Indication of Interest - Immune Response Corp. and Strong River Investments Inc.
INDICATION OF INTEREST
THIS INDICATION OF INTEREST (this "INDICATION") is made as of October
20, 1999 between The Immune Response Corporation, a Delaware corporation (the
"COMPANY"), and the counter signatories hereto on the date of this Indication
(each such signatory is an "OFFEREE" and all such signatories are, collectively,
the "OFFEREES").
WHEREAS, subject to the terms and conditions set forth in this
Indication, the Company desires to offer, from time to time, to the Offerees and
the Offerees would have an interest in receiving one or more offers from the
Company to purchase from the Company shares of the Company's common stock, par
value $.0025 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants contained in this Indication
and for other good and valuable consideration the receipt and adequacy are
hereby acknowledged, the Company and the Offerees agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, the following
terms shall have the meanings set forth in this Section 1.
(a) "AVERAGE PRICE" shall mean the daily volume weighted average price of the
Common Stock on the NASDAQ or a Subsequent Market as reported by Bloomberg
Financial Services, Inc. (or any successor to its function of reporting stock
prices) using the AQR function.
(b) "MATERIAL ADVERSE EFFECT" shall mean any adverse affect on the business,
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole.
(c) "NASDAQ" shall mean the Nasdaq National Market.
(d) "REGISTRATION STATEMENT" shall mean the Company's registration statement
(registration no. 333-83195) on Form S-3, as filed with the Securities and
Exchange Commission (the "Commission") on July 19, 1999, as amended on August
20, 1999 (and all exhibits thereto) and as may be further amended or
supplemented from time to time to reflect the offer of the Shares to the
Offerees pursuant to the terms hereunder and to reflect other changes required
to be included therein by applicable securities laws.
(e) "SETTLEMENT DATE" shall mean the twentieth Trading Day immediately
following a Closing Date (as defined in Section 2(b)).
(f) "SETTLEMENT DATE PRICE" shall mean the product of (i) .94 and (ii) the
average of the Average Prices for the twenty Trading Days during the period
between a Closing Date and the applicable Settlement Date, PROVIDED, that the
number of Trading Days used in the calculation of such average price shall not
include any Trading Days in which the Average Price is less than $4.00
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and a pro rata of the Trading Days in which the average price is less than $4
out of the twenty Trading Days will be deducted from the aggregate Purchase
Price.
(g) "SHARES" shall mean, collectively, the shares of Common Stock which may be
offered from time to time pursuant to the terms hereof.
(h) "SUBSEQUENT MARKET" shall mean either the New York Stock Exchange, the
American Stock Exchange or the Nasdaq SmallCap Market.
(i) "TRADING DAY" means (a) a day on which the Common Stock is traded on the
NASDAQ or on the Subsequent Market on which the Common Stock is then listed or
quoted, as the case may be, or (b) if the Common Stock s not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
2. PRICING AND ADJUSTMENT.
(a) Subject to the terms and conditions set forth herein, for a period of twelve
(12) months from the date hereof, the Offerees, severally and not jointly, would
be interested in receiving one or more offers by the Company to acquire Shares
for an aggregate purchase price of up to Thirty Million Dollars ($30,000,000) at
a per Share purchase price equal to the Average Price on the applicable offer
date (the "PURCHASE PRICE").
(b) During the twelve (12) months from the date hereof, the Company may offer to
the Offerees from time to time Shares (the "OFFER(S)") by delivering to the
Offerees a written offer indicating the aggregate Purchase Price for Shares
offered pursuant to such Offer ("OFFER NOTICE"), PROVIDED, that, the Company may
not deliver more than one (1) Offer Notice during any thirty (30) day period.
The closing of each accepted Offer shall take place two (2) Trading Days
following the indication in writing of an Offeree of its acceptance to purchase
its pro-rata portion of the Shares subject to an Offer (the "CLOSING DATE").
(c) If the Average Price on the Trading Day immediately preceding the receipt by
the Offerees of the respective Offer Notice shall (i) be less than $5.50, then
the aggregate Purchase Price of the applicable Offer shall be Three Million
Dollars ($3,000,000), (ii) be between $5.50 and $6.00, then the aggregate
Purchase Price of the applicable Offer shall be Three Million Five Hundred
Thousand Dollars ($3,500,000) and (iii) exceed $6.00, then the aggregate
Purchase Price of the applicable Offer shall be Four Million Dollars
($4,000,000).
(d) The closing of each accepted Offer shall take place on the applicable
Closing Date at the offices of Pillsbury Madison & Sutro LLP, 235 Montgomery
Street, San Francisco, CA 94104. At each Closing Date, the Company will deliver
stock certificates registered in the name of each
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Offeree representing the Shares to be sold to such Offeree and each Offeree
shall deliver the Purchase Price for the Shares being purchased by it in United
States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose. An Offeree shall have the
option to require the Company to deliver the Shares purchased by it to The
Depositary Trust Company on such Offeree's behalf.
(e) If on any Settlement Date, (i) the Purchase Price shall exceed the
Settlement Date Price, then the Company shall issue to each Offeree, on a pro
rata basis, a number of Shares equal to the quotient obtained by dividing (A)
the number of Shares purchased at the Closing Date multiplied by the difference
between the Purchase Price and the Settlement Date Price by (B) the Average
Price on the Settlement Date and (ii) the Settlement Price shall exceed the
Purchase Price, then each Offeree shall pay to the Company a sum equal to the
product of (A) the number of Shares acquired by such Offeree at the applicable
Offer and (B) the difference between the Purchase Price and the Settlement Date
Price.
(f) On a Settlement Date, each Offeree shall have the right, on a pro rata
basis, to increase the amount of the applicable Offer by an aggregate of up to
$2,500,000 (the "ADDITIONAL AMOUNT"). In such event, the number of Shares
subject to the applicable Offer Notice shall be increased by a number equal to
the quotient obtained by dividing the Additional Amount by the Settlement Date
Price.
(g) All stock prices referred to herein are subject to equitable adjustment for
stock splits, recapitalizations and similar events.
3. FILING OF SUPPLEMENTS TO THE REGISTRATION STATEMENT. It shall be a condition
to the Offerees' acceptance of any Offer that, on or prior to each Closing Date,
the Company shall file with the Commission a supplement to the Registration
Statement or prospectus thereto in order to evidence the offer of the Shares to
the Offerees pursuant to the terms hereto. On each Settlement Date, the Company
shall file with the Commission a supplement to the Registration Statement or
prospectus thereto in order to evidence the offer, if any, of additional Shares
to the Offerees pursuant to Sections 2(e) and (f) hereunder.
4. CONDITIONS PRECEDENT. The Company understands that the Offerees will not
accept any Offer to purchase Shares pursuant to an Offer Notice unless each of
the following conditions is satisfied or waived by the appropriate Offeree:
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true and
correct as of the applicable Closing Date as if first made on such date;
(b) REGISTRATION STATEMENT. The Registration Statement shall have remained
effective under the Securities Act of 1933, as amended (the "Securities Act") at
all times, not subject to any actual or threatened stop order or subject to any
actual or threatened suspension at any time prior to the applicable Closing
Date;
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(c) ADVERSE CHANGES . Since the date hereof, no event or series of events which
reasonably would have or result in a Material Adverse Effect shall have
occurred;
(d) NO SUSPENSIONS OF TRADING IN COMMON STOCK . Trading in the Common Stock
shall not have been suspended by the Commission, the NASDAQ or a Subsequent
Market at any time since the date hereof;
(e) LISTING OF COMMON STOCK . The Common Stock shall have been at all times
since the date hereof listed for trading on the NASDAQ or a Subsequent Market;
(f) SHAREHOLDER APPROVAL . No approval of the shareholders of the Company shall
be required under the rules of the Nasdaq Stock Market or a Subsequent Market on
which the Common Stock is then traded or listed for trading in order to issue
all of the Shares hereunder.
5. FEES. Concurrently with the execution of this Indication, the Company shall
reimburse the Offerees $25,000 of their out of pocket expenses incurred in
connection with the negotiation and preparation of this Indication. Other than
the amount contemplated in the immediately preceding sentence, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Indication.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. the Company
represents, warrants and covenants to each Offeree as follows:
(a) The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as currently conducted, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure to register or qualify could not,
individually or in the aggregate, have a Material Adverse Effect;
(b) The Company is current in all of its reporting obligations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and has timely
made all filings required thereunder. The financial statements of the Company
included in the Registration Statement comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
(c) The Company has furnished each Offeree with copies of the Registration
Statement. At the time of their respective filing and on the date hereof, the
Registration Statement did and do
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not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading;
(d) The Shares have been duly reserved for issuance for the Offerees, are duly
authorized and validly issued and when issued and delivered against payment
therefor, will be fully paid and nonassessable;
(e) The execution, delivery and performance of this Indication by the Company
and the consummation by the Company of the transactions contemplated hereby do
not and will not (i) conflict with or violate any provision of its certificate
of incorporation, bylaws or other charter documents, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, loan, credit facility, indenture or instrument (with
respect to such indentures and instruments, evidencing a Company debt or
otherwise) to which the Company or any subsidiary thereof is a party or by which
any property or asset of the Company or any subsidiary thereof is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(f) Except as disclosed herein, no authorization, approval, filing with or
consent of any governmental body is required for the issuance and sale of the
Shares;
(g) Since September 30, 1999, the Company has not incurred any material
liabilities or material obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and there has not
been any change in its capitalization or any Material Adverse Effect, except as
set forth on Schedule A hereto; and
(h) The Company has sufficient title and ownership of all trademarks, service
marks, trade names, copyrights, patents, trade secrets and other proprietary
rights necessary for its business as now conducted and as proposed to be
conducted as described in the Registration Statements without any conflict with
or infringement of the rights of others.
7. CERTAIN TRADING RESTRICTIONS. Each Offeree warrants and represents for itself
and for no other Offeree that it has no established short position in the Common
Stock on the date of this Indication and has not had any short position in the
securities of the Company at any time during the twelve months prior to the date
of this Indication. From and after first Closing Date and during the period in
which Company is permitted to offer Shares to the Offerees pursuant to the terms
hereof, each Offeree agrees for itself that it will not enter into any Short
Sales (as hereinafter defined). For purposes of this Section, a "Short Sale" by
an Offeree shall mean a sale of Common Stock by an Offeree that is marked as a
short sale and that is made at a time when there is no equivalent offsetting
long position in the Common Stock held by such Offeree. For purposes of
determining whether there is an equivalent offsetting long position in the
Common Stock held by an Offeree on any date of computation, shares of Common
Stock actually held by the Offeree and Shares of
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Common Stock that are issuable by operation of Section 2 hereof shall be
considered held long by such Offeree; however, shares of Common Stock that are
issuable pursuant to convertible or exchangeable share of preferred stock or
debt of the Company shall not be considered held long.
8. PUBLICITY. Neither the Company nor any Offeree shall issue any press release
or make any other public announcement relating to this Indication which has not
been mutually agreed to by the Company and each Offeree.
9. GOVERNING LAW. This Indication shall be governed by and interpreted in
accordance with the laws of the State of New York without giving effect to the
rules governing the conflicts of laws. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the city
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein and hereby irrevocably waives and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Indication and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
10. NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or facsimile, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section.
if to the Company:
The Immune Response Corporation
5935 Darwin Court
Carlsbad, CA 92008
Attn: Howard Sampson
Vice President, Finance, Chief
Financial Officer, Treasurer
And Secretary
Telephone: (760) 431-7080
Facsimile: (760) 431-9420
if to a Offeree: to the address indicated under such Offeree's
name on the signature pages hereto
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three (3) business days
after being deposited in the mail, postage prepaid, if mailed; the next business
day after being deposited with an overnight courier, if deposited with a
nationally recognized, overnight courier service; when receipt is acknowledged,
if sent by facsimile.
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11. ENTIRE UNDERSTANDING. This Indication constitutes the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior oral or written relating thereto.
12. COUNTERPARTS. This Indication may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Indication of Interest was duly executed on
the date first written above.
THE IMMUNE RESPONSE CORPORATION
By: /s/ Howard Sampson
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Name: Howard Sampson
Title: Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary
[REMAINDER OF PAGE LEFT BLANK
SIGNATURE PAGES FOR OFFEREES FOLLOWS]
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STRONG RIVER INVESTMENTS, INC.
By: /s/ Keith L. Hernandez
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Name: Keith L. Hernandez
Title: Attorney-In-Fact
Address for Notice:
Strong River Investments, Inc.
c/o Cavallo Capital Corp.
505 Park Avenue
New York, NY 10022
Facsimile No.: (212) 651-9010
Attn: Avi Vigder
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen. Esq.
[REMAINDER OF PAGE LEFT BLANK
SIGNATURE PAGE FOR ADDITIONAL OFFEREE FOLLOWS]
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SCHEDULE A
DISCLOSURE SCHEDULE
As part of a Securities Purchase Agreement, dated April 24, 1998
between the Company and Themis Partners, L.P., Heracles Fund, Brown Simpson
Strategic Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P. and
any successors thereto, (the "Buyers") (the "Agreement") the Company has an
obligation to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
cover the conversion of the Series F Convertible Preferred Stock issued under
the Agreement into shares of Common Stock. The Company has not yet registered
approximately 850,000 shares of Common Stock needed to remain in compliance with
that obligation. The Company is currently in discussions with the Buyers
regarding the registration of such additional shares and of the possibility of
obtaining a waiver to such obligation.
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