shares of Common Stock issued as payment of
Registration Delay Payments (as defined in the Registration Rights Agreement),
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to each of the Closing Dates, the Certificate of Designations will have
been filed with the Secretary of State of the State of Delaware and will be in
full force and effect, enforceable against the Company in accordance with its
terms.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 40,000,000 shares of Common Stock, of which
as of April 20, 1998, 22,851,553 shares were issued and outstanding and of which
as of the date hereof not more than 22,901,553 shares were issued and
outstanding, as of April 20, 1998, 4,514,262 shares were issuable and reserved
for issuance pursuant to the Company's stock option and purchase plans and
2,051,281 shares are issuable and reserved for issuance pursuant to securities
(other than the Preferred Shares) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 5,000,000 shares of Preferred
Stock, of which as of the date hereof, no shares were issued and outstanding.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in SCHEDULE
3(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) there are no
-7-
outstanding debt securities; (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyers true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "CERTIFICATE
OF INCORPORATION"), and the Company's By-laws, as in effect on the date hereof
(the "BY-LAWS"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.
d. ISSUANCE OF SECURITIES. The Preferred Shares are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designations. At least 1,700,000
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares. Upon conversion in accordance
with the Certificate of Designations, the Conversion Shares will be, and upon
payment thereof, the Dividend Shares and any shares of Common Stock issued as
payment of Registration Delay Payments will be, validly issued, duly listed,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Conversion Shares and the Dividend Shares) will
not (i) result in a violation of the Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
Preferred Stock of the Company or the By-
-8-
laws; (ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
SCHEDULE 3(e), neither the Company nor its Subsidiaries is in violation of any
term of or in default under (i) its Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
Preferred Stock or By-laws or their organizational charter or by-laws,
respectively, or (ii) any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries. The business of the
Company and its Subsidiaries is not being conducted, and shall not be conducted,
in violation of any law, ordinance or regulation of any governmental entity,
except where such violation would not result in a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents or the Certificate of Designations in accordance with the
terms hereof or thereof. Except as disclosed in SCHEDULE 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing. The
Company is not in violation of the listing requirements of The Nasdaq National
Market as in effect on the date hereof and on each of the Closing Dates and is
not aware of any facts which would reasonably lead to delisting or suspension of
the Common Stock by The Nasdaq National Market in the foreseeable future.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1996,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act, (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has delivered to the Buyers or
their respective representatives true and complete copies of the SEC Documents.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. 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
-9-
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) 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 audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Buyers
with any material, nonpublic information.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(g), since December 31, 1997 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities, results of operations or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
except as expressly set forth in SCHEDULE 3(h).
i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF PREFERRED SHARES.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges
that each Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated thereby and any
advice given by any of the Buyers or any of their respective representatives or
agents in connection with the Transaction Documents and the Certificate of
Designations and the transactions contemplated thereby is merely incidental to
such Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
-10-
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to the issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.
k. NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. 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 require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of The Nasdaq Stock Market, Inc., nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of
the ▇▇▇▇ ▇▇▇) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
n. INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(n), none of the
Company's trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement, except where such
expiration or termination would not result in a Material Adverse Effect. The
Company and its Subsidiaries do not have any knowledge of any infringement by
the Company or its Subsidiaries of trademarks, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks,
service ▇▇▇▇ registrations, trade secrets or other similar rights of others,
-11-
or of any such development of similar or identical trade secrets or technical
information by others and, except as set forth on SCHEDULE 3(n), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademarks, trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service ▇▇▇▇ registrations, trade
secrets or other infringement; and the Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing,
except where any of the foregoing would not 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 properties.
o. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance or failure to receive such permits, licenses or other approvals
would not result in a Material Adverse Effect.
p. TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3(p) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
r. REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign
-12-
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not result in a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
s. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
t. Intentionally omitted.
u. TAX STATUS. Except as set forth on SCHEDULE 3(u), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
v. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(v) and
in the SEC Documents filed at least ten days prior to the date hereof and except
for arm's length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed on SCHEDULE 3(c), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
w. DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue
-13-
Conversion Shares upon conversion of the Preferred Shares in accordance with
this Agreement and the Certificate of Designations is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. FORM D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before each of the
Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all filings and reports relating to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following each of the Closing
Dates.
c. REPORTING STATUS. Until the earlier of (i) the date which is one
year after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and the Dividend Shares, if any, and (B) none of the Preferred
Shares is outstanding (the "REGISTRATION PERIOD"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Preferred Shares for substantially the same purposes and in substantially
the same amounts as indicated in SCHEDULE 4(d).
e. FINANCIAL INFORMATION. The Company agrees to send the following
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Registration Period: (i) within two (2) days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any registration statements or
amendments (other than on Form S-8) filed pursuant to the 1933 Act; (ii) on the
same day as the release thereof, facsimile copies of all press releases issued
by the Company or any of its Subsidiaries and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
-14-
f. RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares (without regard to any
limitations on conversions).
g. RIGHT OF FIRST REFUSAL. Subject to the exceptions described
below, the Company agrees that during the period beginning on the date hereof
and ending on the date which is two years after the Initial Closing Date, while
at least 50% of the Preferred Shares issued remain outstanding, neither the
Company nor its Subsidiaries will, without the prior written consent of the
holders of the Preferred Shares representing at least two-thirds (2/3) of the
Preferred Shares then outstanding, negotiate or contract with any party for any
equity financing (including any debt financing with an equity component) or
issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) in any form
("FUTURE OFFERINGS"), unless it shall have first delivered to each Buyer or a
designee appointed by such Buyer written notice (the "FUTURE OFFERING NOTICE")
describing the proposed Future Offering, including the terms and conditions
thereof, and providing each Buyer an option to purchase up to its Aggregate
Percentage (as defined below), as of the date of delivery of the Future Offering
Notice, in the Future Offering (the limitations referred to in this and the
preceding sentence are collectively referred to as the "CAPITAL RAISING
LIMITATION"). For purposes of this Section 4(g), "AGGREGATE PERCENTAGE" at any
time with respect to any Buyer shall mean the percentage obtained by dividing
(i) the aggregate number of Preferred Shares purchased by such Buyer at the
Closings by (ii) the aggregate number of Preferred Shares purchased by all
Buyers at the Closings. A Buyer can exercise its option to participate in a
Future Offering by delivering written notice thereof to participate to the
Company within ten (10) business days of receipt of a Future Offering Notice,
which notice shall state the quantity of securities being offered in the Future
Offering that such Buyer will purchase, up to its Aggregate Percentage, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage. In the event that one or more Buyers fail to elect to purchase up
to each such Buyer's Aggregate Percentage then each Buyer which has indicated
that it is willing to purchase a number of securities in excess of its Aggregate
Percentage shall be entitled to purchase its pro rata portion (determined in the
same manner as described in the preceding sentence) of the securities in the
Future Offering which one or more Buyers have not elected to purchase. In the
event the Buyers fail to elect to fully participate in the Future Offering
within the periods described in this Section 4(g), the Company shall not be
obligated to sell any of the securities of the Future Offering to any of the
Buyers and the Company shall have 45 days thereafter to sell the securities of
the Future Offering, upon terms and conditions (including the amount thereof),
no more favorable to the purchasers thereof than specified in the Future
Offering Notice. In the event the Company has not sold such securities of the
Future Offering within such 45 day period, the Company shall not thereafter
issue or sell such securities without first offering such securities to the
Buyers in the manner provided in this Section 4(g). The Capital Raising
Limitation shall not apply to (i) a loan from a commercial bank, (ii) any
transaction involving the Company's issuances of securities (A) as consideration
in a merger or consolidation, (B) in connection with any strategic partnership
or joint venture (the primary
-15-
purpose of which is not to raise equity capital), or (C) as consideration for
the acquisition of a business, product or license or other assets by the
Company, (iii) the issuance of Common Stock in a firm commitment, underwritten
public offering with net proceeds of at least $15,000,000, (iv) the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof, (v) the grant of
additional options or warrants, or the issuance of additional securities, under
any Company stock option plan, restricted stock plan, stock purchase plan or
other plan or written compensation contract for the benefit of the Company's
employees or directors, (vi) the issuance of Common Stock for consideration per
share (which shall exclude the value of any other securities issued to the
purchaser of such Common Stock to the extent that such other securities,
including without limitation warrants, have not been assigned or otherwise
allocated a specific purchase price) which is not and can not be (including by
way of any adjustment to the purchase price) less than 90% of the current market
price of the Common Stock on the date of such issuance, or (vii) the issuance of
any security convertible into or exercisable or exchangeable for Common Stock,
provided that the sum of the consideration paid by the purchaser for such
convertible security (which shall exclude the value of any other securities
issued to the purchaser of such Common Stock to the extent that such other
securities, including without limitation warrants, have not been assigned or
otherwise allocated a specific purchase price) and the consideration payable by
such purchaser at the time of conversion, exercise or exchange is not and can
not be (including by way of any floating conversion, exercise or exchange price
or adjustment to the conversion, exercise or exchange price) less than, on a per
share of Common Stock received basis, the current market price of the Common
Stock on the date of issuance of such convertible security. The Buyers shall
not be required to participate or exercise their right of first refusal with
respect to a particular Future Offering in order to exercise their right of
first refusal with respect to later Future Offerings.
h. LISTING. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
The Nasdaq National Market), if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents and the Certificate of Designations. The Company shall
maintain the Common Stock's authorization for listing on The Nasdaq National
Market or The New York Stock Exchange, Inc. ("NYSE"). Neither the Company nor
any of its Subsidiaries shall take any action which may result in the delisting
or suspension of the Common Stock on The Nasdaq National Market or NYSE (other
than to switch listings from The National Nasdaq Market to NYSE). The Company
shall promptly provide to each Buyer copies of any notices it receives from The
Nasdaq National Market or NYSE regarding the continued eligibility of the Common
Stock for listing on such automated quotation system or securities exchange.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(h).
i. EXPENSES. Subject to Section 9(l) below, following the Initial
Closing, the Company shall reimburse the Buyers for the Buyers' expenses
(including attorneys fees and
-16-
expenses) in connection with negotiating and preparing the Transaction Documents
and consummating the Transactions contemplated thereby up to an aggregate of
$50,000.
j. Intentionally omitted.
k. FILING OF FORM 8-K. On or before the fifth (5th) business day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
l. UNDERWRITING LOCK-UP AGREEMENT. At any time during the period
beginning on the Initial Closing Date and ending on the date which is two years
after the Initial Closing Date, while at least 50 Preferred Shares remain
outstanding the Company may require that all, but not less than all, of the
holders of the Preferred Shares enter into a "lock-up" agreement with the
underwriters of a public offering of the Common Stock pursuant to which the
holders would agree not to sell any Conversion Shares issued with respect to
Preferred Shares converted on Conversion Dates (as defined in the Certificate of
Designations) during the period beginning on the date designated by the Company,
which date shall be not less than 10 business days after the holders' receipt of
such notice, and ending on the date which is up to 90 days after the beginning
of the lock-up period as designated by the Company (the "UNDERWRITING LOCK-UP
PERIOD"). The Company shall exercise this right by delivering written notice
(the "LOCK-UP REQUEST NOTICE") of such request to all of the holders of the
Preferred Shares then outstanding at least 10 business days prior to the date on
which the Underwriting Lock-Up Period will begin, but in no event prior to the
filing of the registration statement for such proposed offering. The Lock-Up
Request Notice shall state (i) that the underwriters of such offering have
requested that the holders of the Preferred Shares enter into a "lock-up"
agreement, (ii) the date on which the Underwriting Lock-Up Period will begin,
and (iii) the name of the managing underwriters of the proposed offering.
Notwithstanding the foregoing, the Company shall not be entitled to require the
holders to enter into a "lock-up" agreement unless (A) the Underwriting Lock-Up
Period is not more than 90 days, (B) the Underwriting Lock-Up Period shall
terminate immediately upon (I) the termination or abandonment or indefinite
delay of the underwritten offering, (II) the announcement of a pending or
consummated Major Transaction or (III) the occurrence of a Triggering Event, (C)
all officers and directors of the Company enter into substantially similar
"lock-up" agreements, (D) such underwritten public offering is completed at a
price per share to the public of not less than $7.50 per share (subject to
adjustment as a result of any stock split, stock dividend, recapitalization,
reverse stock split, consolidation, exchange or similar event) and generates
aggregate gross proceeds to the Company of at least $15,000,000, (E) there has
been no other Underwriting Lock-Up Period during the 365-day period immediately
preceding the first day of the Underwriting Lock-Up Period being requested, (F)
during the period beginning on and including the date which is 20 business days
prior to the filing of the registration statement for the proposed offering and
ending on and including the first day of the Underwriting Lock-Up Period, the
Registration Statement has been effective and there has been no stop order or
other regulatory prohibition on trading of the Common Stock, (G) the offering
shall be underwritten
-17-
by one or more of the underwriters included on the Schedule of Underwriters
attached to this Agreement and (H) on the date of the Company's delivery of
the Lock-Up Request Notice there are at least 50 Preferred Shares
outstanding. In the event the Company requires an Underwriting Lock-Up
Period, the Maturity Date (as defined in the Certificate of Designations)
shall be extended one and one-half (1 1/2) days for each day in the
Underwriting Lock-Up Period as provided in Section 2(g) of the Certificate of
Designations.
M. RIGHT TO EXCHANGE PREFERRED SHARES. If at any time while any
Preferred Shares are outstanding and any Preferred Shares are subject to a
Minimum Adjustment Price (as defined in Section 2(b)(viii) of the Certificate of
Designations) the Company issues securities convertible into or exercisable or
exchangeable for Common Stock ("CONVERTIBLE SECURITIES") at a conversion,
exercise or exchange price which varies or may vary with the market price of the
Common Stock, the Company shall provide written notice thereof via facsimile and
overnight courier to each holder of Preferred Shares ("VARIABLE SECURITY
NOTICE") on the date of issuance of such Convertible Securities. Each holder of
Preferred Shares shall have the right to exchange all of such holder's Preferred
Shares for a like amount (based on principal, stated or liquidation amount, as
the case may be) of the Convertible Securities by delivering written notice of
such election to the Company within 15 business days of the holder's receipt of
the Variable Security Notice.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares and upon payment by the Company of dividends
on the Preferred Shares in Dividend Shares (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares and the Dividend
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that
no instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares and the Dividend Shares, prior
to registration of the Conversion Shares and the Dividend Shares under the ▇▇▇▇
▇▇▇) will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreements set forth in Section 2(g) to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in
generally acceptable form, that registration of a resale by such Buyer of any of
such Securities is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Dividend Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer and without any
restrictive legends. The Company acknowledges that a breach by it of its
obligations hereunder will cause
-18-
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. INITIAL CLOSING DATE. The obligation of the Company hereunder to
issue and sell the Initial Preferred Shares to each Buyer at the Initial Closing
is subject to the satisfaction, at or before the Initial Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware.
(iii) Such Buyer shall have delivered to the Company the Purchase
Price for the Preferred Shares being purchased by such Buyer at the
Initial Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(iv) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the Initial Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Initial
Closing Date.
b. PUT CLOSING DATE. The obligation of the Company hereunder to
issue and sell the Put Preferred Shares to each Buyer at each of the Put
Closings is subject to the satisfaction, at or before the Put Closing Date, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase Price
for the Put Preferred Shares being purchased by such Buyer at the Put
Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
-19-
(ii) The representations and warranties of such Buyer set forth in
paragraphs (a), (b), (c), (e), (f), (g) and (h) of Section 2 shall be true
and correct in all material respects as of the date when made and as of the
Put Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by such Buyer at or prior to
the Put Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. INITIAL CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Initial Preferred Shares at the Initial Closing is subject to the
satisfaction, at or before the Initial Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designations, shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such
Buyer.
(iii) The Common Stock shall be authorized for quotation on The
Nasdaq National Market or listing on NYSE, trading in the Common Stock
issuable upon conversion of the Initial Preferred Shares to be traded on
The Nasdaq National Market or NYSE shall not have been suspended by the
SEC, The Nasdaq Stock Market, Inc. or NYSE and all of the Conversion
Shares issuable upon conversion of the Initial Preferred Shares to be
sold at the Initial Closing and the Dividend Shares issuable with
respect thereto shall be listed upon The Nasdaq National Market or NYSE.
(iv) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Initial Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents or Certificate of
Designations to be performed, satisfied or complied with by the Company
at or prior to the Initial Closing Date. Such Buyer shall have received
a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Initial Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Initial Closing Date
regarding the representation contained in Section 3(c) above.
-20-
(v) Such Buyer shall have received the opinion of Pillsbury
Madison & Sutro LLP dated as of the Initial Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in substantially
the form of EXHIBIT C attached hereto.
(vi) The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall
request) for the Initial Preferred Shares being purchased by such Buyer
at the Initial Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, at least
1,700,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10
days of the Initial Closing.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies
of its Certificate of Incorporation and (C) By-laws, each as in effect
at the Initial Closing.
(xii) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the Initial Closing
Date.
(xiii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
b. PUT CLOSING DATES. The obligation of each Buyer hereunder to
purchase the Put Preferred Shares at each of the Put Closings is subject to
the satisfaction, at or before each of the Put Closing Dates, of each of the
following conditions, provided that these conditions
-21-
are for each Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion:
(i) The Company shall have complied with the requirements of
Section 1(c) and all of the Put Notice Conditions set forth in Section
1(d) shall have been satisfied.
(ii) The Certificate of Designations, shall be in full force and
effect and shall not have been amended since the Initial Closing Date,
and a copy thereof certified by the Secretary of State of the State of
Delaware shall have been delivered to such Buyer.
(iii) The Common Stock shall be authorized for quotation on The
Nasdaq National Market or listing on NYSE, trading in the Common Stock
issuable upon conversion of the Put Preferred Shares to be traded on The
Nasdaq National Market or NYSE shall not have been suspended by the SEC,
The Nasdaq Stock Market, Inc. or NYSE and all of the Conversion Shares
issuable upon conversion of the Put Preferred Shares to be sold at the
Put Closing and the Dividend Shares issuable with respect thereto shall
be listed upon The Nasdaq National Market or NYSE.
(iv) The representations and warranties of the Company set forth
in Section 3 (other than those set forth in paragraphs (g), (h) and (m)
through (r) of Section 3) shall be true and correct as of the date when
made and as of the Put Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents or the Certificate of Designations to be performed, satisfied
or complied with by the Company at or prior to the Put Closing Date.
Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Put Closing Date, to
the foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, as to Section
7(b)(v) below and an update as of the Put Closing Date regarding the
representation contained in Section 3(c) above.
(v) The representations of the Company set forth in paragraphs
(g), (h) and (m) through (r) of Section 3 shall be true and correct as
of the date of this Agreement and the Initial Closing Date and the
following representation shall be true and correct as of the Put Closing
Date: The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy
law nor does the Company or any of its Subsidiaries have any knowledge
or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
(vi) Such Buyer shall have received the opinion of Pillsbury
Madison & Sutro LLP dated as of the Put Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the
form of EXHIBIT C attached hereto.
-22-
(vii) The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall
request) for the Put Preferred Shares being purchased by such Buyer at
the Put Closing.
(viii) The Board of Directors of the Company shall have adopted,
and shall not have amended, the Resolutions.
(ix) As of the Put Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares, a number of shares
of Common Stock equal to at least 150% of the number of shares of Common
Stock which would be issuable upon conversion in full of the then
outstanding Preferred Shares (without regard to any limitations on
conversions), including for such purposes the Put Preferred Shares to be
issued at such Put Closing.
(x) The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(xi) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in the state of such corporation's state of incorporation
issued by the Secretary of State of such state of incorporation as of a
date within 10 days of the Put Closing Date.
(xii) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the Put Closing
Date.
(xiii) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies
of its Certificate of Incorporation and (C) By-laws, each as in effect
at the Put Closing.
(xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of this Agreement and the Registration Rights Agreement and acquiring
the Securities thereunder and in addition to all of the Company's other
obligations under the Transaction Documents and the Certificate of Designations,
the Company shall defend, protect, indemnify and hold harmless each Buyer and
each other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the forgoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against
-23-
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or the Certificate of Designations (d) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (e) the status of such Buyer or
holder of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-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, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. 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 to such party at the address for such
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
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon
-24-
the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents or the
Certificate of Designations unless the same consideration also is offered to all
of the parties to the Transaction Documents or holders of the Preferred Shares,
as the case may be.
f. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically generated and kept on file by the
sending party); or (iii) one (1) business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
The Immune Response Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
-25-
With a copy to:
Pillsbury Madison & Sutro LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
If to the Transfer Agent:
▇▇▇▇▇▇ Trust Company of California
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of two-thirds (2/3) of the Preferred Shares then
outstanding including by merger or consolidation. A Buyer may assign some or
all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary contained in the Transaction Documents, Buyer shall be
entitled to pledge the Securities in connection with a bona fide margin account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions
-26-
set forth in Section 8, shall survive each of the Closings. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. PUBLICITY. The Company and a majority of the Buyers shall have
the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Initial Closing shall not
have occurred with respect to a Buyer on or before three (3) business days from
the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for expenses up to the amount described in Section 4(i)
above.
m. PLACEMENT AGENT. The Company acknowledges that it has engaged
Prudential Securities Incorporated as placement agent in connection with the
sale of the Preferred Shares. The Company shall be responsible for the payment
of any placement agent's fees or brokers commissions relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.
n. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. REMEDIES. Each Buyer and each holder of Preferred Shares or
Conversion Shares shall have all rights and remedies set forth in the
Transaction Documents and the Certificate of Designation and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall
be
-27-
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
p. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Registration
Rights Agreement or the Certificate of Designations or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
* * * * * *
-28-
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
THE IMMUNE RESPONSE CORPORATION THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Its: President and Chief
Executive Officer By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
------------------------ ------------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Its: President
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, LTD.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Member
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, L.P.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Member
SCHEDULE OF BUYERS
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
------------------------- ----------------------------------- --------- -----------------------------------
Themis Partners L.P. Promethean Investment Group, L.L.C. 47 Promethean Investment Group, L.L.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10019 ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Residence: New York Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited 143 Promethean Investment Group, L.L.C.
▇.▇. ▇▇▇ ▇▇▇ 40 West 57th Street, Suite 1520
3rd Floor British ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇'▇ Drive Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Georgetown, Grand Cayman ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Cayman Island, BWI Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Cayman Islands ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 312-902-1061
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor 8
Growth Fund, Ltd. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile: 212-247-1329
Residence: Cayman Islands
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor 2
Growth Fund, L.P. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile: 212-247-1329
Residence: New York
SCHEDULE OF UNDERWRITERS
BancAmerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
BT ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ & Co.
Cruttendon ▇▇▇▇ Incorporated
CS First Boston
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ Incorporated
Gruntal & Co.
▇▇▇▇▇▇▇ Sachs & Co.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Company, Inc.
▇.▇. ▇▇▇▇▇▇ & Company
▇▇▇▇▇▇ Brothers
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇ & Company, Inc.
CIBC ▇▇▇▇▇▇▇▇▇▇▇ & Co.
▇▇▇▇▇ ▇▇▇▇▇▇
Prudential Securities Incorprated
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
SBC Warburg/▇▇▇▇▇▇ Read
Sutro & Co. Incorporated
UBS Securities, Inc.
Vector Securities
▇▇▇▇▇, ▇▇▇▇▇ & Company
or any successor to any of the above