SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
NAME OF ISSUER: The Immune Response Corporation
TITLE OF CLASS OF SECURITIES: Common Stock, par value
$.0025 per share.
CUSIP NUMBER: 45252T10
NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS:
Kevin B. Kimberlin
c/o Spencer Trask Holdings Incorporated
535 Madison Avenue
New York, New York 10022
Tel: (212) 355-5565
Fax: (212) 751-3362
DATE OF EVENT WHICH REQUIRES FILING: April 17, 1997
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this 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).
<PAGE>
CUSIP NO.: 45252T10
1. NAME OF REPORTING PERSON: Kevin B. Kimberlin
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) (b)
3. SEC USE ONLY
4. SOURCE OF FUNDS: PF
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e):
Yes NoX
6. CITIZENSHIP OR PLACE OF ORGANIZATION: UNITED STATES
7. SOLE VOTING POWER: 2,104,670
8. SHARED VOTING POWER: 0
9. SOLE DISPOSITIVE POWER: 2,104,670
10. SHARED DISPOSITIVE POWER: 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 2,104,670
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: Yes X No
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
10.3%
14. TYPE OF REPORTING PERSON: IN
<PAGE>
Item 1. Security and Issuer
This statement relates to the Common Stock, $0.0025 par
value per share ("Common Stock"), issued by The Immune Response
Corporation, a Delaware corporation (the "Company"), whose
principal executive offices are located at 5935 Darwin Court,
Carlsbad, California 92008.
Item 2. Identity and Background
(a) This statement is filed by Kevin B. Kimberlin.
(b) The business address of Mr. Kimberlin is c/o
Spencer Trask Holdings Incorporated, 535 Madison Avenue, New
York, New York 10022.
(c) Mr. Kimberlin's present principal occupations are
Chairman of Spencer Trask Holdings Incorporated, an investment
banking firm, and private investor.
(d) Mr. Kimberlin has not, during the last five years,
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Mr. Kimberlin has not, during the last five years,
been 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 laws or
finding any violation with respect to such laws.
(f) Mr. Kimberlin is an individual of United States
citizenship.
Item 3. Source and Amount of Funds or Other Consideration
Prior to April 17, 1997, Mr. Kimberlin, a director of
the Company, had acquired an aggregate of (i) 243,916 shares of
Common Stock for an aggregate price of approximately $2,439.16,
purchased with Mr. Kimberlin's personal funds, (ii) options to
purchase 68,750 shares of Common Stock as compensation for
serving on the Company's Board of Directors and (iii) 16,000
shares of Common Stock through a trust as to which Mr. Kimberlin
is trustee and over which he has sole voting and investment power
for an aggregate price of approximately $160.00, purchased with
Mr. Kimberlin's personal funds. In addition, Mr. Kimberlin's
wife purchased an aggregate of 35,000 shares of Common Stock, of
which Mr. Kimberlin disclaims beneficial ownership, for an
aggregate purchase price of approximately $350.00, acquired with
the Kimberlins' joint personal funds.
On April 17, 1997, Mr. Kimberlin purchased from the
Company, pursuant to a Unit Purchase Agreement, dated April 15,
1997, 1,776,004 units ("Units"), each Unit comprised of one share
of Common Stock and a warrant to purchase one share of Common
Stock (the "Warrants"). The Warrants are exercisable beginning
on April 15, 1998, at a price of $14.00 per share, and expire on
April 14, 2001. As a result of the terms of the Warrants, Mr.
Kimberlin does not presently beneficially own the shares of
Common Stock underlying such Warrants. Mr. Kimberlin intends to
file an amendment to this Schedule 13D when he is deemed to be a
beneficial owner of such underlying shares under Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as
amended. Mr. Kimberlin paid an aggregate purchase price of
$13,852,831.20 for the Units, $10,389,623.40 of which he paid by
delivery of a Promissory Note to the Company, payable in full on
September 30, 1997, with interest accruing thereon at the rate of
5.73% per annum. Mr. Kimberlin entered into a Stock Pledge
Agreement, dated April 15, 1997, with the Company, to secure
payment of such Note. The remainder of the purchase price for
the Units was paid with Mr. Kimberlin's personal funds.
Item 4. Purpose of Transaction
Mr. Kimberlin acquired the Units, and the other shares
of Common Stock previously beneficially owned by him, for
investment purposes.
Mr. Kimberlin does not have any plans or proposals
which relate to or would result in any of the following:
(a) The acquisition of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or
any of its subsidiaries;
(c) A sale or transfer of a material amount of assets
of the Company or any of its subsidiaries;
(d) Any change in the present Board of Directors or
management of the Company;
(e) Any material change in the present capitalization
or dividend policy of the Company;
(f) Any other material change in the Company's
business or corporate structure;
(g) Changes in the Company's charter, By-laws, or
instruments corresponding thereto or other actions which may
impede the acquisition of control of the Company by any person;
(h) A class of securities of the Company 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;
(i) A class of equity securities of the Company
becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or
(j) Any action similar to any of those enumerated
above.
Item 5. Interest in Securities of the Issuer
(a) The aggregate percentage of shares of Common Stock
reported beneficially owned by Mr. Kimberlin is based upon
20,298,207 shares outstanding, which is the total number of
shares of Common Stock outstanding as of April 10, 1997, as
represented by the Company in the Unit Purchase Agreement, dated
April 15, 1997, between Mr. Kimberlin and the Company.
As of the date of this statement, Mr. Kimberlin is the
beneficial owner of 2,104,670 shares of Common Stock (excluding
35,000 shares owned by his wife as to which he disclaims
beneficial ownership), which represented approximately 10.3% of
the issued and outstanding number of shares of Common Stock as of
April 10, 1997.
(b) Mr. Kimberlin has the sole power to vote and
dispose of all shares of Common Stock beneficially owned by him.
(c) See Item 3 above.
(d) No person other than each respective owner of
shares of Common Stock referred to herein is known to have the
right to receive or the power to direct the receipt of dividends
from or the proceeds from the sale of such shares of Common
Stock.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of
the Issuer
Pursuant to a Loan Agreement, dated April 15, 1997, Mr.
Kimberlin loaned to Dennis J. Carlo, president, chief executive
officer and a director of the Company, $1,999,998 to finance Dr.
Carlo's purchase, on April 17, 1997, of 253,715 Units. The loan
is evidenced by a Promissory Note issued by Dr. Carlo to Mr.
Kimberlin, payable in full on April 17, 2000, which bears
interest at 5.69% and the payment of which is secured by a Stock
Pledge Agreement, dated April 15, 1997, between Mr. Kimberlin and
the Company. Dr. Carlo used a portion ($515,765.30) of such loan
amount to purchase Units from the Company, and paid the remaining
$1,484,232.75 of such purchase price by delivery of a Promissory
Note to the Company, payable in full on September 30, 1997. Mr.
Kimberlin also entered into a Stock Pledge Agreement with the
Company and Dr. Carlo, for the purpose of securing the payment of
such Promissory Note. Mr. Kimberlin has agreed to purchase from
the Company and the Company has agreed to sell to Mr. Kimberlin,
an additional 18,867 Units in the event that the Company obtains
the approval of the Nasdaq Stock Market for such transaction.
Item 7. Material to be Filed as Exhibits
1. Unit Purchase Agreement, dated April 15,
1997, between Kevin B. Kimberlin and the
Company.
2. Promissory Note, dated April 17, 1997, for
the amount of $10,389,623.40, issued by Kevin
B. Kimberlin to the Company.
3. Stock Pledge Agreement, dated April 15, 1997,
between Kevin B. Kimberlin and the Company.
4. Loan Agreement, dated April 15, 1997, between
Kevin B. Kimberlin and Dennis J. Carlo.
5. Promissory Note, dated April 17, 1997, for
the amount of $1,999,998.00, issued by Dennis
J. Carlo to Kevin B. Kimberlin.
6. Stock Pledge Agreement, dated April 15, 1997,
among Kevin B. Kimberlin, Dennis J. Carlo and
the Company.
<PAGE>
Signature
After reasonable inquiry and to the best of his
knowledge and belief, the undersigned certifies that the
information set forth in this statement is true, complete
and correct.
May 1, 1997
Kevin B. Kimberlin
-----------------------
Kevin B. Kimberlin
<PAGE>
EXHIBIT INDEX
1. Unit Purchase Agreement, dated April 15,
1997, between Kevin B. Kimberlin and the
Company.
2. Promissory Note, dated April 17, 1997, for
the amount of $10,389,623.40, issued by Kevin
B. Kimberlin to the Company.
3. Stock Pledge Agreement, dated April 15, 1997,
between Kevin B. Kimberlin and the Company.
4. Loan Agreement, dated April 15, 1997, between
Kevin B. Kimberlin and Dennis J. Carlo.
5. Promissory Note, dated April 17, 1997, for
the amount of $1,999,998.00, issued by Dennis
J. Carlo to Kevin B. Kimberlin.
6. Stock Pledge Agreement, dated April 15, 1997,
among Kevin B. Kimberlin, Dennis J. Carlo and
the Company.
<PAGE>
Exhibit 1
UNIT PURCHASE AGREEMENT
THIS UNIT PURCHASE AGREEMENT (the "Agreement") is made
as of this 15th day of April, 1997 by and between THE IMMUNE
RESPONSE CORPORATION, a Delaware corporation (the "Company"), and
KEVIN B. KIMBERLIN, an individual (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the Units.
1.1 Sale and Issuance of Common Stock and Common Stock
Warrants at the Initial Closing. Subject to the terms and
conditions of this Agreement, Investor agrees to purchase at the
Initial Closing and the Company agrees to sell and issue to
Investor at the Initial Closing, 1,776,004 Units at the purchase
price per Unit equal to the product of (a) the sum of (i) the
closing price of the Company's common stock on April 11, 1997
($7.69) and (ii) $1.19 per share of common stock into which the
Warrant (as defined below) is exercisable, multiplied by (b) .879
(the "Per Unit Price"), for an aggregate price of $13,852,831.20
(the "Initial Investment"). Each Unit consists of one share of
the Company's Common Stock, par value $.0025 per share (the
"Common Stock"), and a nontransferable warrant to purchase one
share of the Company's Common Stock (the "Warrant") in the form
attached hereto as Exhibit A.
The shares of Common Stock sold to Investor pursuant to
this Agreement are hereinafter referred to as the "Shares," and
the shares of Common Stock arising from the exercise of the
Warrant are hereinafter referred to as the "Warrant Shares." The
Shares, the Warrant and the Warrant Shares are hereinafter
referred to collectively as the "Securities."
1.2 Sale and Issuance of Common Stock and Common Stock
Warrants at the NASD Approval Closing. Subject only to the
written approval by the National Association of Securities
Dealers, Inc. ("NASD"), which approval must be received by the
Company no later than six weeks from the date hereof in a form
reasonably acceptable to the Company, Investor agrees to purchase
at the NASD Approval Closing and the Company agrees to sell and
issue to Investor at the NASD Approval Closing, 18,867 Units (as
defined above) at the Per Unit Price for an aggregate price of
$147,162.60 (the "NASD Approval Investment").
At the option of Investor, Investor may prepare a
letter for submission by the Company to the NASD outlining the
nature of the Initial Investment and the NASD Approval Investment
and requesting confirmation from the NASD that the NASD Approval
Investment may be consummated without first obtaining approval
from the Company's stockholders. The Company will submit such
letter to the NASD as promptly as practicable after receiving the
same from Investor.
1.3 Initial Closing. The purchase and sale of the
Securities for the Initial Investment shall take place at the
offices of Pillsbury Madison & Sutro LLP, 235 Montgomery Street,
San Francisco, California, at 11:00 A.M., on April 15, 1997, or
at such other time and place as the Company and Investor mutually
agree (which time and place are designated as the "Initial
Closing"). At the Initial Closing, Investor shall deliver to
Company (i) a bank wire in the amount of $3,463,207.80 payable to
the Company's order and (ii) a promissory note in the form
attached hereto as Exhibit B in the principal amount of
$10,389,623.40 payable to the Company's order (the "Promissory
Note"). Upon payment in full of all amounts due under the
Promissory Note, the Company shall deliver to Investor the
Warrant and a certificate representing the Shares; provided,
however, that the Company hereby acknowledges that Investor shall
be the sole record and beneficial owner of the Shares upon the
Initial Closing.
1.4 NASD Approval Closing. The purchase and sale of
the securities for the NASD Approval Investment shall take place
at the offices of Pillsbury Madison & Sutro LLP, 235 Montgomery
Street, San Francisco, California, within five business days
after receipt by the Company from Investor of written NASD
approval for such sale, or at such other time and place as the
Company and Investor mutually agree (which time and place are
designated as the "NASD Approval Closing"). At the NASD Approval
Closing, the Company shall deliver to Investor 18,867 Units
against delivery to the Company by Investor of a bank wire in the
amount of $147,162.60 payable to the Company's order.
2. Representations and Warranties of the Company.
2.1 Organization, Good Standing and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a material adverse
effect on the Company.
2.2 Valid Issuance of the Securities. The issuance,
sale and delivery of the Securities are within the Company's
corporate powers and have been duly authorized by all required
corporate action on the part of the Company and its stockholders
and when such Securities are issued, sold and delivered in
accordance with the terms hereof, such Securities will be duly
and validly issued, fully paid and nonassessable. The issuance,
sale and delivery of the Securities are not subject to preemptive
or any similar rights of the stockholders of the Company or any
liens or encumbrances arising through the Company.
2.3 Authorization. This Agreement has been duly
authorized, validly executed and delivered on behalf of the
Company and is a valid and binding agreement enforceable against
the Company in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or
other equitable remedies and (iii) to the extent the
indemnification provisions contained in Section 7.8 of this
Agreement may be limited by applicable federal or state
securities laws.
2.4 Capitalization. The authorized capital of the
Company consists of:
(a) Preferred Stock. 5,000,000 shares of Preferred
Stock, of which 20,000 shares have been designated Series E
Participating Preferred Stock, par value $.001 per share (the
"Participating Preferred Stock"). There are no shares of
Participating Preferred Stock issued and outstanding.
(b) Common Stock. 40,000,000 shares of Commons Stock,
of which 20,298,207 shares were issued and outstanding on April
10, 1997.
(c) Agreements for Purchase of Shares. Except for (i)
the purchase privileges under the Company's Stockholder Rights
Plan, as described in the Company's filings with the Securities
and Exchange Commission ("SEC"); (ii) options to purchase an
aggregate of 2,963,155 shares of Common Stock granted pursuant to
the various stock plans of the Company as of February 28, 1997;
and (iii) the agreement of Trinity Medical Group Co., Ltd of
Bangkok, Thailand to make an additional equity investment of up
to $10 million, there are no outstanding options, warrants,
rights (including conversion or preemptive rights) or agreements
for the purchase or acquisition from the Company of any shares of
its capital stock. The Company has no obligations or agreements
concerning the repurchase of any of the shares of its outstanding
capital stock.
2.5 Non-contravention. The execution and delivery of
this Agreement and the consummation of the issuance of the
Securities do not and will not conflict with or result in a
breach by the Company of any of the terms or provisions, of or
constitute a default under the certificate of incorporation or
by-laws of the Company, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its 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, federal or state regulatory body, administrative agency or
other United States governmental body having jurisdiction over
the Company or any of its properties or assets.
2.6 Rights Agreement. As a registered holder of the
Shares, Investor will be a beneficiary under that certain Rights
Agreement, dated as of February 26, 1992, between the Company and
First Interstate Bank, Ltd. (the "Rights Agreement"), and will be
entitled to receive one Right for each share of Common Stock
issued pursuant to this Agreement, including the Warrant Shares,
each Right representing the right to purchase one one-thousandth
of a share of Participating Preferred Stock having the rights,
powers and preferences set forth in the Rights Agreement. The
Company shall amend the Rights Agreement so that the execution
and delivery of this Agreement and the consummation of the
issuance of the Securities will not cause Investor to become an
Acquiring Person (as defined in the Rights Agreement) thereunder.
2.7 SEC Filings. The Company has registered its
Common Stock pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Common
Stock is listed and trades on the NASDAQ National Market System.
The Company has filed all forms, reports and documents required
to be filed pursuant to the federal securities laws and the rules
and regulations promulgated thereunder for a period of at least
twelve (12) months immediately preceding the offer or sale of the
Shares and the Warrant (or for such shorter period that the
Company has been required to file such material). The Company's
filings with the SEC complied as of their respective filing
dates, or in the case of registration statements, their
respective effective dates, in all material respects with all
applicable requirements of the Securities Act of 1933 (the
"Securities Act") and the Exchange Act and the rules and
regulations promulgated thereunder. None of such filings,
including, without limitation, any exhibits, financial statements
or schedules included therein, at the time filed, or in the case
of registration statements, at their respective filing dates,
contained any untrue statement of a material fact or omitted 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.
2.8 Litigation. Except as disclosed in the Company's
filings with the SEC, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic
or foreign, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, or any of its
properties, which might result in any material adverse change in
the condition (financial or otherwise) or in the earnings,
business affairs or business prospects of the Company, or which
might materially and adversely affect the properties or assets
thereof.
2.9 No Default. Except as disclosed in the Company's
filings with the SEC, the Company is not in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed
of trust or other material agreement or instrument to which it is
a party or by which it or its property may be bound.
2.10 Subsequent Events. Since December 31, 1996, (i)
the Company has incurred no liability or obligation, contingent
or otherwise, that taken as a whole, is material in the aggregate
to the Company, except in the ordinary course of business, and
(ii) there has been no material adverse change in the condition
or results of operations, financial or otherwise, of the Company,
taken as a whole.
2.11 Consents and Approvals. No consent, approval,
qualification, order or authorization of, or filing with, any
local, state or federal governmental authority or any third party
is required on the part of the Company in connection with the
Company's valid execution, delivery or performance of this
Agreement, or the offer, sale or issuance of the Shares by the
Company, other than the filings that have been made prior to the
Initial Closing or the NASD Approval Closing, as the case may be,
except that any notices of sale required to be filed by the
Company with the SEC under Regulation D of the Securities Act, or
such post-closing filings as may be required under applicable
state securities laws, which will be timely filed within the
applicable periods therefor.
2.12 Registration Statement. To the best of the
Company's knowledge, there exist no facts or circumstances that
would inhibit or delay the preparation and filing of a
registration statement with the SEC under the Securities Act in
accordance with Section 7 of this Agreement.
2.13 Removal of Legends.
(a) Any legend endorsed on a certificate pursuant to
Section 3.7 hereof shall be removed (i) if the shares of the
Common Stock represented by such certificate shall have been
effectively registered under the Securities Act or otherwise
lawfully sold in a public transaction, (ii) if such shares may be
transferred in compliance with Rule 144(k) promulgated under the
Securities Act, or (iii) subject to the provisions of Section
3.6(c) hereof, if the holder of such shares shall have provided
the Company with an opinion of counsel, in form and substance
acceptable to the Company and its counsel and from attorneys
reasonably acceptable to the Company and its counsel, stating
that a public sale, transfer or assignment of such shares may be
made without registration.
(b) Any legend endorsed on a certificate pursuant to
Section 3.7(c) hereof shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal
or if the holder of the Shares provides the Company with an
opinion of counsel, in form and substance acceptable to the
Company and its counsel and from attorneys reasonably acceptable
to the Company and its counsel, stating that such state legend
may be removed.
2.14 Finder's Fee. The Company neither is nor will be
obligated for any finder's fee or commission in connection with
this transaction. The Company agrees to indemnify and hold
harmless Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liabil-
ity) for which the Company or any of its officers, employees or
representatives is responsible.
3. Representations, Warranties and Covenants of
Investor. Investor hereby represents and warrants that:
3.1 Authorization. Investor has full power and
authority to enter into this Agreement and this Agreement
constitutes its valid and binding obligation except (i) as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by
laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) to the
extent the indemnification provisions contained in Section 7.8 of
this Agreement may be limited by applicable federal or state
securities laws.
3.2 Purchase Entirely for Own Account. The Securities
to be received by Investor will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and
Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same, except in
compliance with the Securities Act and applicable state
securities laws. Investor does not have any contract, under-
taking, agreement or arrangement with any person to sell, trans-
fer or grant participations to such person or to any third
person, with respect to any of the Securities.
3.3 Disclosure of Information. Investor believes it
has received all the information it considers necessary or
appropriate for deciding whether to purchase the Securities.
Investor further represents that it has had an opportunity to ask
questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or
the right of Investor to rely thereon.
3.4 Investment Experience. Investor is an investor in
securities of companies in the development stage and acknowledges
that it is able to bear the economic risk of its investment and
has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of
the investment in the Securities.
3.5 Restricted Securities. Investor understands that
the Securities are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired
from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such
securities may be resold without registration under the
Securities Act only in reliance on an exemption therefrom. In
this connection Investor represents that it is familiar with SEC
Rule 144, as presently in effect ("Rule 144"), and understands
the resale limitations imposed thereby and by the Securities Act.
3.6 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, Investor
further agrees not to make any disposition of all or any portion
of the Securities unless and until:
(a) One (1) year from the date hereof has elapsed; and
(b) The entire principal balance of the promissory
note attached hereto as Exhibit B, together with all accrued and
unpaid interest, fees and late charges thereon, has been paid in
full by Investor to the Company; and
(c) There is then in effect a Registration Statement
under the Securities Act covering such proposed disposition and
such disposition is made in accordance with such Registration
Statement; or
(d) (i) Such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company
with a reasonably detailed statement of the circumstances sur-
rounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration
of such shares under the Securities Act. It is agreed that the
Company will not require opinions of counsel for transactions
made pursuant to Rule 144, as currently in existence, except in
unusual circumstances.
3.7 Legends. Each certificate representing any of the
Securities shall bear substantially one or all of the following
legends:
(a) In the Case of All Securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS REGISTERED UNDER THE 1933 ACT AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND THE
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES
LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE (INCLUDING ANY FUTURE HOLDERS) IS BOUND
BY THE TERMS OF A UNIT PURCHASE AGREEMENT BETWEEN THE
ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE
OBTAINED FROM THE COMPANY).
(b) In the Case of the Warrant:
THIS WARRANT IS NON-TRANSFERABLE AND MAY ONLY BE EXERCISED
BY THE ORIGINAL PURCHASER.
(c) Any legend required by the laws of the State of
California or other jurisdiction, including any legend required
by the California Department of Corporations and sections 417 and
418 of the California Corporations Code.
3.8 Accredited Investor. Investor is an accredited
investor as defined in Rule 501(a) of Regulation D under the
Securities Act.
3.9 Confidentiality. Investor hereby represents,
warrants and covenants that Investor shall maintain in confi-
dence, and shall not use or disclose without the prior written
consent of the Company, any information identified as confiden-
tial that is furnished to Investor by the Company in connection
with this Agreement. This obligation of confidentiality shall
not apply, however, to any information (a) in the public domain
through no unauthorized act or failure to act by Investor,
(b) lawfully disclosed to Investor by a third party who possessed
such information without any obligation of confidentiality or (c)
known previously by Investor or lawfully developed by Investor
independent of any disclosure by the Company. Investor further
covenants that Investor shall return to the Company all tangible
materials containing such information upon request by the
Company.
3.10 Finder's Fee. Investor neither is nor will be
obligated for any finder's fee or commission in connection with
this transaction. Investor agrees to indemnify and hold harmless
the Company from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees or
representatives is responsible.
3.11 Covenant. Investor hereby covenants and agrees to
pledge shares of capital stock (i) set forth on Schedule 1 to the
Stock Pledge Agreement between the Company and Investor as
collateral for the Promissory Note and (ii) set forth on Schedule
1 to the Stock Pledge Agreement among the Company, Investor and
Dennis J. Carlo for the promissory note payable to the Company by
Dennis J. Carlo, in amounts equal to double the principal amount
of such promissory notes. Upon expiration on August 7, 1997 of
that certain lock-up agreement with respect to such shares of
capital stock, Investor will take all such action as is necessary
or appropriate to perfect the pledge of such shares of capital
stock as a first priority security interest.
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE SECURI-
TIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS
EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Conditions of Investor's Obligations at Closing.
The obligations of Investor under this Agreement are subject to
the fulfillment on or before each Closing of each of the
following conditions, the waiver of which shall not be effective
unless Investor consents in writing thereto:
5.1 Representations and Warranties. The representa-
tions and warranties of the Company contained in Section 2 shall
be true on and as of each Closing with the same effect as though
such representations and warranties had been made on and as of
the date of such Closing.
5.2 Performance. The Company shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before each Closing.
5.3 Compliance Certificate. The Chief Financial
Officer of the Company shall deliver to Investor at each Closing
a certificate certifying that the conditions specified in
Sections 5.1 and 5.2 have been fulfilled and stating that there
has been no material adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the
Company since December 31, 1996.
5.4 Qualification. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in
connection with the lawful issuance and sale of the Securities to
Investor (i) pursuant to Section 1.1 of this Agreement shall be
duly obtained and effective as of the Initial Closing, and (ii)
pursuant to Section 1.2 of this Agreement shall be duly obtained
and effective as of the NASD Approval Closing.
5.5 Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contem-
plated at each Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to Investor and
its special counsel, and Investor shall have received all such
counterpart original and certified or other copies of such
documents as it may reasonably request.
6. Conditions of the Company's Obligations at
Closing. The obligations of the Company to Investor under this
Agreement are subject to the fulfillment on or before each
Closing of each of the following conditions by Investor:
6.1 Representations and Warranties. The representa-
tions and warranties of Investor contained in Section 3 hereof
shall be true on and as of each Closing with the same effect as
though such representations and warranties had been made on and
as of such Closing.
6.2 Payment of Purchase Price. Investor shall have
delivered to the Company the purchase price specified in
Section 1.1 on or before the Initial Closing, and shall have
delivered to the Company the purchase price specified in
Section 1.2 on or before the NASD Approval Closing.
6.3 Qualification. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in
connection with the lawful issuance and sale of the Securities to
Investor (i) pursuant to Section 1.1 of this Agreement shall be
duly obtained and effective as of the Initial Closing, and (ii)
pursuant to Section 1.2 of this Agreement shall be duly obtained
and effective as of the NASD Approval Closing.
6.4 Stock Pledge Agreement. Investor shall have
executed a Stock Pledge Agreement for the benefit of the Company
in the form attached hereto as Exhibit C.
6.5 Fairness Opinion. The Company shall have received
from its investment banker, Montgomery Securities, an opinion
that the proposed consideration to be received by the Company
from Investor in exchange for the Units is fair to the Company
from a financial point of view, such opinion to be in the form
attached hereto as Exhibit D.
7. Registration Rights. The Company covenants and
agrees as follows:
7.1 Certain Additional Definitions.
As used in this Agreement, the following capitalized
terms shall have the following meanings:
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
"Register," "registered" and "registration" refer to a
registration effected by preparing and filing with the SEC a
registration statement or similar document in compliance with the
Securities Act, and such registration statement or document
becoming effective under the Securities Act.
"Registrable Securities" shall mean (i) the Shares,
(ii) the shares of Common Stock issued pursuant to that certain
Unit Purchase Agreement of even date herewith between the Company
and Dennis J. Carlo, and (iii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for
or in replacement of the shares referenced in (i) and (ii) above,
provided, however, that Registrable Securities shall not include
any shares of Common Stock which have previously been registered
or which have been sold in a public offering.
"Registration Statement" shall mean any registration
statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such
Registration Statement.
7.2 Registration. If after one year following the
Initial Closing, but no later than five years following the
Initial Closing, Investor requests in writing that the Company
file a Registration Statement for a public offering of the
Registerable Securities (a "Demand Request"), the Company will
use its reasonable best efforts to effect a registration to
permit the sale of such Registrable Securities as described
below, and pursuant thereto the Company will:
(a) within ten (10) days of the
Company's receipt of a Demand Request, give written notice of
such request to all holders of Registerable Securities
("Holders");
(b) prepare and file with the SEC
within sixty (60) days of the Company's receipt of a Demand
Request, and use its reasonable best efforts to have declared
effective by the SEC, a Registration Statement on any appropriate
form under the Securities Act as may then be available to the
Company relating to resale of all of the Registrable Securities
which the Holders request to be registered within twenty (20)
days of the mailing of the notice required under Section 7.2(a)
and use its reasonable best efforts to cause such Registration
Statement to remain continuously effective for a period of one
year or such shorter period which will terminate when all
Registrable Securities covered by such Registration Statement
have been sold; provided that a registration will not count as
the permitted demand registration until the Registration
Statement becomes effective and remains effective for the period
specified herein, so long as such registration is not withdrawn
at the request of the holder;
(c) prepare and file with the SEC such
amendments, supplements and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to
keep such Registration Statement effective for the period
specified in Section 7.2(b) and to comply with the provisions of
the Securities Act and the Exchange Act with respect to the
distribution of all Registrable Securities during such period;
(d) notify the Investor promptly, and
confirm such notice in writing, (i) when the Prospectus or any
supplement or post-effective amendment has been filed and, with
respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to the
Registration Statement or Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (v) when a Prospectus or a
Prospectus supplement is required to be delivered under the
Securities Act upon discovery that the Prospectus, as then in
effect, includes an untrue statement of material fact or omits to
state a material fact necessary to make the statements therein
not misleading in light of the circumstances then existing, which
requires amendment or supplementation of the Registration
Statement or Prospectus;
(e) use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness
of the Registration Statement at the earliest possible moment;
(f) deliver to the Investor without
charge as many copies of the Prospectus (including each
preliminary Prospectus) and any amendment or supplement thereto
as Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities in compliance with the
Securities Act;
(g) cause all Registrable Securities
covered by the Registration Statement to be listed on each
securities exchange or market on which shares of the Common Stock
are then listed, and if shares of the Common Stock are not so
listed, use its reasonable best efforts promptly to cause all
such Registerable Securities to be listed on either the New York
Stock Exchange, the American Stock Exchange or the Nasdaq Stock
Market;
(h) use its reasonable best efforts to
qualify or register the Registrable Securities for sale under (or
obtain exemptions from the application of) the Blue Sky laws of
such jurisdictions as are reasonably requested by Investor. The
Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it
would be subject to general service of process or taxation as a
foreign corporation in any jurisdiction where it is not now so
subject;
(i) otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of
the SEC under the Securities Act and the Exchange Act and take
such other actions as may be reasonably necessary to facilitate
the registration of the Registrable Securities hereunder.
Investor shall furnish to the Company such information
regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
If the Company delivers a certificate in writing to
Investor to the effect that a delay in the sale of Registrable
Securities by Investor under the Registration Statement is
necessary because a sale pursuant to such Registration Statement
in its then current form would reasonably be expected to
constitute a violation of the federal securities laws, then
Investor shall agree not to sell or otherwise transfer such
Registrable Securities for the period of time specified by the
Company in its certificate. In no event shall such delay exceed
ten (10) business days; provided, however, that if, prior to the
expiration of such ten (10) business day period, the Company
delivers a certificate in writing to Investor to the effect that
a further delay in such sale beyond such ten (10) business day
period is necessary because a sale pursuant to such Registration
Statement in its then current form would reasonably be expected
to constitute a violation of the federal securities laws, the
Company may refuse to permit Investor to resell any Registrable
Securities pursuant to such Registration Statement for one
additional period not to exceed five (5) business days.
7.3 Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement,
including without limitation all registration and filing fees,
fees with respect to the filings required to be made with the
NASD, fees and expenses of compliance with the securities or Blue
Sky laws, printing expenses, messenger, telephone and delivery
expenses, fees and disbursements of counsel for the Company, fees
and disbursements of all independent certified public accountants
of the Company, fees and expenses incurred in connection with the
listing of the securities, rating agency fees and the fees and
expenses of any person, including special experts, retained by
the Company, will be borne by the Company, regardless of whether
the Registration Statement becomes effective; provided, however,
that the Company will not be required to pay discounts,
commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to
the distribution of the Registrable Securities or fees or
disbursements of any counsel to Investor.
7.4 Underwritten Registrations; Selection of
Underwriter. If Investor so elects, the offering of Registerable
Securities shall be in the form of an underwritten offering and
the Company shall have the exclusive right to designate the
managing underwriter or underwriters with respect to the related
offering of the Registerable Securities, which underwriter or
underwriters must be reasonably acceptable to the Investor.
7.5 Rule 144. The Company covenants that it will file
the reports required to be filed by it under the Securities Act
and the Exchange Act and it will take such further action as
Investor may reasonably request, all to the extent required to
enable Investor to sell Registrable Securities without
registration under the Securities Act in reliance on the
exemption provided by Rule 144 or Rule 144A or any successor or
similar rules or statues. Upon the request of Investor, the
Company will deliver to Investor a written statement as to
whether the Company has complied with such information and
requirements.
7.6 Transfer or Assignment of Registration Rights.
The rights to cause the Company to register Securities and all
related rights granted to Investor by the Company under this
Section 7 may be transferred or assigned by Investor only to a
transferee or assignee of not less than 100,000 shares of
Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like), provided that the Company is given
written notice at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of the
transferee or assignee and identifying the Securities with
respect to which such registration rights are being transferred
or assigned, and, provided further, that the transferee or
assignee of such rights assumes the obligations of Investor under
this Section 7.
7.7 "Market Stand-Off" Agreement. If requested by the
Company and an underwriter of Common Stock (or other securities)
of the Company, Investor shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company
held by Investor (other than those included in the registration)
during the one hundred twenty (120) day period following the
effective date of a registration statement of the Company filed
under the Securities Act.
The obligations described in this Section 7.7 shall not
apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Rule 145
transaction on Form S-4 or similar forms that may be promulgated
in the future. The Company may impose stop-transfer instructions
with respect to the Securities subject to the foregoing
restriction until the end of such one hundred twenty (120) day
period.
Each time the Company invokes its Market Stand-off
rights under this Section 7.7 while Investor is entitled to make
a Demand Request, the period during which Investor shall be
entitled to make a Demand Request under Section 7.2 hereof shall
be extended by an additional one hundred twenty (120) days;
provided, however, that Investor's Demand Request period will not
be extended following the first Market Stand-Off unless such
Market Stand-Off occurs within one hundred twenty (120) days of
the expiration of Investor's Demand Request period.
7.8 Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this
Section 7:
(a) To the extent permitted by law, the
Company will indemnify and hold harmless the Investor, any person
or entity to or through whom Investor sells Registerable
Securities that may be deemed to be an underwriter (as defined in
the Securities Act), any officer, director, partner or agent
thereof, and each person, if any, who controls the Investor or
underwriter within the meaning of the Securities Act or the
Exchange Act against any and all losses, claims, damages, or
liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other United States
federal or state securities law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact
contained in any related registration statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto or offering circular or in
any application or other document or communication executed by or
on behalf of the Company relating to such registration (together,
"Selling Documents"), (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or other United States federal
or state securities law, or any rule or regulation promulgated
under the Securities Act, the Exchange Act or other United States
federal or state securities law; and the Company will pay to the
Investor, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability, or action as incurred; provided, however, that the
indemnity agreement contained in this subsection 7.8(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by the Investor, underwriter or controlling person.
(b) To the extent permitted by law, the
Investor will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed a Selling
Document, each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter, any officer,
director, partner or agent thereof and any controlling person of
any such underwriter, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the
Exchange Act or other United States federal or state securities
law insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity
with written information furnished by the Investor expressly for
use in connection with such registration; and the Investor will
pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 7.8(b), in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 7.8(b) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Investor, which consent shall not be
unreasonably withheld; provided further, that in no event shall
any indemnity under this subsection 7.8(b) exceed the proceeds
(net of underwriting discounts and commissions) from the related
offering of the Registerable Securities received by the Investor.
(c) After receipt by an indemnified
party under this Section 7.8 of notice of the commencement of any
action (including any governmental action) involving a claim
referred to in Sections 7.8(a) or 7.8(b) hereof, such indemnified
party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 7.8, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together
with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7.8, but
the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 7.8.
(d) If the indemnification provided for
in this Section 7.8 is held by a court of competent jurisdiction
to be unavailable to an indemnified party with respect to any
loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid
or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations; provided, however, that
in any such case, (A) the Investor will not be required to
contribute any amount in excess of the proceeds (net of
underwriting discounts and commissions) received by the Investor
from all Registrable Securities offered and sold by the Investor
pursuant to the applicable Selling Document; and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation. The relative fault of the
indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the
Violation relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to
the extent that the provisions on indemnification and
contribution contained in any underwriting agreement entered into
by the Company in connection with an underwritten public offering
are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall control, provided that Investor
is a signatory to the underwriting agreement.
(f) The obligations of the Company and
the Investor under this Section 7.8 shall survive the completion
of any offering of Registrable Securities in a Registration
Statement under this Section 7 and otherwise.
8. Miscellaneous.
8.1 Survival of Warranties. The representations and
warranties of the Company contained in or made pursuant to this
Agreement shall survive the execution and delivery of this
Agreement and each Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf
of Investor or the Company.
8.2 Successors and Assigns. Except as otherwise
provided in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.3 Governing Law. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of
Delaware, except as they may be preempted by federal law. In any
action brought or arising out of this Agreement, Investor and the
Company hereby consent to the jurisdiction of any federal or
state court having proper venue within the State of California
and also consent to the service of process by any means
authorized by California or federal law.
8.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an origi-
nal, but all of which together shall constitute one and the same
instrument.
8.5 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon personal
delivery to the party to be notified (or upon the date of
attempted delivery where delivery is refused) or, if sent by
telecopier, telex, telegram, or other facsimile means, upon
receipt of appropriate confirmation of receipt, or five (5) days
after deposit with the United States Postal Service, by
registered or certified mail, or one (1) day after deposit with
next day air courier, with postage and fees prepaid and addressed
to the party entitled to such notice at the address indicated for
such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days advance written
notice to the other parties to this Agreement.
8.7 Expenses. Except as otherwise specified in this
Agreement, irrespective of whether the Initial Closing or the
NASD Approval Closing is effected, 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 disbursements in addition to any other relief to which
such party may be entitled.
8.8 Amendments and Waivers. Except as otherwise
specified in this Agreement, any term of this Agreement may be
amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder
of any Securities purchased under this Agreement at the time
outstanding (including securities into which such Securities are
convertible), each future holder of all such Securities, and the
Company.
8.9 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance
of this Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its
terms.
8.10 Aggregation of Stock. All shares of Common Stock
held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the
availability of any rights under this Agreement.
8.11 Entire Agreement. This Agreement, the Exhibits
hereto and other documents delivered expressly hereby constitute
the full and entire understanding and agreement, and supersede
all prior agreements and understandings, both written and oral,
between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants or agreements except as
specifically set forth herein and therein.
8.12 Press Releases. The Company agrees not to issue
any press release concerning the transactions contemplated by
this Agreement, the terms of which are not reasonably acceptable
to Investor.
8.13 Exchange Act Filings. The Company agrees to
consult with Investor before filing with the SEC any information
required under the Exchange Act concerning the transactions
contemplated by this Agreement and agrees to consider in good
faith all reasonable comments received from Investor in
connection therewith.
[REMAINDER OF THE PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
THE IMMUNE RESPONSE CORPORATION
By ___________________________
Title ________________________
Address: 5935 Darwin Court
Carlsbad, CA 92008
INVESTOR
___________________________
Kevin B. Kimberlin
Address: Spencer Trask, Inc.
535 Madison Avenue
New York, NY 10022
<PAGE>
Exhibit 2
PROMISSORY NOTE
Loan Amount: $10,389,623.40 Carlsbad, California
Interest Rate: 5.73% April 17, 1997
FOR VALUE RECEIVED, the undersigned, KEVIN B. KIMBERLIN
("Borrower"), hereby promises to pay to the order of THE IMMUNE
RESPONSE CORPORATION, a Delaware corporation ("Lender"), at 5935
Darwin Court, Carlsbad, California, 92008 or such other place as
Lender may designate by written notice to Borrower, by wire
transfer of immediately available funds, the principal sum of TEN
MILLION THREE HUNDRED EIGHTY-NINE THOUSAND SIX HUNDRED TWENTY-
THREE AND 40/100 DOLLARS ($10,389,623.40), with interest, to be
paid as set forth below.
1. Payments. The entire principal balance of this
Promissory Note (this "Note"), together with all accrued and
unpaid interest thereon, shall be due and payable on September
30, 1997 (the "Maturity Date"). Interest on the outstanding
principal balance hereunder shall accrue at the rate of 5.73% per
annum, calculated on the basis of a three hundred and sixty-five
day year.
2. Purpose of Note. Borrower acknowledges that the
purpose of the loan evidenced by this Note is to provide partial
financing for the purchase of 1,776,004 shares of Lender's common
stock and warrants to purchase 1,776,004 shares of such common
stock.
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.
4. Security. This Note is a full-recourse note. Payment
of this Note is secured by a certain Stock Pledge Agreement (the
"Pledge Agreement") of even date herewith from Borrower, as
Pledgor, to Lender, as Pledgee, encumbering Borrower's interest
in certain shares of capital stock at such time as permitted
under that certain lock-up agreement to which Borrower is a party
(described in Exhibit A hereto), and as more particularly
described in the Pledge Agreement.
5. 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 under the
Pledge 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 writ-
ing 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 reorga-
nization, 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.
6. 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.
7. Miscellaneous.
(a) No delay or omission on the part of Lender in
exercising any right under this Note or under the Pledge
Agreement or any other 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.
(c) Borrower hereby waives presentment for payment, demand,
notice of demand and of dishonor and non-payment 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,
subject to Section 7(b).
(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.
8. 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 two percent (2%) 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 Pledge Agreement or from
exercising any of the other rights and remedies of Lender.
9. Governing Law. This Note shall be governed by and
interpreted in accordance with the laws of the State of Delaware,
except as they may be preempted by federal law. In any action
brought or arising out of this Note, Borrower and Lender hereby
consent to the jurisdiction of any federal or state court having
proper venue within the State of California and also consent to
the service of process by any means authorized by California or
federal law.
10. 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.
11. Successors. This Note shall be binding upon Borrower
and the personal representatives, heirs, successors and assigns
of Borrower.
12. Severability. If any part of this Note is determined
to be illegal or unenforceable, all other parts shall remain in
full force and effect.
13. 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.
------------------------------
Kevin B. Kimberlin
Exhibit 3
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Agreement") is made
and entered into as of April 15, 1997 by and between
KEVIN B. KIMBERLIN, an individual ("Pledgor") and THE IMMUNE
RESPONSE CORPORATION, a Delaware corporation ("Pledgee")
with reference to the facts set forth in the Recitals below:
RECITALS
WHEREAS, Pledgor is a co-founder of Pledgee and has
been a director of Pledgee since 1986;
WHEREAS, Pledgor is an individual of substantial net
worth;
WHEREAS, Pledgor and Pledgee have entered into a Unit
Purchase Agreement, of even date herewith, pursuant to which
Pledgor has purchased from Pledgee 1,776,004 Units, each
Unit consisting of one share of Pledgee's Common Stock and a
warrant to purchase one share of Pledgee's Common Stock. As
partial consideration for Pledgee's Units, and for other
good and valuable consideration, Pledgor has delivered to
Pledgee that certain Promissory Note (the "Note"), dated as
of April 17, 1997, executed by Pledgor in favor of Pledgee
in the principal amount of TEN MILLION THREE HUNDRED EIGHTY-
NINE THOUSAND SIX HUNDRED TWENTY-THREE AND 40/100 DOLLARS
($10,389,623.40)(the "Loan");
WHEREAS, to induce Pledgee to make the Loan, Pledgor
has agreed to pledge to Pledgee as security for repayment of
the Loan certain shares of capital stock with a fair market
value approximately equal to double the principal amount of
the Loan; and
WHEREAS, Pledgor has agreed not to sell any shares of
Pledgee's Common Stock purchased pursuant to the Unit
Purchase Agreement prior to maturity of the Note and
repayment of the Loan:
NOW, THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Pledgor hereby agrees with Pledgee as follows:
1. Pledge. In consideration of Pledgee's making of
the Loan to Pledgor, receipt of which is hereby
acknowledged, Pledgor hereby agrees and covenants to pledge,
grant a security interest in, assign, transfer and deliver
to Pledgee, as collateral security for the payment and
performance in full when due by Pledgor of the Obligations
(defined below), and on the earliest date permitted under
that certain lock-up agreement to which Pledgor is a party
(described in Exhibit A hereto, the "Lock-up Agreement"), a
number of shares of capital stock, more particularly
described on the attached Schedule 1, having an aggregate
fair market value at the time transferred to Pledgee equal
to double the principal amount of the Loan (collectively,
the "Pledged Shares"), together with the certificates
evidencing same, which certificates shall be duly endorsed
in blank or accompanied by stock powers duly executed in
blank.
From the date hereof until such time as the Pledged
Shares may be transferred to Pledgee in accordance with this
Section 1 and the Lock-up Agreement, Pledgor shall segregate
and hold separate for safekeeping the Pledged Shares and the
certificates evidencing the same.
2. Obligations Secured. Subject only to the time
restrictions contained in the Lock-up Agreement, this
Agreement is made, and the security interest pledged herein
will be given, to secure payment and performance in full by
Pledgor of all obligations (collectively the "Obligations")
of Pledgor owing to Pledgee under the Note and this
Agreement, together with all extensions, amendments,
restatements, modifications, supplements and renewals
thereof, when the same shall become due, whether at
maturity, at a time fixed for payment or by acceleration or
otherwise, in accordance with the terms of the Note,
together with Pledgor's performance and compliance with all
other terms and conditions of this Agreement and any other
agreement now or in the future entered into between Pledgor
and Pledgee with respect to the Loan or any modifications,
amendments, restatements, supplements or renewals thereof.
3. Attorney-in-Fact. Subject to the rights of
Pledgor provided for in this Agreement and the time
restrictions contained in the Lock-up Agreement, Pledgor
hereby irrevocably agrees and covenants to appoint Pledgee
as Pledgor's attorney-in-fact, coupled with an interest,
with full authority in the place and stead of Pledgor and in
the name of Pledgor, Pledgee or otherwise, from time to time
to take any action, execute any document, instrument or
other agreement which Pledgee reasonably may deem necessary
or advisable, in its sole discretion, to accomplish the
purposes of this Agreement, including without limitation, to
arrange for the transfer of the Pledged Shares on the books
of the issuer to the name of Pledgee.
4. Dividends. After the Pledged Shares have been
transferred to Pledgee in accordance with Section 1 hereof
and for the remaining term of this Agreement, all dividends
and other amounts received in cash by Pledgee as a result of
Pledgee's record ownership of the Pledged Shares shall be
applied to the payment of the principal and interest on the
Loan.
5. Voting Rights. During the term of this Agreement,
and as long as Pledgor is not in default in the performance
of any of the terms of this Agreement, or in the payment of
the principal or interest of the Loan, or with respect to
any of the other Obligations, Pledgor shall have the right
to vote the Pledged Shares on all corporate questions.
Pledgee shall execute due and timely proxies in favor of
Pledgor to this end.
6. Representations and Warranties of Pledgor.
Pledgor represents and warrants: that Pledgor is the legal
and beneficial owner of the Pledged Shares; that Pledgor has
owned the Pledged Shares for two (2) or more years; that
there are no restrictions on the transfer of any of the
Pledged Shares, other than as may appear on the face of the
certificates thereof and those contained in the Lock-up
Agreement; that Pledgor has the right and power to transfer
the Pledged Shares free of any encumbrances or liens,
without obtaining the consents of any other party or
parties; that Pledgor is not now and has never been an
officer or director of the issuer of the Pledged Shares; and
that Pledgor is not now an affiliate (as such term is
defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended) of
the issuer of the Pledged Shares.
7. Adjustments. In the event that during the term of
this Agreement, any share dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of the company that has issued the Pledged
Shares, all new, substituted and additional shares, or other
securities issued by reason of any such change with respect
to the Pledged Shares, shall be transferred to and held by
Pledgee in the same manner as the Pledged Shares originally
pledged to Pledgee under this Agreement.
8. Warrants and Rights. In the event that during the
term of this Agreement, subscription warrants or any other
rights or options shall be issued in connection with the
Pledged Shares, such warrants, rights and options shall be
immediately assigned by Pledgee to Pledgor, and if exercised
by Pledgor, all new shares or other securities so acquired
by Pledgor as a result thereof shall be immediately assigned
to Pledgee to be held in the same manner as the Pledged
Shares originally pledged under this Agreement and shall in
all respects be subject to the terms of this Agreement.
9. Payment of Loan. Upon payment in full, at
maturity, of all principal and interest due to Pledgee under
the Note, together with any other amounts due to Pledgee
under the terms of the Note or this Agreement, less amounts
received and applied by Pledgee in reduction of the Loan,
and upon full satisfaction of all of the other Obligations
provided for under this Agreement and the Note, Pledgee
shall transfer to Pledgor all of the Pledged Shares and all
rights received by Pledgee as a result of Pledgee's record
ownership of the Pledged Shares and this Agreement shall
terminate. Notwithstanding the above requirement that the
Obligations be satisfied in full prior to Pledgee's release
of its interest in the Pledged Shares under this Agreement,
Pledgee shall extend all reasonable cooperation to Pledgor
in connection with any proposed sale by Pledgor of the
Pledged Shares, provided the proceeds of such sale shall be
applied by Pledgor to repay the Loan in full, together with
all other amounts owed to Pledgee with respect to the
Obligations.
10. Default. In the event that Pledgor defaults in
the performance of any of the material terms of this
Agreement, or on the payment at maturity of the principal or
interest of the Loan, or defaults with respect to any of the
Obligations, Pledgee shall have all of the rights and
remedies provided to it and be subject to the obligations
under the Delaware Uniform Commercial Code with respect to
such default or nonperformance. In this connection, after
the Pledged Shares have been transferred to Pledgee in
accordance with Section 1 hereof, Pledgee may, as permitted
by the Delaware Uniform Commercial Code, and without
liability for any diminution in price that may have
occurred, sell all of the Pledged Shares in the manner and
for the price that Pledgee may determine upon fifteen (15)
days written notice to Pledgor of the time and place of any
public sale or the time after which any private sale is to
be made. At any bona fide public sale, Pledgee shall be
free to purchase all or any part of the Pledged Shares. Out
of the proceeds of any sale of the Pledged Shares, Pledgee
may retain an amount equal to the principal and interest
then due with respect to the Loan under the Note, plus any
other amounts due with respect to the Obligations or
otherwise under the Note, plus the amount of the expenses of
the sale, and shall pay any balance of the proceeds of any
sale to Pledgor after satisfaction of all of the
Obligations. If Pledgor defaults in the performance of any
of the Obligations before the Pledged Shares have been
transferred to Pledgee in accordance with Section 1 hereof,
or if the proceeds of the sale of such Pledged Shares are
insufficient to cover the principal and interest of the Loan
and other amounts due with respect to the Obligations,
including expenses of the sale, Pledgor shall remain liable
to Pledgee for any deficiency in accordance with applicable
provisions of the Delaware Uniform Commercial Code.
11. Miscellaneous. This Agreement and the Note shall
be governed by and interpreted in accordance with the laws
of the State of Delaware, except as they may be preempted by
federal law. In any action brought or arising out of this
Agreement or the Note, Pledgor and Pledgee hereby consent to
the jurisdiction of any federal or state court having proper
venue within the State of California and also consent to the
service of process by any means authorized by California or
federal law. The headings used in this Agreement are for
convenience only and shall be disregarded in interpreting
the substantive provisions of this Agreement. Time is of
the essence in each term of this Agreement and the Note. If
any provision of this Agreement or the Note shall be
determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, that portion shall be
deemed severed therefrom and the remaining parts shall
remain in full force as though the invalid, illegal or
unenforceable portion had never been a part thereof. This
Agreement may be executed in one or more counterparts, all
of which, taken together, shall constitute one and the same
Agreement. The Recitals and any Schedules attached to this
Agreement are hereby incorporated into this Agreement by
this reference.
12. Integration; Interpretation. The 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.
The Agreement and the Note shall not be modified except by
written instrument executed by all parties.
13. Further Assurances; Substitution of Collateral.
Pledgor shall execute, acknowledge and deliver, upon written
request of Pledgee, any and all further documents,
agreements or other instruments, and take such further
actions, as Pledgee may reasonably require for carrying out
the purpose and intent of the covenants set forth in this
Agreement. If at any time, the value of the Pledged Shares
declines to such an extent that in the reasonable opinion of
Pledgee such collateral is inadequate either to secure
satisfaction of Pledgor's Obligations or to satisfy the
requirements of Federal Reserve Board Regulation G, Pledgee
may require Pledgor to substitute reasonably equivalent
collateral for some or all of the Pledged Shares as security
for Pledgor's satisfaction of the Obligations, which
substituted collateral shall be acceptable to Pledgee in its
sole discretion and shall be subject, in all respects, to
the terms and conditions of this Agreement upon such
substitution. Pledgor shall execute, acknowledge and
deliver such additional documents, agreements and
instruments with respect to such substituted collateral as
Pledgee may require, including without limitation,
mortgages, deeds of trust or financing statements, in form
and content sufficient to perfect Pledgee's security
interest in such substituted collateral.
IN WITNESS WHEREOF, Pledgor and Pledgee have caused
this Agreement to be duly executed as of the date first
written above.
PLEDGOR PLEDGEE
THE IMMUNE RESPONSE CORPORATION
- -----------------------------
Kevin B. Kimberlin
By: __________________________
Title:________________________
<PAGE>
SCHEDULE 1
PLEDGED SHARES
[TO BE COMPLETED BY PLEDGOR]
No. of Class of Certificate
Issuer Shares Shares No. Date
- ------ ------ -------- ----------- ----
Ciena Corporation _______ Common ____________ ____
<PAGE>
Exhibit 4
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.
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 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.
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 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
____________________________
Kevin B. Kimberlin
BORROWER
_____________________________
Dennis J. Carlo
<PAGE>
Exhibit 5
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.
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.
(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.
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.
-----------------------------
Dennis J. Carlo
<PAGE>
SCHEDULE A
Principal Principal Interest Loan
Date Loan Payment Payment Balance By
- ---- --------- --------- -------- ------- --
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
______ $_________ $_________ $_________ $________ ____
<PAGE>
Exhibit 6
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Agreement") is made and
entered into as of April 15, 1997 by and among Dennis J. Carlo,
an individual ("Beneficiary"), Kevin B. Kimberlin, and individual
("Pledgor"), and THE IMMUNE RESPONSE CORPORATION, a Delaware
corporation ("Pledgee") with reference to the facts set forth in
the Recitals below:
RECITALS
WHEREAS, Pledgor is a co-founder of Pledgee and has been a
director of Pledgee since 1986;
WHEREAS, Beneficiary is the President, Chief Executive
Officer and a director of Pledgee;
WHEREAS, Pledgor is an individual of substantial net worth;
WHEREAS, Beneficiary and Pledgee have entered into a Unit
Purchase Agreement, of even date herewith, pursuant to which
Beneficiary has purchased from Pledgee 253,715 Units, each Unit
consisting of one share of Pledgee's Common Stock and a warrant
to purchase one share of Pledgee's Common Stock. As partial
consideration for Pledgee's Units, and for other good and
valuable consideration, Beneficiary has delivered to Pledgee that
certain Promissory Note (the "Note"), dated as of April 17, 1997,
executed by Beneficiary in favor of Pledgee in the principal
amount of ONE MILLION FOUR HUNDRED EIGHTY-FOUR THOUSAND TWO
HUNDRED THIRTY-TWO AND 75/100 DOLLARS ($1,484,232.75)(the
"Loan");
WHEREAS, to induce Pledgee to make the Loan, Pledgor has
agreed to pledge to Pledgee as security for repayment of the Loan
certain shares of capital stock with a fair market value
approximately equal to double the principal amount of the Loan;
and
WHEREAS, Beneficiary has agreed not to sell any shares of
Pledgee's Common Stock purchased pursuant to the Unit Purchase
Agreement prior to maturity of the Note and repayment of the
Loan:
NOW, THEREFORE, in consideration of the foregoing premises
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor, Pledgee
and Beneficiary hereby agree as follows:
1. Pledge. In consideration of Pledgee's making
of the Loan to Beneficiary, receipt of which is hereby
acknowledged, Pledgor hereby agrees and covenants to pledge,
grant a security interest in, assign, transfer and deliver to
Pledgee, as collateral security for the payment and performance
in full when due by Beneficiary of the Obligations (defined
below), and on the earliest date permitted under that certain
lock-up agreement to which Pledgor is a party (described in
Exhibit A hereto, the "Lock-up Agreement"), a number of shares of
capital stock, more particularly described on the attached
Schedule 1, having an aggregate fair market value at the time
transferred to Pledgee equal to double the principal amount of
the Loan (collectively, the "Pledged Shares"), together with the
certificates evidencing same, which certificates shall be duly
endorsed in blank or accompanied by stock powers duly executed in
blank.
From the date hereof until such time as the Pledged
Shares may be transferred to Pledgee in accordance with this
Section 1 and the Lock-up Agreement, Pledgor shall segregate and
hold separate for safekeeping the Pledged Shares and the
certificates evidencing the same.
2. Obligations Secured. Subject only to the time
restrictions contained in the Lock-up Agreement, this Agreement
is made, and the security interest pledged herein will be given,
to secure payment and performance in full of all obligations
(collectively the "Obligations") of Beneficiary owing to Pledgee
under the Note, and to secure performance in full of all
Obligations of both Beneficiary and Pledgor owing to Pledgee
under this Agreement, together with all extensions, amendments,
restatements, modifications, supplements and renewals thereof,
when the same shall become due, whether at maturity, at a time
fixed for payment or by acceleration or otherwise, in accordance
with the terms of the Note, together with Beneficiary's and
Pledgor's performance and compliance with all other terms and
conditions of this Agreement and any other agreement now or in
the future entered into between Beneficiary and Pledgee with
respect to the Loan or any modifications, amendments,
restatements, supplements or renewals thereof.
3. Attorney-in-Fact. Subject to the rights of
Pledgor provided for in this Agreement and the time restrictions
contained in the Lock-up Agreement, Pledgor hereby irrevocably
agrees and covenants to appoint Pledgee as Pledgor's attorney-in-
fact, coupled with an interest, with full authority in the place
and stead of Pledgor and in the name of Pledgor, Pledgee or
otherwise, from time to time to take any action, execute any
document, instrument or other agreement which Pledgee reasonably
may deem necessary or advisable, in its sole discretion, to
accomplish the purposes of this Agreement, including without
limitation, to arrange for the transfer of the Pledged Shares on
the books of the issuer to the name of Pledgee.
4. Dividends. After the Pledged Shares have been
transferred to Pledgee in accordance with Section 1 hereof and
for the remaining term of this Agreement, all dividends and other
amounts received in cash by Pledgee as a result of Pledgee's
record ownership of the Pledged Shares shall be applied to the
payment of the principal and interest on the Loan.
5. Voting Rights. During the term of this
Agreement, and as long as Beneficiary is not in default in the
performance of any of the terms of this Agreement, or in the
payment of the principal or interest of the Loan, or with respect
to any of the other Obligations, Pledgor shall have the right to
vote the Pledged Shares on all corporate questions. Pledgee
shall execute due and timely proxies in favor of Pledgor to this
end.
6. Representations and Warranties of Pledgor.
Pledgor represents and warrants: that Pledgor is the legal and
beneficial owner of the Pledged Shares; that Pledgor has owned
the Pledged Shares for two (2) or more years; that there are no
restrictions on the transfer of any of the Pledged Shares, other
than as may appear on the face of the certificates thereof and
those contained in the Lock-up Agreement; that Pledgor has the
right and power to transfer the Pledged Shares free of any
encumbrances or liens, without obtaining the consents of any
other party or parties; that Pledgor is not now and has never
been an officer or director of the issuer of the Pledged Shares;
and that Pledgor is not now an affiliate (as such term is defined
in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended) of the issuer of the
Pledged Shares.
7. Adjustments. In the event that during the term
of this Agreement, any share dividend, reclassification,
readjustment or other change is declared or made in the capital
structure of the company that has issued the Pledged Shares, all
new, substituted and additional shares, or other securities
issued by reason of any such change with respect to the Pledged
Shares, shall be transferred to and held by Pledgee in the same
manner as the Pledged Shares originally pledged to Pledgee under
this Agreement.
8. Warrants and Rights. In the event that during
the term of this Agreement, subscription warrants or any other
rights or options shall be issued in connection with the Pledged
Shares, such warrants, rights and options shall be immediately
assigned by Pledgee to Pledgor, and if exercised by Pledgor, all
new shares or other securities so acquired by Pledgor as a result
thereof shall be immediately assigned to Pledgee to be held in
the same manner as the Pledged Shares originally pledged under
this Agreement and shall in all respects be subject to the terms
of this Agreement.
9. Payment of Loan. Upon payment in full, at
maturity, of all principal and interest due to Pledgee under the
Note, together with any other amounts due to Pledgee under the
terms of the Note or this Agreement, less amounts received and
applied by Pledgee in reduction of the Loan, and upon full
satisfaction of all of the other Obligations provided for under
this Agreement and the Note, Pledgee shall transfer to Pledgor
all of the Pledged Shares and all rights received by Pledgee as a
result of Pledgee's record ownership of the Pledged Shares and
this Agreement shall terminate. Notwithstanding the above
requirement that the Obligations be satisfied in full prior to
Pledgee's release of its interest in the Pledged Shares under
this Agreement, Pledgee shall extend all reasonable cooperation
to Pledgor in connection with any proposed sale by Pledgor of the
Pledged Shares, provided the proceeds of such sale shall be
applied by Pledgor to repay the Loan in full, together with all
other amounts owed to Pledgee with respect to the Obligations.
10. Default. In the event that Beneficiary
defaults in the performance of any of the material terms of this
Agreement, or on the payment at maturity of the principal or
interest of the Loan, or defaults with respect to any of the
Obligations, Pledgee shall have all of the rights and remedies
provided to it and be subject to the obligations under the
Delaware Uniform Commercial Code with respect to such default or
nonperformance. In this connection, after the Pledged Shares
have been transferred to Pledgee in accordance with Section 1
hereof, Pledgee may, as permitted by the Delaware Uniform
Commercial Code, and without liability for any diminution in
price that may have occurred, sell all of the Pledged Shares in
the manner and for the price that Pledgee may determine upon
fifteen (15) days written notice to both Beneficiary and Pledgor
of the time and place of any public sale or the time after which
any private sale is to be made. At any bona fide public sale,
Pledgee shall be free to purchase all or any part of the Pledged
Shares. Out of the proceeds of any sale of the Pledged Shares,
Pledgee may retain an amount equal to the principal and interest
then due with respect to the Loan under the Note, plus any other
amounts due with respect to the Obligations or otherwise under
the Note, plus the amount of the expenses of the sale, and shall
pay any balance of the proceeds of any sale to Pledgor after
satisfaction of all of the Obligations. If Beneficiary defaults
in the performance of any of the Obligations before the Pledged
Shares have been transferred to Pledgee in accordance with
Section 1 hereof, or if the proceeds of the sale of such Pledged
Shares are insufficient to cover the principal and interest of
the Loan and other amounts due with respect to the Obligations,
including expenses of the sale, Beneficiary shall remain liable
to Pledgee for any deficiency in accordance with applicable
provisions of the Delaware Uniform Commercial Code.
11. Miscellaneous. This Agreement and the Note
shall be governed by and interpreted in accordance with the laws
of the State of Delaware, except as they may be preempted by
federal law. In any action brought or arising out of this
Agreement or the Note, Pledgor, Pledgee and Beneficiary hereby
consent to the jurisdiction of any federal or state court having
proper venue within the State of California and also consent to
the service of process by any means authorized by California or
federal law. The headings used in this Agreement are for
convenience only and shall be disregarded in interpreting the
substantive provisions of this Agreement. Time is of the essence
in each term of this Agreement and the Note. If any provision of
this Agreement or the Note shall be determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable,
that portion shall be deemed severed therefrom and the remaining
parts shall remain in full force as though the invalid, illegal
or unenforceable portion had never been a part thereof. This
Agreement may be executed in one or more counterparts, all of
which, taken together, shall constitute one and the same
Agreement. The Recitals and any Schedules attached to this
Agreement are hereby incorporated into this Agreement by this
reference.
12. Integration; Interpretation. The 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. The Agreement and
the Note shall not be modified except by written instrument
executed by all parties.
13. Further Assurances; Substitution of Collateral.
Beneficiary and Pledgor shall execute, acknowledge and deliver,
upon written request of Pledgee, any and all further documents,
agreements or other instruments, and take such further actions,
as Pledgee may reasonably require for carrying out the purpose
and intent of the covenants set forth in this Agreement. If at
any time, the value of the Pledged Shares declines to such an
extent that in the reasonable opinion of Pledgee such collateral
is inadequate either to secure satisfaction of Beneficiary's
Obligations or to satisfy the requirements of Federal Reserve
Board Regulation G, Pledgee may require Pledgor to substitute
reasonably equivalent collateral for some or all of the Pledged
Shares as security for Beneficiary's satisfaction of the
Obligations, which substituted collateral shall be acceptable to
Pledgee in its sole discretion and shall be subject, in all
respects, to the terms and conditions of this Agreement upon such
substitution. Pledgor shall execute, acknowledge and deliver
such additional documents, agreements and instruments with
respect to such substituted collateral as Pledgee may require,
including without limitation, mortgages, deeds of trust or
financing statements, in form and content sufficient to perfect
Pledgee's security interest in such substituted collateral.
IN WITNESS WHEREOF, Pledgor, Pledgee and Beneficiary
have caused this Agreement to be duly executed as of the date
first written above.
PLEDGOR PLEDGEE
THE IMMUNE RESPONSE
CORPORATION
_____________________________
Kevin B. Kimberlin
By: ___________________
Title: ________________
BENEFICIARY
________________________
Dennis J. Carlo, Ph.D.
<PAGE>
SCHEDULE 1
PLEDGED SHARES
[TO BE COMPLETED BY BENEFICIARY]
No. of Class of Certificate
Issuer Shares Shares No. Date
- ------ ------ -------- ----------- ----
Ciena Corporation ______ Common __________ ____
