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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. )*
THE IMMUNE RESPONSE CORPORATION
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
45252T106
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(CUSIP Number)
Dennis J. Carlo, Ph.D.
P.O. Box 1176
Rancho Santa Fe, CA 92067
(760) 431-7080
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
WITH A COPY TO:
Thomas E. Sparks, Jr.
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120-7880
(415) 983-1000
April 17, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(CONTINUED ON FOLLOWING PAGE(S))
Page 1 of 6 Pages
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CUSIP NO. 45252T106
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(1) NAMES OF REPORTING PERSONS. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS: Dennis J. Carlo, Ph.D.
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER (A) / /
OF A GROUP (SEE INSTRUCTIONS) (B) / /
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS (SEE INSTRUCTIONS) 00
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(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A.
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NUMBER OF SHARES (7) SOLE VOTING POWER 1,219,907 (see Item 5)
BENEFICIALLY OWNED -------------------------------------------------------
BY EACH REPORTING (8) SHARED VOTING POWER 73,755 (see Item 5)
PERSON WITH -------------------------------------------------------
(9) SOLE DISPOSITIVE POWER 1,219,907 (see Item 5)
-------------------------------------------------------
(10) SHARED DISPOSITIVE POWER 73,755 (see Item 5)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,293,662 (see Item 5)
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(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.7% (see Item 5)
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(14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN
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Page 2 of 6 Pages
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is the
common stock, par value $.0025 per share (the "Common Stock") of The Immune
Response Corporation, a Delaware corporation (the "Issuer"). The Issuer's
principal executive offices are located at 5935 Darwin Court, Carlsbad,
California 92008.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The person filing this Schedule is Dennis J. Carlo, Ph.D.
(b) Dr. Carlo's address is P.O. Box 1176, Rancho Santa Fe, California
92067.
(c) The principal occupation of Dr. Carlo is President, Chief
Executive Officer and Director of the Issuer. The principal business of the
Issuer is biopharmaceutical research and the development and licensing of
potential immune-based therapies and potential gene therapies. The Issuer's
address is listed in Item 1 above.
(d)-(e) At no time during the last five years was Dr. Carlo convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities law or finding any
violation with respect to such laws.
(f) Dr. Carlo is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a Loan Agreement dated April 15, 1997 by and between Kevin B.
Kimberlin and Dr. Carlo, Mr. Kimberlin agreed to loan to Dr. Carlo the principal
sum of $1,999,998 (the "Loan") for the purpose of purchasing up to 256,410 units
of Common Stock and warrants issued by the Issuer. Each unit is comprised of
one share of Common Stock and a warrant to purchase one share of Common Stock (a
"Unit"). The Loan is evidenced by a promissory note from Dr. Carlo to Mr.
Kimberlin dated April 17, 1997 and payable in three (3) years.
The principal sum of the Loan has been or will be distributed to Dr. Carlo
in the following manner. First, $494,744.25 was distributed on April 17, 1997
and, at Dr. Carlo's request, was wired directly to the Issuer as partial
consideration for the issuance to Dr. Carlo of 253,715 Units (the "Purchased
Units"). The balance of the consideration for the Purchased Units was a
promissory note by Dr. Carlo in the principal amount of $1,484,232.75, due
September 30, 1997 and payable to the Issuer. Second, $1,484,232.75 will be
distributed on September 30, 1997 for payment of the principal amount of the
promissory note from Dr. Carlo to the Issuer. Finally, the issuer has requested
approval from the National Association of Securities Dealers, Inc. to sell and
issue to Dr. Carlo 2,695 additional Units (the "Additional Units"). In the
event that such approval is obtained on or before May 27, 1997, $21,021 will be
distributed under the Loan to Dr. Carlo within five (5) business days after
receipt of such approval by the Issuer to be used by Dr. Carlo to purchase 2,695
the Additional Units.
Page 3 of 6 Pages
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ITEM 4. PURPOSE OF TRANSACTION.
Dr. Carlo has acquired beneficial ownership of shares of Common Stock for
the purpose of investment.
Except as set forth above, Dr. Carlo has no present plans or proposals
which relate to, or would result in: the acquisition by any person of
additional securities of the Issuer; an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving the Issuer or any of
its subsidiaries; a sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries; a change in the present board of directors or
management of the Issuer, including plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board; a material
change in the present capitalization or dividend policy of the Issuer or any
other material change in the Issuer's business or corporate structure; a change
in the Issuer's certificate of incorporation or bylaws or other actions which
might impede the acquisition of control of the Issuer by any person; causing a
class of securities of the issuer being delisted from a national securities
exchange or ceasing to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association; a class of equity
securities of the Issuer becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or any
action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Prior to the transaction which is the subject of this statement, Dr.
Carlo beneficially owned 784,241 shares of Common Stock representing 3.9% of the
issued and outstanding shares of Common Stock. This figure includes options to
acquire 589,908 shares of Common Stock and 73,755 shares of Common Stock held in
trusts for the benefit of Dr. Carlo's family, as to which he maintains shared
voting and investment power with his wife, Jean M. Carlo. Ms. Carlo also has
the right to exercise 175,117 of Dr. Carlo's options; this right expires
ratably between December 3, 2000 and May 2, 2005.
As a result of his purchase of the Purchased Units, Dr. Carlo acquired
direct ownership of 253,715 shares of Common Stock and a warrant to purchase
253,715 shares of Common Stock. Dr. Carlo is deemed to have beneficial
ownership of the number of shares subject to the warrant. Thus, on a fully
diluted basis, Dr. Carlo beneficially owned 5.7% of the Common Stock issued and
outstanding as of April 17, 1997. (Note that on the same day that Dr. Carlo
acquired the Purchased Units, the Issuer sold and issued to a third party
1,776,004 shares of Common Stock and a warrant to purchase 1,776,004 shares of
Common Stock.)
In the event that Dr. Carlo acquires the Additional Units, he would have
beneficial ownership of 5.8% of the Common Stock then issued and outstanding,
assuming there were no other changes in holdings of Common Stock by other
stockholders.
(b) Dr. Carlo has the sole power to vote or direct the disposition of up
to 1,214,517 shares of Common Stock. In the event that Dr. Carlo acquires the
Additional Units, he will have the sole power to vote or direct the disposition
of up to 1,219,907 shares of Common Stock.
As indicated in Item 5(a), Dr. Carlo shares the power to vote or direct the
disposition of 73,755 shares of Common Stock which are held in trusts for the
benefit his family.
Page 4 of 6 Pages
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The power to vote or direct the disposition of the 73,755 shares of
Common Stock which are held in trusts for the benefit of Dr. Carlo's
family is shared with Jean M. Carlo.
Ms. Carlo's address is 840 Cofair Court, Solana Beach, California 92075.
Ms. Carlo is currently not employed.
At no time during the last five years was Ms. Carlo convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
law or finding any violation with respect to such laws.
Ms. Carlo is a citizen of the United States of America.
(c) No transactions of Common Stock were effected by Dr. Carlo during the
past 60 days.
(d) No person other than Dr. Carlo herein has the right to receive or the
power to direct the receipt of dividends or the proceeds from the sale of the
securities being reported herein.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described in Items 3 and 5, Dr. Carlo has no contract,
arrangement, understanding or relationship (legal or otherwise) with any person
with respect to any security of the Issuer, including, but not limited to,
transfer or voting of any securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or losses, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit A: Loan Agreement dated April 15, 1997 by and between
Kevin B. Kimberlin and Dennis J. Carlo.
Exhibit B: Promissory Note dated April 17, 1997 for the amount of
$1,999,998 payable to Kevin B. Kimberlin by Dennis J.
Carlo.
Exhibit C: Trust Agreements (to be filed by amendment).
Page 5 of 6 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 25, 1997
/s/ DENNIS J. CARLO
-----------------------------------
Dennis J. Carlo
Page 6 of 6 Pages
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Exhibit A
EXECUTION COPY
LOAN AGREEMENT
THIS AGREEMENT, effective as of April 15, 1997 is made by and between Kevin
B. Kimberlin ("Lender") and Dennis J. Carlo ("Borrower").
RECITALS
A. Lender has agreed to loan to Borrower the principal sum of ONE MILLION
NINE HUNDRED NINETY-NINE THOUSAND NINE HUNDRED NINETY-EIGHT DOLLARS ($1,999,998)
(the "Loan") for the purpose of purchasing UP TO 256,410 units of common stock
and warrants issued by The Immune Response Corporation, a Delaware corporation
(the "Company") pursuant to that certain Unit Purchase Agreement, dated as of
even date hereof, between Borrower and the Company (the "Unit Purchase
Agreement"). Each unit is comprised of one share of common stock and a warrant
to purchase one share of common stock ("Units").
B. In connection with its purchase of the Company's Units, at the Initial
Closing (as defined in the Unit Purchase Agreement), Borrower shall pay the
Company $494,744.25 cash and execute a promissory note for the benefit of the
Company in the principal amount of $1,484,232.75, due September 30, 1997. At
the NASD Approval Closing (as defined in the Unit Purchase Agreement), Borrower
shall pay the Company $21,021.00 cash; and
C. After the Initial Closing, Borrower will own 253,715 shares of the
Company's common stock (the "Stock"); after the NASD Approval Closing, in the
event such closing occurs, Borrower will acquire an additional 2,695 shares of
the Company's common stock, for an aggregate number of 256,410 shares of Stock.
NOW, THEREFORE, in consideration of the premises set forth above and the
mutual promises and covenants contained herein, the parties agree as follows:
I. BORROWING AND REPAYMENT IN CASH.
A. The Lender and Borrower acknowledge that the principal sum of the Loan
shall be delivered to Borrower in the following manner: (i) $494,744.25 on the
date hereof, (ii) $1,484,232.75 on September 30, 1997; and (iii) $21,021.00 on
the NASD Approval Closing date, in the event such closing occurs. All
outstanding principal and interest accrued in connection with the Loan is due
three (3) years from the date hereof payable by wire transfer of immediately
available funds to Lender.
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B. The Loan shall be evidenced by a Promissory Note (the "Note") in
substantially the form attached hereto as EXHIBIT A and incorporated herein, and
the terms of the Loan shall be specified in the Note.
II. BORROWER'S REPRESENTATIONS AND WARRANTIES.
A. Borrower represents and warrants that:
1. The proceeds of the Loan will be used for the purpose set forth above
and for no other purpose.
2. There are no pending or threatened claims, investigations or suits
which may adversely affect Borrower's financial condition.
3. There are no other instruments existing that will require Borrower's
obligations under this Agreement or the Note to be subordinated to other
obligations Borrower now has, nor will Borrower become bound by such instruments
while this Agreement is in effect, or while amounts remain outstanding under the
Note, without Lender's prior written approval.
4. The execution, delivery and performance of this Agreement and the Note
and the use of the proceeds of the Loan by the Borrower as set forth herein does
not, and will not, conflict with or result in a breach by Borrower of any of the
terms or provisions of, or constitute a default under, any mortgage, deed of
trust or other material agreement or instrument to which Borrower is a party or
by which Borrower or any of his properties or assets are bound or any existing
applicable law, rule or regulation of the United States or any state thereof or
any applicable decree, judgment or order of any federal or state court,
regulatory body, administrative agency or other governmental body having
jurisdiction over the Borrower or any of his assets or properties.
III. BORROWER'S COVENANTS.
A. So long as any of the principal balance or accrued unpaid interest, if
any, under the Note remains outstanding, Borrower shall, unless the Lender
consents otherwise in writing, punctually pay all principal and interest amounts
due under the Note, as described in this Agreement and the Note.
IV. REPURCHASE RIGHT.
In the event that Borrower's employment with the Company is terminated for
any reason other than by the Company without Cause, (as defined under applicable
Delaware law), Borrower shall provide prompt written notice of such termination
to
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Lender (a "Termination Notice"), and Lender shall be entitled to purchase from
Borrower a number of Units equal to (a) the aggregate number of Units purchased
by Borrower, multiplied by (b) a fraction, the numerator of which is the
difference between (x) twelve (12) and (y) the number of full three-month
periods that have elapsed between the date of this Agreement and the date of the
termination of Borrower's employment, and the denominator of which is twelve
(12), at a purchase price of $7 per Unit, by delivering to Borrower written
notice thereof, accompanied by payment for the number of Units to be purchased
as calculated in accordance with this Section IV, within ten (10) days following
the date of Lender's receipt of a Termination Notice.
V. TERMINATION.
This Agreement shall remain in full force and effect so long as any sums
remain owing by Borrower to the Lender under the Note.
VI. GENERAL PROVISIONS.
A. NOTICES. All notices permitted or required to be given under this
Agreement shall be in writing and shall be deemed delivered upon personal
delivery, or twenty-four (24) hours following: (1) electronically confirmed
facsimile transmission; or (2) deposit for overnight delivery with a bonded
courier holding itself out to the public as providing such service; or forty-
eight (48) hours following deposit in the United States mail, certified mail,
postage prepaid, in any such case addressed as follows:
If to the Lender:
Kevin B. Kimberlin
Spencer Trask, Inc.
535 Madison Avenue
New York, NY 10022
If to Borrower:
Dennis J. Carlo
The Immune Response Corporation
5935 Darwin Court
Carlsbad, CA 92208
B. PARTIES' RELATIONSHIP; INDEMNITY. This Agreement is intended to
create a relationship of debtor-creditor only and is not intended to be, and
shall not be construed as, an agreement of joint venture, partnership or agency,
or other similar business relationship.
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C. NO CONTINUING WAIVER. No delay or failure of the Lender to exercise
any right or remedy it may have under this Agreement or the Note shall operate
as a continuing waiver of such right or remedy, nor prejudice the Lender's right
to insist upon full compliance by Borrower of the terms of this Agreement or the
Note.
D. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware. In any action brought or
arising out of this Agreement, Lender and Borrower hereby consent to the
jurisdiction of any federal or state court having proper venue within the State
of New York and also consent to service of process by any means authorized by
New York or federal law.
E. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
F. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that the obligations
of Borrower under this Agreement are personal and shall not be assigned or
delegated without the prior written consent of the Lender.
G. SEVERABILITY. Should any provision of this Agreement be found void or
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected thereby, but shall remain in full force and
effect.
H. FURTHER ASSURANCE. Each party shall take such further action and
shall execute such further documentation as may be necessary or convenient to
effectuate the transactions contemplated in this Agreement.
I. INTEGRATION; INTERPRETATION. This Agreement and the Note contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated herein and supersede all prior negotiations
and agreements. This Agreement and the Note shall not be modified except by
written instrument executed by all parties.
J. EXPENSES. Each party hereto shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary
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disbursements in addition to any other relief to which such party may be
entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LENDER
/s/ KEVIN B. KIMBERLIN
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Kevin B. Kimberlin
BORROWER
/s/ DENNIS J. CARLO
------------------------------
Dennis J. Carlo
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Exhibit B
EXECUTION COPY
PROMISSORY NOTE
Loan Amount: $1,999,998.00 Carlsbad, California
Interest Rate: 5.69% April 17, 1997
FOR VALUE RECEIVED, the undersigned, Dennis J. Carlo ("Borrower"),
hereby promises to pay to the order of Kevin B. Kimberlin ("Lender"), at 535
Madison Avenue, New York, New York 10022, or such other place as Lender may
designate by written notice to Borrower, in lawful money of the United States of
America, the principal sum of ONE MILLION NINE HUNDRED NINETY-NINE THOUSAND NINE
HUNDRED NINETY-EIGHT DOLLARS ($1,999,998.00) or, if less, the aggregate of all
amounts which Lender may, from time to time lend to Borrower, plus interest, to
be paid as set forth below.
All amounts lent to Borrower by Lender, and all payments made on
account of principal hereof, shall be recorded by Lender on the grid on SCHEDULE
A to this Promissory Note (the "Note") and shall be presumptive evidence of the
indebtedness of Borrower hereunder.
1. PAYMENTS. The entire principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable three (3) years
from the date hereof (the "Maturity Date"), provided, however, that if such day
is not a Business Day (as defined below), then on the next succeeding Business
Day. Interest on the outstanding principal balance hereunder shall accrue at
the rate of 5.69% per annum, calculated on the basis of a three hundred and
sixty-five day year compounded quarterly.
2. PURPOSE OF NOTE. Borrower acknowledges that the purpose of the loan
evidenced by the Loan Agreement, of even date herewith, between Lender and
Borrower ("the Loan Agreement"), and this Note is to provide financing for the
purchase of up to 256,410 shares of The Immune Response Corporation's ("IRC")
common stock and warrants to purchase up to 256,410 shares of such common stock
pursuant to that certain Unit Purchase Agreement of even date herewith between
Borrower and IRC (the "Unit Purchase Agreement").
3. PREPAYMENT. Borrower may prepay all or any portion of this Note at
any time without penalty, fee or acceleration prior to the Maturity Date of this
Note.
<PAGE>
4. ACCELERATION OF DUE DATE. The entire unpaid principal balance of this
Note, together with all accrued and unpaid interest thereon, shall, at the
election of Lender, become immediately due and payable upon the occurrence of
any of the following, irrespective of the payment schedule set forth in
Paragraph 1 of this Note:
(a) Any failure on the part of Borrower to make any payment
under this Note when the same is due;
(b) Any failure on the part of Borrower to perform or observe
any of his obligations, or Borrower's breach of any representation or
warranty, under the Loan Agreement or any other security instrument
which secures this Note as and when performance is due;
(c) If at any time Borrower shall admit in writing his inability
to pay his debts as they become due, or shall make any assignment for
the benefit of any creditors, or shall file a petition seeking any
reorganization, arrangement, composition, readjustment or similar
release under any present or future statute, law or regulation, or on
the filing or commencement of any petition, action, case or
proceeding, voluntary or involuntary, under any state or federal law
regarding bankruptcy or insolvency.
5. COLLECTION COSTS BORNE BY BORROWER. Borrower agrees to pay all costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by Lender in any action brought to enforce the terms of this Note and/or to
collect this Note, and any appeal thereof.
6. MISCELLANEOUS.
(a) No delay or omission on the part of Lender in exercising any right
under this Note or under the Loan Agreement or any security agreement given to
secure this Note shall operate as a waiver of such right or of any other right
under this Note.
(b) In the event of default under this Note, Borrower shall have fifteen
(15) days from the date of notice of default and demand for payment in which to
cure such default. Such notice may be by written notice mailed to Borrower at
the last address given to Lender by Borrower and shall be deemed received three
(3) days after being mailed by certified, first-class mail, return receipt
requested or the next day mailed by overnight delivery.
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(c) Borrower hereby waives presentment for payment, demand, notice of
demand and of dishonor and non-payment of this Note, notice of intention to
accelerate the maturity of this Note, protest and notice of protest, diligence
in collecting, and the bringing of suit against any other party. The pleading
of any statute of limitations as a defense to any demand against the Borrower,
any endorsers, guarantors and sureties of this Note is expressly waived by each
and all of such parties to the extent permitted by law. Time is of the essence
under this Note.
(d) Any payment hereunder shall first be applied to any collection costs,
then against accrued and unpaid interest hereunder and then against the
outstanding principal balance of this Note.
7. LATE CHARGE. If payment of principal or interest under this Note
shall not be made within ten (10) days after the date due, Borrower agrees to
pay, in addition to the unpaid principal or interest, a sum equal to four
percent (4%) of the unpaid principal or interest, which sum Borrower agrees
represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of this Note, of the costs and expenses incident to
handling and collecting such delinquent payment that will be sustained by Lender
due to the failure of Borrower to make timely payment. The parties further
agree that proof of actual damages would be costly and impracticable. Such
charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Note or
under the Loan Agreement or from exercising any of the other rights and remedies
of Lender.
8. GOVERNING LAW. The Note shall be governed by the laws of the State of
Delaware and shall be construed in accordance therewith. In any action brought
or arising out of this Agreement, Lender and Borrower hereby consent to the
jurisdiction of any federal or state court having proper venue within the State
of New York and also consent to service of process by any means authorized by
New York or federal law.
9. DEFINITIONS.
BUSINESS DAY. As used in this Note the term "Business Day" shall mean
any day other than a Saturday, Sunday or a legal holiday observed by employees
of the State of California.
10. SUCCESSORS. This Note shall be binding upon Borrower and the personal
representatives, heirs, successors and assigns of Borrower.
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<PAGE>
11. SEVERABILITY. If any part of this Note is determined to be illegal or
unenforceable, all other parts shall remain in full force and effect.
12. MAXIMUM INTEREST PAYABLE. All agreements between the undersigned and
the holder hereof, whether now existing or hereafter arising and whether written
or oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity hereof or otherwise, shall the interest contracted
for, charged, received, paid or agreed to be paid to the holder hereof exceed
the maximum amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the holder hereof in excess
of the maximum lawful amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance the holder hereof shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to the undersigned. All interest paid or agreed to be paid to the
holder hereof shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in full
of the principal (including the period of any renewal or extension hereof) so
that the interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all agreements
between the undersigned and the holder hereof.
/s/ DENNIS J. CARLO
---------------------------------------------
Dennis J. Carlo
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SCHEDULE A
Principal Principal Interest Loan
Date Loan Payment Payment Balance By
- ---- ---- ------- ------- ------- --
$494,744.25 $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
5
