Exhibit 99.2
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THE IMMUNE RESPONSE CORPORATION
SECURITIES PURCHASE AGREEMENT
DATED AS OF
FEBRUARY 9, 2006
WITH RESPECT TO
8% SECURED CONVERTIBLE PROMISSORY NOTE
AND WARRANT
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of February
9, 2006, by and between THE IMMUNE RESPONSE CORPORATION, a Delaware corporation
(the "Company") and QUBIT HOLDINGS, LLC (the "Purchaser");
WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Company, for $250,000 in cash an 8% senior secured
convertible promissory note substantially in the form of EXHIBIT A hereto (the
"Note") in the principal amount of $250,000;
WHEREAS, the Company desires to have the right to sell to the Purchaser for
$250,000 in cash an 8% senior secured convertible promissory note of like tenor
to the Note (the "Second Note") in the principal amount of $250,000 and the
Purchaser desires to grant the Company the right to cause the Purchaser to
purchase for $250,000 in cash the Second Note;
WHEREAS, to induce the Purchaser to purchase the Note, the Company will
issue to the Purchaser a warrant substantially in the form of EXHIBIT B hereto
(the "Warrant") to purchase 37,500,000 shares of common stock, par value $0.0025
per share, of the Company (the "Common Stock") with an initial exercise price of
$0.02 per share; and
WHEREAS, to induce the Purchaser to grant the put right for the Second
Note, the Company agrees that upon exercise of such put right it will also issue
to the Purchaser a warrant of like tenor to the Warrant (the "Second Warrant")
to purchase 37,500,000 shares of Common Stock with an initial exercise price of
$0.02 per share.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
1. AUTHORIZATION; SALE OF NOTES AND WARRANTS
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1.1 AUTHORIZATION. The Company has, or before the Closing (as
defined in Section 2.3) will have, duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of the Note, the Second Note, the
Warrant and the Second Warrant.
1.2 SALE OF NOTE AND WARRANT. Subject to the terms and conditions
of this Agreement, at the Closing, the Company will sell, and the Purchaser will
purchase, the Note and the Warrant.
1.3 SALE AND PURCHASE THE SECOND NOTE AND SECOND WARRANT. Subject
to the terms and conditions of this Agreement, the Purchaser hereby agrees to
purchase the Second Note and the Second Warrant as soon as is commercially
reasonable after the date on which the Company gives written notice (the
"Company Notice") to the Purchaser of its desire to sell the Second Note and the
Second Warrant; PROVIDED, that the Company gives such notice prior to the date
that is six (6) months after the date hereof. For avoidance of doubt, the
Purchaser shall not be obligated to purchase the Second Note and the Second
Warrant if the Company fails to give such written notice to the Purchaser prior
to the date that is six (6) months after the date hereof.
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2. PURCHASE PRICE; CLOSINGS.
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2.1 PURCHASE PRICE OF NOTE AND WARRANT. The purchase price (the
"Purchase Price") to be paid by the Purchaser to the Company to acquire the Note
and Warrant shall be $250,000.
2.2 PURCHASE PRICE OF SECOND NOTE AND WARRANT. The purchase price
(the "Second Purchase Price"} to be paid by the Purchaser to the Company to
acquire the Second Note and the Second Warrant shall be $250,000.
2.3 THE CLOSING. Subject to the terms and conditions of this
Agreement, the closing (the "Closing") of the sale and purchase of the Note and
Warrant shall take place at the offices of Xxxxxxx Xxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx XX 00000 (or remotely via the exchange of documents and signatures) on
the date of this Agreement (the "Closing Date"). At the Closing:
(a) the Company shall deliver to the Purchaser a Certificate
of the Secretary of the Company attesting as to resolutions of the Board of
Directors of the Company, authorizing and approving all matters in connection
with this Agreement and the transactions contemplated hereby;
(b) the Company shall deliver to the Purchaser, the Note in
the principal amount of $250,000 and the Warrant exercisable for 37,500,000
shares of Common Stock;
(c) the Purchaser shall pay directly to the Company, by wire
transfer of immediately available funds, the Purchase Price for the Note and
Warrant being purchased by the Purchaser hereunder;
(d) the Company shall execute and deliver that certain
Security Agreement in the form attached as EXHIBIT C hereto (the "Security
Agreement") entered into by the Company in favor of Xxxxxx Asset Partners, LLC,
as agent for the Purchaser; and
(e) The Company shall execute and deliver that certain
Intercreditor Agreement in the form attached as EXHIBIT D hereto (the
"Intercreditor Agreement") by and among the Company, Cheshire Associates, LLC
and Cornell Capital Partners, L.P. in favor of Xxxxxx Asset Partners, LLC, as
agent for the Purchaser.
2.4 THE SECOND CLOSING. Subject to the terms and conditions of this
Agreement, the closing (the "Second Closing"} of the sale and purchase of the
Second Note and the Second Warrant shall take place at the offices of Xxxxxxx
Krooks LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx XX 00000 (or remotely via the exchange of
documents and signatures) on the date, after the slate of the Company Notice
provided for in Section 1.3 of this Agreement, that is mutually agreed upon
between the Company and the Purchaser (the "Second Closing Date"). At the Second
Closing:
(a) the Company shall deliver to the Purchaser, the Second
Note in the principal amount of $250,000 and the Second Warrant exercisable for
37,500,000 shares of Common Stock;
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(b) the Purchaser shall pay directly to the Company, by wire
transfer of immediately available funds, the Second Purchase Price for the
Second Note and the Second Warrant being purchased by the Purchaser hereunder;
(c) The Company shall deliver a certificate executed by its
Chief Executive Officer certifying that each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
and all covenants shall have been complied with by the Company, in all material
respects, when made on the date hereof and on and as of the Second Closing Date
as though made on and as of the Second Closing Date; and
(d) The Purchaser shall execute and deliver to the Company a
certificate certifying that each of the representations, warranties and
covenants of the Purchaser contained in this Agreement shall be true and
correct, in all material respects, when made on the date hereof and on and as of
the Second Closing Date as though made on and as of the Second Closing Date.
3. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and
warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has requisite corporate power and authority to conduct its business
as presently conducted and as proposed to be conducted by it and to enter into
and perform this Agreement, as well as the Note, Warrant, Second Note, Second
Warrant the Security Agreement and the Intercreditor Agreement (collectively,
the "Ancillary Agreements") and to carry out the transactions contemplated by
this Agreement and the Ancillary Agreements. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on the
business, assets or liabilities or condition (financial or otherwise) of the
Company or its business (a "Company Material Adverse Effect"). The Company has
furnished, to the extent requested by any Purchaser in writing, complete and
accurate copies of its certificate of incorporation (the "Articles") and
By-laws, each as amended to date and presently in effect.
3.2 SUBSIDIARIES, ETC. The Company has no subsidiaries and does not
own or control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, limited liability company, joint
venture or other non-corporate business enterprise.
3.3 CAPITALIZATION.
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(a) The capitalization of the Company as of the date of this
Agreement, including its authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans and agreements, the number of
shares issuable and reserved for issuance pursuant to securities (other than the
Note and Warrant) exercisable for, or convertible into or exchangeable for any
shares of Common Stock and the number of shares initially to be reserved for
issuance upon conversion of the Note and exercise of the Warrant, is set forth
in the SEC Documents (as defined below) or has otherwise been made known to the
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Purchaser. All issued and outstanding shares of capital stock of the Company
have been validly issued, fully paid and non-assessable.
(b) Except as set forth in the SEC Documents or has
otherwise been made known to the Purchaser, (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right, or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or to make any other distribution in respect thereof, and (iv) there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
(c) Except for the Ancillary Agreements and as disclosed in
the SEC Documents, there is no agreement, written or oral, between the Company
and any holders of its securities, or, to the best of the Company's knowledge,
among any holder of its securities, relating to the sale or transfer (including
without limitation agreements relating to rights of first refusal, co-sale
rights or "drag - along" rights), registration under the Securities Act of 1933,
as amended (the "Securities Act'), or voting, of the capital stock of the
Company.
3.4 ISSUANCE OF NOTE AND WARRANT. The issuance, sale and delivery
of the Note, Warrant, Second Note and Second Warrant in accordance with this
Agreement, and the issuance and delivery of the shares of Common Stock issuable
upon (i) conversion of the Note and Second Note (the "Note Shares") and (ii)
exercise of the Warrant and Second Warrant (the "Warrant Shares," and together
with the Note Shares, the "Securities"), have been duly authorized by all
necessary corporate action on the part of the Company, and all such shares have
been, or will be prior to the Closing; or Second Closing, as applicable, duly
reserved for issuance. The Securities when so issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement, when
issued upon such conversion, will be duly and validly issued, fully paid and
nonassessable. This Section 3.4, and all other provisions of Article 3 of this
Agreement, are expressly subject to the fact that due to a shortage of
authorized but unissued shares of Common Stock, the Securities are not yet
authorized and the Note, Second Note, Warrant and Second Warrant cannot be
converted or exercised unless and until the Company amends the Articles to
increase its authorized number of shares of Common Stock.
3.5 CORPORATE POWER; AUTHORITY FOR AGREEMENT; NO CONFLICT. The
Company will have, at the Closing, all requisite corporate power to execute and
deliver this Agreement and the Ancillary Agreements, to sell and issue the Note
and Warrant hereunder, to issue the Securities, to consummate the other
transactions contemplated by the terms of this Agreement and carry out and
perform its obligations under the terms of this Agreement. The execution,
delivery and performance by the Company of this Agreement and the Ancillary
Agreements, and the consummation by the Company of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action.
This Agreement has been, and the Ancillary Agreements when executed at the
Closing will be, duly executed and delivered by the Company and constitute valid
and binding obligations of the Company enforceable in accordance with their
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respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. The execution and delivery of
this Agreement and the Ancillary Agreements, the consummation of the
transactions contemplated hereby and thereby and the compliance with their
respective provisions by the Company will not (a) conflict with or violate any
provision of the Articles or By-laws of the Company, (b) require on the part of
the Company any filing with, or any permit, order, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (each of the
foregoing is hereafter referred to as a "Governmental Entity"), (c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest (as defined below)
or other arrangement to which the Company is a party or by which the Company is
bound or to which its assets are subject, other than any of the foregoing events
listed in this clause (c) that do not and will not, individually or in the
aggregate, have a Company Material Adverse Effect, or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets. For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge, or
other lien (whether arising by contract or by operation of law).
3.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, qualification, declaration or filing with, any Governmental
Entity is required on the part of the Company in connection with the offer,
issuance, sale and delivery of the Note and Warrant, the issuance and delivery
of the Securities or the other transactions to be consummated at the Closing, as
contemplated by this Agreement and the Ancillary Agreements, except such filings
as shall have been made prior to and shall be effective on and as of the Closing
and such filings required to be made after the Closing under applicable federal
and state securities laws. Based on the representations made by the Purchaser in
Section 4 of this Agreement, the offer and sale of the Note and Warrant to the
purchaser will be in compliance with applicable Federal and state securities
laws.
3.7 LITIGATION. Except as set forth in the SEC Documents, there is
no claim, action, suit or proceeding, or governmental inquiry or investigation,
pending, or, to the Company's knowledge, any threat thereof, against the
Company, before any court, agency or tribunal which questions the validity of
this Agreement, the Ancillary Agreements or the right of the Company to enter
into any such agreements, or which could reasonably be expected to result in a
Company Material Adverse Effect; there is no litigation pending or to the
Company's knowledge, any threat thereof, against the Company or any of its
employees by reason of the past employment relationships of any of the Company's
employees, their use in connection with the Company's business of any
proprietary information or techniques or their obligations under any agreements
with former employers, the proposed activities of the Company, or negotiations
by the Company with possible investors in the Company; and the Company is not
subject to any outstanding judgment, order or decree.
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3.8 FINANCIAL STATEMENTS. The Company has filed with the Securities
and Exchange Commission ("Commission") all periodic reports, schedules,
registration statements and definitive proxy and information statements that the
Company was required to file with Commission on or after December 31, 2004
(collectively, the "SEC Documents"). The Company is not aware of any event
occurring on or before the date of this Agreement (other than the transactions
effected hereby) that would require the filing of, or with respect to which the
Company intends to file, a Form 8-K after the date of this Agreement, except as
has otherwise been made known to the Purchaser. Each SEC Document, as of the
date of the filing thereof with the Commission (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such amending or
superseding filing), complied in all material respects with the requirements of
the Securities Act or Securities Exchange Act of 1934, as amended ("Exchange
Act"), as applicable, and the rules and regulations promulgated thereunder and,
as of the date of such filing (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing), such SEC Document
(including all exhibits and schedules thereto and documents incorporated by
reference therein) did not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that are required to be filed as exhibits to the
SEC Documents have been filed as required. The Company has no liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business, liabilities in connection with the transactions contemplated by
this Agreement and liabilities that, under GAAP, are not required to be
reflected in the financial statements included in the SEC Documents. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. The financial statements included in the SEC
Documents have been and will be prepared in accordance with GAAP consistently
applied at the times and during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements, or (iii) as set forth in
the SEC Documents), and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, is the case of
unaudited statements, to normal year-end adjustments).
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
SEC Documents, the Company does not have any known liability (whether absolute
or contingent), except for (a) liabilities shown on the balance sheet as of
December 31, 2005 (the "Balance Sheet Date"), (b) liabilities that have arisen
since the Balance Sheet Date in the ordinary course of business and which are
similar in nature and amount to the liabilities that arose during the comparable
period of time in the immediately preceding fiscal period, (c) contractual and
other liabilities incurred in the ordinary course of business that are not
required by generally accepted accounting principles and practices consistently
applied in the United States to be reflected on a balance sheet and that would
not, either individually or in the aggregate, have or result in a Company
Material Adverse Effect and (d) liabilities incurred in connection with the
transactions contemplated hereunder.
3.10 INTELLECTUAL PROPERTY. Except as set forth in the SEC Documents
or which would not reasonably be expected to result in a Company Material
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Adverse Effect, there is no pending nor, to the Company's knowledge, threatened
claim, suit or action, nor have there been any written communications,
contesting or challenging the rights of the Company in or to any item of
intellectual property owned or used by Company in the conduct of its business
(the "Intellectual Property") or the validity of any of the Intellectual
Property. To the Company's knowledge, there is no infringement upon or
authorized use of any of the Intellectual Property by any third party or which
would not reasonably be expected to result in a Company Material Adverse Effect.
No officer, director, equity holder or affiliate of the Company's nor any of
their respective associates has any right to or interest in any of the
Intellectual Property, including, without limitation, any right to payments (by
royalty or otherwise) in respect of any use or transfer thereof.
3.11 COMPLIANCE. The Company has, in all material respects, complied
with all laws, regulations and orders applicable to its business and has all
material permits and licenses required thereby. There is no term or provision of
any mortgage, indenture, contract, agreement or instrument to which the Company
is a party or by which it is bound, or, to the Company's knowledge, of any
provision of any state or Federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company, which materially adversely
affects or, so far as the Company may now reasonably foresee, in the future is
reasonably likely to result in or have a Company Material Adverse Effect.
3.12 FOREIGN ASSETS CONTROL LEGISLATION. Neither the sale of the
Note and the Warrant by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto. Without limiting the foregoing, neither the Company nor
any of its subsidiaries (a) is a person whose property or interests in property
are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in
any dealings or transactions, or be otherwise associated, with any such person.
The Company is in compliance with the USA Patriot Act of 2001 (signed into law
October 26, 2001).
3.13 PERMITS. The Company has all material franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
3.14 Broker's Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
in connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Company or any action taken by any entity
or individual on behalf of the Company.
4. REPRESENTATIONS OF THE PURCHASER. The Purchaser represents and
warrants to the Company as follows;
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4.1 EXISTENCE AND POWER. The Purchaser (a) is a duly organized
legal entity, validly existing and in good standing under the laws of the state
of its organization, and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as presently
conducted and (b) has the requisite power and authority to execute, deliver and
perform its obligations under this Agreement and each Ancillary Agreement to
which the Purchaser is a party.
4.2 AUTHORIZATION, NO CONTRAVENTION. The execution delivery and
performance by the Purchaser of this Agreement and each of the Ancillary
Agreements to which the Purchaser is a party and the transactions contemplated
hereby and thereby, (a) have been duly authorized by all necessary action, (b)
do not contravene the terms of such Purchaser's organizational documents, or any
amendment thereof and (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any lien under, any material contractual
obligation of the Purchaser or any requirement of law applicable to the
Purchaser.
4.3 GOVERNMENTAL AUTHORIZATION, THIRD PARTY CONSENTS. No approval,
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Entity or any other person, and no lapse of a
waiting period under any requirement of law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Note and Warrant) by, or enforcement against,
the Purchaser of this Agreement and each of the Ancillary Agreements to which it
is a party or the transactions contemplated hereby and thereby.
4.4 BINDING EFFECT. This Agreement and the related documents to
which the Purchaser is a party have been duly executed and delivered by the
Purchaser and constitute the legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to granting a decree ordering specific performance or
other equitable remedies.
4.5 PURCHASE FOR OWN ACCOUNT. The Note, Warrant and Securities
hereby acquired by the Purchaser pursuant to this Agreement, and any capital
stock issuable upon conversion or exercise thereof, are being, and any
corresponding securities issued at the Second Closing or underlying such
securities would be, acquired for the Purchaser's own account for investment and
not with a view to the resale or distribution of any part thereof, and the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing (as such term is defined in the Securities Act) the same.
If the Purchaser should in the future decide to dispose of any of the Note,
Warrant or Securities, or any capital stock issuable upon conversion or exercise
thereof, the Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state securities laws, as then
in effect. Each Purchaser agrees to the imprinting, so long as required by law,
of legends on certificates representing any of its Note, the Warrant and
Securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
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STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT THE TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
4.6 RESTRICTED SECURITIES. The Purchaser understands the Note,
Warrant and Securities will not be registered at the time of their issuance
under the Securities Act since the Note, Warrant and Securities are being
acquired from the Company in a transaction exempt from the registration
requirements of the Securities Act, which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein.
4.7 INVESTMENT REPRESENTATIONS.
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(a) The Purchaser acknowledges that the offer and sale of
the Note, Warrant and Securities were not accomplished by the publication of any
advertisement.
(b) The Purchaser is an "accredited investor" as that term
is defined in Regulation D under the Securities Act.
(c) The Purchaser acknowledges that (i) an investment in the
Note, Warrant and Securities is highly speculative, and that the Purchaser may
suffer the loss of all or part of its investment and that (ii) the Company, its
officers, directors, members and their successors and assigns make no
representation or warranty hereunder or otherwise regarding the fair market
value or future value of the Securities;
(d) The Purchaser has examined the Note, Warrant and
Securities sold pursuant to this Agreement and is familiar with and understands
the terms of this Agreement;
(e) In making the decision to purchase the Note, Warrant and
Securities the Purchaser has relied solely on independent investigation made by
the Purchaser. The Purchaser confirms that the Purchaser has had the opportunity
to ask questions of, and receive answers from, the Company concerning the sale
of the Note, Warrant and Securities, the financial condition, outlook and
business operations of the Company and has otherwise had an opportunity to
obtain any additional information, to the extent that the Company possess such
information or could acquire it without unreasonable effort or expense;
(f) The Purchaser's overall commitment to investments which
are not readily marketable is not disproportionate to the Purchaser's purchase
of the Note, Warrant and Securities, will not cause such overall commitment to
become excessive and the Purchaser can afford to bear the loss of the Purchase
Price paid for the securities sold pursuant to this Agreement;
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(g) The Purchaser satisfied any special suitability or other
applicable requirements of the Purchaser's current needs and personal
contingencies and has no need for liquidity in its investment in the Note,
Warrant and Securities; and
(h) The Purchaser acknowledges that this transaction has not
been reviewed or scrutinized by the Securities and Exchange Commission or by any
administrative agency charged with the administration of the securities laws of
any state, and that no such agency has passed on or made any recommendation or
endorsement of the shares constituting the Securities.
4.8 EXPERIENCE. The Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to the Purchaser any and all written
information which it has requested and have answered to such Purchaser's
satisfaction all inquiries made by the Purchaser; and the Purchaser has
sufficient knowledge and experience in finance and business that it is capable
of evaluating the risks and merits of its investment in the Company and the
Purchaser is able financially to bear the risks thereof.
4.9 BROKER'S FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the
Purchaser in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any action taken by
any entity or individual.
5. INDEMNIFICATION.
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(a) The Company agrees to indemnify and hold harmless the
Purchaser and its general partners, employees, officers, directors, members,
agents and other representatives (collectively, the "Purchaser Indemnitees"),
against any expenses, damages, liabilities or losses (joint or several) arising
out of such investigations, proceedings, claims or actions, to which the
Purchaser Indemnitees may become subject, whether under the Act or any rules or
regulations promulgated thereunder, the Exchange Act or any rules or regulations
promulgated thereunder, or any other federal or state law or regulation, or
common law, arising or out of or based upon any breach of any representation,
warranty, agreement, obligation or covenant of the Company contained herein. The
Company also agrees to reimburse the Purchaser Indemnitees for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such investigations, proceedings, claims or actions, as such expenses or
other costs are incurred. The Indemnitees may select their own counsel; and
(b) The Purchaser agrees to indemnify and hold harmless the
Company and any of the Company's employees, officers, directors, members, agents
and other representatives (collectively, the "Company Indemnitees"), against any
expenses, damages, liabilities or losses (joint or several) arising out of such
investigations, proceedings, claims or actions, to which the Company Indemnitees
may become subject, whether under the Act or any rules or regulations
promulgated thereunder, or any other federal or state law or regulation, or
common law, arising or out of or based upon any breach of any representation,
warranty, agreement, obligation or covenant of the Purchaser contained herein.
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The Purchaser also agrees to reimburse the Company Indemnitees for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such investigations, proceedings, claims or actions, as such expenses or
other costs are incurred. The Company Indemnitees may select their own counsel.
6. FURTHER AGREEMENT. The parties hereto acknowledge and agree that the
Purchaser shall become a party to, and the Securities shall be considered
Registrable Securities under, the Registration Rights Agreement to be entered
into by the Company in connection with in its next offering of up to an
aggregate principal amount of $5,000,000 senior secured, convertible promissory
notes (the "Bridge Notes") consummated by the Company after the date hereof and
pursuant to a confidential private placement memorandum.
7. MISCELLANEOUS.
--------------
7.1 SUCCESSORS AND ASSIGNS. Subject to securities laws restrictions
of general applicability, this Agreement, and the rights and obligations of the
Purchaser hereunder, may be assigned by the Purchaser to (a) any person or
entity to which the Note and/or Warrant are transferred by such Purchaser, or
(b) to any Affiliated Party (as hereinafter defined), and, in each case, such
transferee shall be deemed a "Purchaser" for purposes of this Agreement;
PROVIDED that such assignment of rights shall be contingent upon the transferee
providing a written instrument to the Company notifying the Company of such
transfer and assignment and agreeing in writing to be bound by the terms of this
Agreement. Without prior written consent of the Agent, the Company may not
assign its rights under this Agreement for twelve (12) months from the date
hereof. For purposes of this Agreement, "Affiliated Party" shall mean, with
respect to the Purchaser, any person or entity which, directly or indirectly,
controls, is controlled by or is under common control with such Purchaser,
including, without limitation, any general partner, officer or director of the
Purchaser and any venture capital fund now or hereafter existing which is
controlled by one or more general partners of, or shares the same management
company as, the Purchaser.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made herein shall survive for twelve (12) months
following the Closing or the Second Closing, as the case may be. The Purchaser
is entitled to rely, and the parties hereby acknowledge that the Purchaser has
so relied, upon the truth, accuracy and completeness of each of the
representations and warranties of the Company contained herein, irrespective of
any independent investigation made by the Purchaser. The Company is entitled to
rely, and the parties hereby acknowledge that the Company has so relied, upon
the truth, accuracy and completeness of each of the representations and
warranties of the Purchaser contained herein, irrespective of any independent
investigation made by the Company.
7.3 EXPENSES. Each party hereto shall pay its own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel, financial
advisors and accountants.
7.4 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
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7.5 SPECIFIC PERFORMANCE. In addition to any and all other remedies
that may be available at law in the event of any breach of this Agreement, the
Purchaser shall be entitled to specific performance of the agreements and
obligations of the Company hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
7.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. The
Company and the Purchaser hereby irrevocably consent to the jurisdiction of the
Courts of the State of New York and of any Federal Court located in the county
of New York, State of New York in connection with any action or proceeding
arising out of or relating to this Agreement. In any such litigation the Company
waives personal service of any summons, complaint or other process and agrees
that the service thereof may be made by certified or registered mail directed to
the Chief Executive Officer of the Company at its address set forth below.
7.7 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) three business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below;
If to the Company, to The Immune Response Corporation, 0000 Xxxxxx
Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X. X'Xxxxx, CEO and
President, telefax number (000) 000-0000, or at such other address as may have
been furnished in writing by the Company to the other parties hereto, with a
copy to Xxxxxx Xxxxxx LLP, 4350 La Jolla Xxxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Esq., telefax number (858)
587-5903; or
If to the Purchaser, to Qubit Holdings, LLC, _________________,
Attention: Xxxx Xxxxxxxx, Non-Member Manager, telefax number (___) ____________,
or at such other address as may have been furnished in writing by the Purchaser
to the other parties hereto, with a copy to Xxxxxxx Krooks LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx, Esq., telefax
number (000) 000-0000.
Any party may give any notice, request, consent or other
communication under this Agreement using any other means (including, without
limitation, personal delivery, messenger service, telecopy, first class mail or
electronic mail), but no such notice, request, consent or other communication
shall be deemed to have been duly given unless and until it is actually received
by the party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
7.8 COMPLETE AGREEMENT. This Agreement (including its exhibits)
constitutes the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter and except as specifically set
forth herein or therein, no party makes any representation, warranty, covenant
or undertaking with respect to any such matters.
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7.9 AMENDMENTS AND WAIVERS. This Agreement may be amended or
terminated and the observance of any term of this Agreement may be waived with
respect to all parties to this Agreement (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the Purchaser. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
7.10 PRONOUNS. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
7.11 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, and
all of which shall constitute one and the same document. This Agreement may be
executed by facsimile signatures.
7.12 SECTION HEADINGS AND REFERENCES. The section headings are for
the convenience of the parties and in no way alter, modify, amend, limit or
restrict the contractual obligations of the parties. Any reference in this
agreement to a particular section or subsection shall refer to a section or
subsection of this Agreement, unless specified otherwise.
8. AGENT APPOINTMENT.
------------------
8.1 The Purchaser hereby authorizes Xxxxxx Asset Partners, LLC, a
Delaware limited liability company ("Xxxxxx"), to act as collateral agent (the
"Agent") on behalf of the Purchaser, and in such capacity to enter into the
Security Agreement, the Intercreditor Agreement, and to exercise for the benefit
of the Purchaser all rights, powers and remedies provided to it, under or
pursuant to the Security Agreement and the Intercreditor Agreement, including,
without limitation, those available upon an Event of Default (as defined in the
Note), subject always to the terms, conditions, limitations and restrictions
provided in the Note, the Warrant, the Security Agreement and the Intercreditor
Agreement. Except with respect to actions as to which the Agent is expressly
required to act under the terns of the Security Agreement and/or, the
Intercreditor Agreement, the Purchaser hereby agrees that the Agent may act or
refrain from acting thereunder with the consent, in writing of holders of a
majority of the aggregate principal amount of Bridge Notes and the Note
outstanding as of the date of such consent ("Requisite Holders"), and that the
Requisite Holders shall have the right to direct the time, method and place of
conducting any proceeding for any right or remedy available to the Agent;
provided, however, that such direction shall not be in conflict with any rule of
law or expose the Agent to personal liability, such direction shall not be
unduly prejudicial to the rights of any non-consenting holder, and the Agent may
take any action deemed proper by the Agent, in its discretion, that is not
inconsistent with such direction or the terms of the Security Agreement and/or
the Intercreditor Agreement. The Purchaser agrees that the duties of the Agent
are only such as are specifically provided in the Security Agreement and/or the
Intercreditor Agreement, and the Agent shall have no other duties, implied or
otherwise. The appointment of Xxxxxx as Agent shall be deemed accepted by
Xxxxxx, and it shall be and become obligated to the extent provided in the
Security Agreement and the Intercreditor Agreement, only upon the execution and
delivery of the Security Agreement and the Intercreditor Agreement by Xxxxxx and
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the other parties to the Security Agreement and the Intercreditor Agreement,
respectively.
8.2 The Purchaser agrees that the Agent may consult with counsel of
its choice and shall not be responsible or liable for any action taken, suffered
or omitted to be taken by it in good faith in accordance with the advice of such
counsel (subject to the exceptions set forth in the next two sentences). The
Purchaser further agrees that the Agent shall not incur liability for any action
or omission to act by it unless the Agent's conduct constitutes willful
misconduct or gross negligence. During the continuance of an Event of Default,
the Agent shall be required to use the same degree of care and skill in its
exercise of its powers and performance of its duties as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
8.3 None of the provisions of this Agreement, the Security
Agreement or the Intercreditor Agreement shall be construed to require the Agent
to expend or risk its own funds or otherwise to incur any liability (financial
or otherwise) in the performance of any of its duties hereunder or thereunder,
or in the exercise of any of its rights or powers unless it shall be satisfied
that one or both of the Company and/or the Purchaser are at the time obligated
and in a financial position to pay the Agent's reasonably anticipated fees for
its services and its out-of pocket expenses (including fees of its counsel) in
the performance of such duties or the exercise of any of such rights or powers
and to indemnify it against such risk or liability. In no event shall the Agent
be liable for (i) any consequential, punitive or special damages or (ii) the
acts or omissions of its nominees, correspondents, designees, subagents or
subcustodians. The Agent shall not incur any liability for not performing any
act or fulfilling any duty, obligation or responsibility hereunder or thereunder
by reason of any occurrence beyond the control of the Agent (including, but not
limited to, any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility).
8.4 The Purchaser agrees that the Agent shall not be required or
bound to make any investigation into the facts or matters stated in any
resolution certificate, statement, instrument, opinion, report, notice,
request, consent, entitlement order, approval or other paper or document. The
Agent may execute any of the powers under this Agreement, the Security Agreement
or the Intercreditor Agreement or perform any duties hereunder or thereunder
either directly or by or through agents, attorneys, custodians or nominees
appointed with due care, and shall not be responsible or liable for the acts or
omissions, including any willful misconduct or gross negligence, on the part of
any agent, attorney, custodian or nominee so appointed.
8.5 The Company covenants and agrees for the benefit of the
Purchaser, and as an additional obligation secured under the Security Agreement,
to be responsible to pay to the Agent from time to time, and the Agent shall be
entitled to, fees and expenses as provided in the Security Agreement.
8.6 The Company agrees, for the benefit of the Purchaser, and as an
additional obligation secured under the Security Agreement, to indemnify and
hold the Agent and its directors, employees, officers, agents, successors and
assigns harmless from and against any and all losses, claims, damages,
14
liabilities and expenses, including, without limitation, reasonable costs of
investigation and reasonable counsel fees and expenses that may be imposed on
the Agent or incurred by it in connection with its acceptance of its appointment
as the Agent hereunder or under the Security Agreement or the Intercreditor
Agreement or the performance of its duties thereunder, except as a result of the
Agent' s gross negligence or willful misconduct. Such indemnity includes,
without limitation, all losses, damages, liabilities and expenses (including
reasonable counsel fees and expenses) incurred in connection with any litigation
(whether at the trial or appellate levels) arising from this Agreement, the
Security Agreement or the Intercreditor Agreement or involving the subject
matter hereof or thereof.
8.7 The Purchaser agrees that Xxxxxx or any successor may at any
time resign as Agent by giving written notice thereof to the Company at least 20
business days prior to the date of such proposed resignation. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
collateral agent by written instrument executed by authority of its manager a
copy of which shall be delivered to the resigning Agent and a copy to the
successor collateral agent. If an instrument of acceptance by a successor
collateral agent shall not have been delivered to the Agent within 20 business
days after giving such notice of resignation, the resigning Agent may petition
any court of competent jurisdiction for the appointment of a successor
collateral agent. Such court may thereupon, after such notice, if any, as it may
deem proper, appoint a successor collateral agent. The Agent may be removed at
any time by written action by Requisite Holders, delivered to the Agent and to
the Company. If the Agent shall be so removed, the Company shall promptly
appoint a successor collateral agent in accordance with the procedures set forth
in this Section 8.7.
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IN WITNESS WHEREOF, Executed as of the date first written above.
COMPANY:
THE IMMUNE RESPONSE CORPORATION
By: /s/ Xxxxxx X. X'Xxxxx
-----------------------------------
Name: Xxxxxx X. X'Xxxxx
Title: Chief Executive Officer and
President
PURCHASER:
QUBIT HOLDINGS, LLC
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Non-Member Manager
[Signature Page to Securities Agreement]
