-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GASQZxneSO+GF1UqxrT3a6+rGym58WgrNHqf99/J58bsJUiZIp6SGHOeimtCN6+l 00pBPUngEbWYPthy8WsSpQ== 0000898432-02-000826.txt : 20021121 0000898432-02-000826.hdr.sgml : 20021121 20021121105843 ACCESSION NUMBER: 0000898432-02-000826 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20021121 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNE RESPONSE CORP CENTRAL INDEX KEY: 0000817785 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 330255679 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41038 FILM NUMBER: 02835630 BUSINESS ADDRESS: STREET 1: 5935 DARWIN COURT CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 6194317080 MAIL ADDRESS: STREET 1: 5935 DARWIN COURT CITY: CARLSBAD STATE: CA ZIP: 92008 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KIMBERLIN KEVIN CENTRAL INDEX KEY: 0000904841 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: SPENCER TRASK SECURITIES INC STREET 2: 535 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123555565 SC 13D/A 1 kk-new13da.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A 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 & Co. 535 Madison Avenue, 18th Floor New York, New York 10022 Tel: (212) 355-5565 Fax: 212-751-3483 DATES OF EVENT WHICH REQUIRES FILING: May 3, 2002, June 24, 2002, July 11, 2002, July 30, 2002 and November 12, 2002 If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ x ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) 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). CUSIP NO.: 45252T10 1. NAME OF REPORTING PERSON: Kevin B. Kimberlin 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) (b) x 3. SEC USE ONLY 4. SOURCE OF FUNDS: AF 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): Yes No X 6. CITIZENSHIP OR PLACE OF ORGANIZATION: UNITED STATES 7. SOLE VOTING POWER: 18,211,486 shares 8. SHARED VOTING POWER: 8,750 shares 9. SOLE DISPOSITIVE POWER: 18,211,486 shares 10. SHARED DISPOSITIVE POWER: 8,750 shares 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 18,220,236 shares 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: Yes No x 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 66.0% 14. TYPE OF REPORTING PERSON: IN THE NUMBER OF SHARE AND PRICE PER SHARE AMOUNTS SET FORTH IN THIS FORM HAVE BEEN CALCULATED TO TAKE INTO ACCOUNT THE EFFECTS OF THE 1 FOR 4 REVERSE STOCK SPLIT EFFECTED ON OR ABOUT OCTOBER 9, 2002 BY THE ISSUER. 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 & Co., 535 Madison Avenue, New York, New York 10022. (c) Mr. Kimberlin's present principal occupations are Chairman of Spencer Trask & Co. 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 On November 9, 2001, the Company entered into a note purchase agreement (the "Note Purchase Agreement"), with Kevin Kimberlin Partners, L.P. ("KKP") which was subsequently amended to add Oshkim Limited Partnership ("Oshkim"), The Kimberlin Family 1998 Irrevocable Trust (the "Kimberlin Trust") and Cheshire Associates LLC ("Cheshire") as parties, and provided for the sale of notes and warrants in multiple-stage private placements. Mr. Kevin Kimberlin, a member of the Company's Board of Directors, is an affiliate and/or related party of each of KKP, Oshkim, the Kimberlin Trust and Cheshire. At the initial closing on November 9, 2001 (the "November Financing"), the Company issued to KKP a note convertible initially into 433,426 shares of Common Stock and a warrant to purchase initially 433,426 shares of Common Stock in exchange for gross proceeds of $2.0 million. At a subsequent closing on February 14, 2002 (the "February Financing"), the Company issued to Oshkim a note which is convertible initially into 429,000 shares of Common Stock and a warrant to purchase 429,000 initially shares of Common Stock in exchange for gross proceeds of $2.0 million. After the November Financing but before the February Financing, the Company had several discussions with the staff of the NASD with respect to the staff's concern about whether the Company was in compliance with certain NASD rules requiring stockholder approval for certain types of financing arrangements. As a result of these discussions, the Company, KKP and Oshkim entered into certain amendments to the Note Purchase Agreement and the Company thereafter sought the approval by its stockholders of the Company's financing arrangements with Mr. Kimberlin's affiliates. At a special meeting of the Company's stockholders held on April 2, 2002 ("April 2 Meeting"), the November and February Financings, as well as potential future financings by Mr. Kimberlin's affiliates pursuant to the Note Purchase Agreement, were approved by the Company's stockholders. Pursuant to the Note Purchase Agreement, as approved by the Company's stockholders, the Company issued: o to Oshkim, on May 3, 2002, a promissory note convertible initially into 2,319,109 shares of common stock and a warrant exercisable initially for up to 2,319,109 additional shares of common stock in exchange for gross proceeds of $4.0 million (the "May Financing"); o to Oshkim, on June 24, 2002, a promissory note convertible initially into 523,451 shares of common stock and a warrant initially exercisable for up to 523,451 additional shares of common stock in exchange for gross proceeds of $1.0 million (the "June Financing"); o to the Kimberlin Trust, an entity affiliated with Mr. Kimberlin, on July 11, 2002, a promissory note convertible initially into 354,858 shares of common stock and a warrant exercisable for up to 354,858 additional shares of common stock in exchange for gross proceeds of $566,638 (the "First July Financing"); o to the Kimberlin Trust on July 30, 2002, a promissory note convertible initially into 430,068 shares of common stock and a warrant exercisable initially for up to 430,068 additional shares of common stock in exchange for gross proceeds of $637,189 (the "Second July Financing"); and o to Cheshire on November 12, 2002, a promissory note convertible initially into 4,243,354 shares of common stock and a warrant exercisable initially for up to 4,243,354 additional shares of common stock in exchange for gross proceeds of $4,849,453.79 (the "November 2002 Financing"). The notes and warrants issued in the November, February, May, June and July Financings have been contributed by KKP, Oshkim and the Kimberlin Trust (as applicable) to Cheshire. Up to $2.0 million of the notes issued to Oshkim and the Kimberlin Trust in the June, First July and Second July Financings, and contributed to Cheshire, is convertible, at the sole option of Cheshire, in whole or in part, into units to be sold by the Company as part of a contemplated private offering of units comprised of the Issuer's common stock and warrants. Item 4. Purpose of Transaction The Company's management and Board of Directors determined that the Company should raise additional capital through the sale of equity securities to address its short-term working capital needs. Kevin B. Kimberlin, a member of the Company's Board of Directors and related partners of each of KKP, Oshkim, the Kimberlin Trust and Cheshire, decided to finance the Company when it was unable to obtain financing on acceptable terms. In a multiple-stage private placement, notes convertible into Common Stock and warrants to purchase Common Stock were acquired by KKP, Oshkim, the Kimberlin Trust and Cheshire. Similar notes and warrants may be sold to KKP, Oshkim, the Kimberlin Trust, Cheshire and/or other related parties of Mr. Kimberlin in subsequent closings pursuant to the Note Purchase Agreement. Mr. Kimberlin and his related entities will consider providing limited debt financing to the Company for the 30 to 60 day period following the date of this filing. However, if and to the extent the Company shall be unable to achieve, during that period of time, the cost reductions contemplated by the restructuring program commenced by it in September 2002, Mr. Kimberlin and his related entities presently expect to cease providing funds to the Company immediately thereafter. If this were to occur, and/or the Company's current private offering of units is not successfully completed prior to the cessation of funding by Mr. Kimberlin and his related entities to the Company, Mr. Kimberlin and his related entities, which are secured lenders to the Company, may seek to cause the Company to seek protection from its creditors under the United States Bankruptcy Code. Spencer Trask Ventures, Inc., the placement agent for the Company's current private offering of units, and also an entity related to Mr. Kimberlin, has indicated that if the offering is not successfully completed on or prior to November 29, 2002, it will need to re-evaluate its efforts in connection with the financing. Such re-evaluation could result in the private offering being terminated. Mr. Kimberlin does not have any plans or proposals which relate to or would result in any of the following: (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 9,897,887 shares outstanding, which is the total number of shares of Common Stock outstanding as of November 12, 2002, as represented by the Company. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, based on voting and investment power with respect to shares. Shares of common stock subject to options, notes or warrants currently exercisable, or exercisable within 60 days after November 12, 2002, are deemed outstanding for computing the percentage ownership of Mr. Kimberlin, but are not deemed outstanding for computing the percentage ownership of any other person. As of the date of this statement, Mr. Kimberlin is the beneficial owner of 18,214,355 shares of Common Stock, which represented approximately 66.0% of the issued and outstanding number of shares of Common Stock as of November 11, 2002. Mr. Kimberlin's spouse held 8,750 shares of Common Stock; a retirement account for the benefit of Mr. Kimberlin held 4,000 shares of Common Stock; Kimberlin Family Partners, L.P., a Colorado limited partnership, of which Mr. Kimberlin is the general partner, held 56,979 shares of Common Stock; Kevin Kimberlin Partners, L.P., of which the general partner is KKP Management LLC, a Nevada limited liability company, of which Mr. Kimberlin is the managing member, held 448,717 shares of Common Stock. Additionally, Mr. Kimberlin can be deemed to be the beneficial owner of (a) 433,426 shares of Common Stock issuable on conversion of the promissory note issued to KKP at the November Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (b) 433,426 shares of Common Stock issuable on exercise of the warrant issued to KKP at the November Financing and subsequently contributed to Cheshire, (c) 429,000 shares of Common Stock issuable on conversion of the promissory note issued to Oshkim at the February Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (d) 429,000 shares of Common Stock issuable on exercise of the warrant issued to Oshkim at the February Financing and subsequently contributed to Cheshire, (e) 2,319,109 shares of Common Stock issuable on conversion of the promissory note issued to Oshkim at the May Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (f) 2,319,109 shares of Common Stock issuable on exercise of the warrant issued to Oshkim at the May Financing and subsequently contributed to Cheshire, (g) 523,451 shares of Common Stock issuable on conversion of the promissory note issued to Oshkim at the June Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (h) 523,451 shares of Common Stock issuable on exercise of the warrant issued to Oshkim at the June Financing and subsequently contributed to Cheshire, (i) 354,858 shares of Common Stock issuable on conversion of the promissory note issued to the Kimberlin Trust at the First July Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (j) 354,858 shares of Common Stock issuable on exercise of the warrant issued to the Kimberlin Trust at the First July Financing and subsequently contributed to Cheshire, (k) 430,068 shares of Common Stock issuable on conversion of the promissory note issued to the Kimberlin Trust at the Second July Financing and subsequently contributed to Cheshire (plus shares issuable upon conversion of the accrued interest on the note), (l) 430,068 shares of Common Stock issuable on exercise of the warrant issued to the Kimberlin Trust at the Second July Financing and subsequently contributed to Cheshire, (m) 4,243,354 shares of Common Stock issuable on conversion of the promissory note issued to Cheshire at the November 2002 Financing and (n) 4,243,354 shares of Common Stock issuable on exercise of the warrant issued to Cheshire at the November 2002 Financing. Upon the exercise of options, 44,931 shares may be acquired by Mr. Kimberlin currently or within 60 days after November 12, 2002. Mr. Kimberlin, as of November 12, 2002, may be deemed to be the beneficial owner of 18,214,355 shares representing 66.0% of the class, based on the 9,897,887 shares of Common Stock outstanding as of November 12, 2002. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, based on voting and investment power with respect to shares. Shares of common stock subject to options, notes or warrants currently exercisable, or exercisable within 60 days after November 12, 2002, are deemed outstanding for computing the percentage ownership of Mr. Kimberlin, but are not deemed outstanding for computing the percentage ownership of any other person. Shares of common stock issuable upon conversion of accrued interest as of November 12, 2002 on promissory notes held by Cheshire have been included in the calculation of Mr. Kimberlin's beneficial ownership. (b) Mr. Kimberlin has the sole power to vote and dispose of all shares of Common Stock beneficially owned by him, other than in respect of the 8,750 shares of Common Stock held by his spouse. (c) See Item 6 below. (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 The notes issued pursuant to the Note Purchase Agreement accrue interest at a rate of 8% per year. The notes issued in the May, June, July and November 2002 Financings will mature on the three-year anniversary of their respective issuance dates. The initial conversion price for the shares of Common Stock issued upon conversion of the note issued (i) at the May Financing is $1.728 per share, (ii) at the June Financing is $1.9104, (iii) at the First July Financing if $1.5968, (iv) at the Second July Financing is $1.1852 and (v) at the November 2002 Financing is $1.1424. The principal and any accrued and unpaid interest on any notes issued in any subsequent closing shall initially be convertible into Common Stock at a price per share equal to 80% of the average closing bid prices for Common Stock for the ten consecutive trading days ending the trading day prior to the date such additional note is issued. The conversion price of the notes shall adjust for stock splits, recapitalizations, recombinations, and stock dividends. The conversion price of the notes shall also be reduced pursuant to a fully-weighted average adjustment in the event the Company issues certain securities without consideration or for a consideration per share of less than the then-applicable conversion price of such note. The initial purchase price for the shares of Common Stock issuable upon exercise of the warrant issued (i) at the May Financing is $2.16 per share, (ii) at the June Financing is $2.388 per share, (iii) at the First July Financing is $1.996, (iv) at the Second July Financing is $1.4816 and (v) at the November 2002 Financing is $1.428. At each subsequent closing pursuant to the Note Purchase Agreement, Cheshire (or another entity related to Mr. Kimberlin) may receive additional warrants. The number of shares of Common Stock that may be purchased upon exercise of an additional warrant shall equal the face value of the corresponding note issued in the subsequent closing divided by the initial conversion price of such note. The exercise price of the additional warrant shall equal the average of the closing bid prices for the Common Stock for the ten consecutive trading days ending the trading day prior to the date the corresponding note is issued. The exercise price of the warrants shall adjust for stock splits, recapitalizations, recombinations, and stock dividends. The exercise price of the warrants shall also be reduced pursuant to a fully-weighted average adjustment in the event the Company issues certain securities without consideration or for a consideration per share of less than the then-applicable exercsie price of such warrant. Additionally, if the average of the closing bid prices of Common stock for any ten consecutive trading days is less than 75% of the then effective exercise price of a warrant (the "Adverse Market Price"), then the exercise price of the warrant will adjust to that ten-day average closing price. The number of shares issuable on exercise of the warrants will not be adjusted in connection with this adjustment to the purchase price. To exercise at the adjusted ten-day average closing price, Cheshire must give a notice to the company during a period in which the ten-day average closing price remains equal to or below the Adverse Market Price and pay the exercise price to the Company within five days of the delivery of the notice. On November 9, 2001, the Company entered into an Intellectual Property Security Agreement (the "Security Agreement") with KKP to secure the notes and warrants to be issued pursuant to the Note Purchase Agreement. On February 14, 2002, the Company, KKP and Oshkim entered into Amendment No. 1 to the Security Agreement to add Oshkim as a party. On July 11, 2002, the Company, KKP, Oshkim and the Kimberlin Trust entered into Amendment No. 2 to the Security Agreement to add the Kimberlin Trust and any affiliates of the foregoing as parties. Pursuant to the Security Agreement, the Company granted to KKP, Oshkim, the Kimberlin Trust and Cheshire a prior security interest in all of its rights to its trademarks, patents, trademark licenses, and patent licenses (unless prohibited expressly by the terms of the license), and any related proceeds from its trademarks or patents. The Security Agreement prohibits the Company from entering into any license agreement that is inconsistent with the Security Agreement or is reasonably likely to have a material adverse effect on the security interests held by KKP, Oshkim, the Kimberlin Trust and Cheshire. The Security Agreement also restricts the Company's ability to sell or assign an interest in the patents, trademarks, patent licenses, or trademark licenses absent the prior written consent of KKP, Oshkim, the Kimberlin Trust and Cheshire. The Security Agreement further provides that the Company will take steps to preserve its rights in the patents, the trademarks, the patent licenses and the trademark licenses. The Company and certain of Mr. Kimberlin's affiliates and/or related parties have entered into an intercreditor agreement with Transamerica Finance Corporation ("Transamerica") providing for, among other things, the sharing of proceeds with Transamerica in the event that such affiliates and/or related parties of Mr. Kimberlin exercise certain rights and/or remedies in the event of default by the Company. After the Second July Financing, the staff of the NASD informed the Company that the Company had not properly obtained stockholder approval in accordance with NASD Rule 4350(i) at the April 2 Meeting for the May, June and July Financings and potential future financings under the Note Purchase Agreement. On August 8, 2002, to address Nasdaq's concerns regarding whether the Company was compliant with NASD Rule 4350(i), the Company entered into a Letter Agreement with Oshkim and the Kimberlin Trust (the "Letter Agreement"). The Letter Agreement provides that from its date of execution until the receipt of stockholder approval of the transactions under the Note Purchase Agreement, neither Oshkim nor the Kimberlin Trust would vote, sell, pledge, offer, dispose of or transfer any of the shares of Common Stock issuable upon conversion of the notes issued in the May, June or July Financings or exercise of the warrants issued in the May, June or July Financings. As a result of the NASD staff's position, at a special meeting of its stockholders on October 28, 2002, the Company sought and received the re-approval by its stockholders of the May, June, First July and Second July Financings. Item 7. Material to be Filed as Exhibits 99.1 8% Convertible Secured Promissory Note, dated May 3, 2002, issued by the Company in favor of Oshkim. 99.2 Warrant Agreement, dated May 3, 2002, between Oshkim and the Company. 99.3 Amendment No. 2 to Note Purchase Agreement, dated May 3, 2002, between KKP, Oshkim and the Company. 99.4 8% Convertible Secured Promissory Note, dated June 24, 2002, issued by the Company in favor of Oshkim. 99.5 Warrant Agreement, dated June 24, 2002, between Oshkim and the Company. 99.6 8% Convertible Secured Promissory Note, dated July 11, 2002, issued by the Company in favor of the Kimberlin Trust. 99.7 Warrant Agreement, dated July 11, 2002, between the Kimberlin Trust and the Company. 99.8 Amendment No. 3 to Note Purchase Agreement, dated July 11, 2002, between KKP, Oshkim, the Kimberlin Trust and the Company. 99.9 Amendment No. 2 to Intellectual Property Security Agreement, dated July 11, 2002, between KKP, Oshkim, the Kimberlin Trust and the Company. 99.10 8% Convertible Secured Promissory Note, dated July 30, 2002, issued by the Company in favor of the Kimberlin Trust. 99.11 Warrant Agreement, dated July 30, 2002, between the Kimberlin Trust and the Company. 99.12 Letter Agreement, dated August 8, 2002, between Oshkim, the Kimberlin Trust and the Company. 99.13 8% Convertible Secured Promissory Note, dated November 12, 2002, issued by the Company in favor of Cheshire. 99.14 Warrant Agreement, dated November 12, 2002, between Cheshire and the Company. 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. November 20, 2002 /s/ Kevin B. Kimberlin ----------------------- Kevin B. Kimberlin EXHIBIT INDEX 99.1 8% Convertible Secured Promissory Note, dated May 3, 2002, issued by the Company in favor of Oshkim. 99.2 Warrant Agreement, dated May 3, 2002, between Oshkim and the Company. 99.3 Amendment No. 2 to Note Purchase Agreement, dated May 3, 2002, between KKP, Oshkim and the Company. 99.4 8% Convertible Secured Promissory Note, dated June 24, 2002, issued by the Company in favor of Oshkim. 99.5 Warrant Agreement, dated June 24, 2002, between Oshkim and the Company. 99.6 8% Convertible Secured Promissory Note, dated July 11, 2002, issued by the Company in favor of the Kimberlin Trust. 99.7 Warrant Agreement, dated July 11, 2002, between the Kimberlin Trust and the Company. 99.8 Amendment No. 3 to Note Purchase Agreement, dated July 11, 2002, between KKP, Oshkim, the Kimberlin Trust and the Company. 99.9 Amendment No. 2 to Intellectual Property Security Agreement, dated July 11, 2002, between KKP, Oshkim, the Kimberlin Trust and the Company. 99.10 8% Convertible Secured Promissory Note, dated July 30, 2002, issued by the Company in favor of the Kimberlin Trust. 99.11 Warrant Agreement, dated July 30, 2002, between the Kimberlin Trust and the Company. 99.12 Letter Agreement, dated August 8, 2002, between Oshkim, the Kimberlin Trust and the Company. 99.13 8% Convertible Secured Promissory Note, dated November 12, 2002, issued by the Company in favor of Cheshire. 99.14 Warrant Agreement, dated November 12, 2002, between Cheshire and the Company. EX-99 3 exhibitone.txt EXHIBIT 99.1 EXHIBIT 99.1 ------------ THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE IMMUNE RESPONSE CORPORATION 8% CONVERTIBLE SECURED PROMISSORY NOTE -------------------------------------- $4,000,000 New York, New York May 3, 2002 FOR the receipt of $1,980,712.33 in cash and the cancellation of $2,000,000 of principal indebtedness plus $19,287.67 interest represented by the 8% Secured Promissory Note dated March 20, 2002 from the Issuer to the Purchaser (as defined below), the undersigned, The Immune Response Corporation, a Delaware corporation (the "Issuer"), hereby unconditionally promises to pay on the Note Maturity Date (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between the Purchaser, Kevin Kimberlin Partners, L.P., a Delaware limited partnership, and the Issuer, and as amended as of February 14, 2002 and further amended as of May 3, 2002 (the "Note Purchase Agreement")) to the order of Oshkim Limited Partnership, a Delaware limited partnership (the "Purchaser"), at the office of the Purchaser located at 535 Madison Avenue, 18th Floor, New York, New York 10022, or such other address designated by the Purchaser, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) Four Million Dollars ($4,000,000) or (b) if less as a result of any voluntary conversion(s) of this Note in part in accordance with Section 3.4 of the Note Purchase Agreement, the aggregate unpaid principal amount of this Note. Subject to Section 3.4 of the Note Purchase Agreement, the Issuer further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time, from the date hereof, in like money, at the rate of eight (8%) percent per annum, as and at the dates specified in Section 3.3 of the Note Purchase Agreement. This Note is one of the promissory notes referred to in the Note Purchase Agreement, and is entitled to the benefits thereof, is secured as provided therein (and as provided in that certain Intellectual Property Security Agreement, dated November 9, 2001, executed by the Issuer and as amended as of February 14, 2002) and is subject to conversion as set forth therein. In the event of any conflict between the Note Purchase Agreement and this Note, the terms and provisions of the Note Purchase Agreement shall govern. Upon the occurrence of any one or more of the Events of Default specified in the Note Purchase Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Note Purchase Agreement. Subject to the provisions of the legend above, this Note is freely transferable, in whole or in part, by the Purchaser, and such transferee shall have the same rights hereunder as the Purchaser. The Issuer may not assign or delegate any of its obligations under this Note without the prior written consent of the Purchaser (or its successor, transferee or assignee). All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Subject to Section 3.3 of the Note Purchase Agreement, the Issuer agrees to pay all of the Purchaser's expenses, including reasonable attorneys' costs and fees, incurred in collecting sums due under this Note. This Note shall be subject to prepayment only in accordance with the terms of the Note Purchase Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE IMMUNE RESPONSE CORPORATION By:__________________________ Name:______________________ Title:_____________________ -2- EX-99 4 exhibittwo.txt EXHIBIT 99.2 EXHIBIT 99.2 ------------ WARRANT AGREEMENT ----------------- WARRANT AGREEMENT (this "Agreement"), dated as of May 3, 2002, by and between The Immune Response Corporation, a Delaware corporation (the "Company"), and Oshkim Limited Partnership, a Delaware limited partnership (the "Warrant Holder"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the parties have entered into that certain Note Purchase Agreement, dated as of November 9, 2001, by and between the Company and Kevin Kimberlin Partners, L.P., as amended by Amendment No. 1 to the Note Purchase Agreement dated as of February 14, 2002 and Amendment No. 2 dated as of May 3, 2002, each by and between the Company, Kevin Kimberlin Partners, L.P. and the Warrant Holder (the "Note Purchase Agreement"); and WHEREAS, pursuant to the Note Purchase Agreement, the Warrant Holder has agreed to loan to the Company Four Million ($4,000,000) Dollars (the "Loan Amount"), subject to the issuance by the Company of a convertible secured promissory note (the "Note"), and the Company has agreed to issue to the Warrant Holder warrants (the "Warrants") to purchase 9,276,437 shares of the Company's common stock, par value $.0025 per share (the "Common Stock"), which equals the Loan Amount divided by eighty (80%) percent of the Exercise Price (as defined in Section 1 hereof), subject to the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. WARRANTS. The Company hereby grants to the Warrant Holder, subject to the terms set forth herein, the right to purchase from the Company at any time and from time to time after the date hereof until 5:00 p.m., New York City local time, on May 3, 2012 (the "Expiration Date"), up to 9,276,437 fully paid and non-assessable shares of Common Stock, subject to adjustment pursuant to Section 3 hereof (the "Shares"), which number of Shares equals the Loan Amount divided by eighty (80%) percent of the Exercise Price. Notwithstanding the foregoing, the Warrants shall only be exercisable to the extent that shares of Common Stock issuable on exercise of the Warrants, when aggregated with (i) the Company's outstanding shares of Common Stock as of the date hereof and (ii) shares of Common Stock issuable on conversion or exercise, as the case may be, of notes, warrants and stock options outstanding as of the date hereof, would not exceed the number of shares authorized under the Company's Restated Certificate of Incorporation, as amended. The Company shall promptly cause its Restated Certificate of Incorporation, as amended, to be further amended to increase the number of shares of Common Stock authorized thereunder as shall be sufficient for reserving and making available shares of Common Stock issuable upon the exercise in full of the Warrants issued to the Warrant holder hereunder. For purposes of this Agreement, the "Exercise Price" shall initially be $0.54, which is equal to the average of the closing bid prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date hereof, subject to any adjustments pursuant to Section 3 hereof. 2. EXERCISE OF WARRANTS. 2.1 EXERCISE. The Warrants may be exercised by the Warrant Holder, in whole or in part, by delivering the Notice of Exercise purchase form, attached as EXHIBIT A hereto, duly executed by the Warrant Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer or check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the "Purchase Price"). The Purchase Price may also be paid, in whole or in part, by delivery of such purchase form and of shares of Common Stock owned by the Warrant Holder having a Fair Market Value (as defined in Section 2.3 hereof) on the last trading day ending the day immediately preceding the Exercise Date (as defined below) equal to the portion of the Purchase Price being paid in such shares. In addition, the Warrants may be exercised, pursuant to a cashless exercise, except as set forth in Section 3.3(4) below, by providing irrevocable instructions to the Company, through delivery of the aforesaid purchase form with an appropriate reference to this Section 2.1 to issue the number of shares of the Common Stock equal to the product of (a) the number of shares as to which the Warrants are being exercised multiplied by (b) a fraction, the numerator of which is the Fair Market Value of a share of the Common Stock on the last business day preceding the Exercise Date less the Exercise Price therefore and the denominator of which is such Fair Market Value. For purposes hereof, "Exercise Date" shall mean the date on which all deliveries required to be made to the Company upon exercise of Warrants pursuant to this Section 2.1 shall have been made. 2.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of the Warrants (in whole or in part) in accordance with Section 2.1 hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Warrant Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of the Warrants not exercised by the Warrant Holder. The Warrant Holder shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2.1 hereof were delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.3 FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is The Nasdaq National Market or any other national securities exchange, the last sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market, or (b) if the principal market for the Common Stock is not a national securities exchange or The Nasdaq National Market and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the closing bid and the closing asked prices for the Common Stock on such day as quoted on such System, or (c) if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by Pink Sheets LLC; PROVIDED, however, that if 2 none of (a), (b) or (c) above is applicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be reasonably determined, in good faith, by the Board of Directors of the Company (the "Board of Directors"). 3. ADJUSTMENTS. 3.1 STOCK SPLITS, STOCK DIVIDENDS AND COMBINATIONS. If the Company at any time subdivides the outstanding shares of the Common Stock or issues a stock dividend (in Common Stock) on the outstanding shares of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately decreased, and the number of Shares subject hereto shall be proportionately increased, and if the Company at any time combines (by reverse stock split or otherwise) the outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject hereto shall be proportionately decreased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. 3.2 MERGER OR CONSOLIDATION. In the case of any consolidation of the Company with, or merger of the Company with or into another entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding capital stock of the Company), the entity formed by such consolidation or merger shall execute and deliver to the Warrant Holder a supplemental warrant agreement providing that the Warrant Holder of the Warrants then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrants) to receive, upon exercise of such Warrants, the kind and amount of shares of capital stock and other securities and property receivable upon such consolidation or merger by a holder of the number of Shares for which such Warrants might have been exercised immediately prior to such consolidation or merger. Such supplemental warrant agreement shall contain provisions which shall be identical to the adjustments provided in Section 3.1 hereof and to the provisions of Section 10 hereof. This Section 3.2 shall similarly apply to successive consolidations or mergers. 3.3 The Exercise Price shall also be subject to adjustment as follows: (1) SPECIAL DEFINITIONS. For purposes of this Section 3.3, the following definitions shall apply: (A) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (B) "Original Issue Date" shall mean the date of this Agreement. (C) "Convertible Securities" shall mean any evidence of indebtedness, shares of capital stock (other than Common Stock) or other securities convertible into or exchangeable for Common Stock. 3 (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the Original Issue Date, other than shares of Common Stock issued at any time: (i) upon exercise of the Warrants (including any additional warrants issued to the Warrant Holder or Kevin Kimberlin Partners, L.P. in accordance with the terms and provisions of the Note Purchase Agreement); (ii) pursuant to the exercise of options, warrants or other Common Stock purchase rights issued (or to be issued) to employees, officers or directors of, or consultants or advisors to, or any strategic ally of, the Company pursuant to any stock purchase or stock option plan or other arrangement approved by the Board of Directors; (iii) pursuant to the exercise of options, warrants or Convertible Securities outstanding as of the Original Issue Date; or (iv) in connection with the acquisition of all or part of another entity by stock acquisition, merger, consolidation or other reorganization, or by the purchase of all or part of the assets of such other entity (including securities issued to persons formerly employed by such other entity and subsequently hired by the Company and to any brokers or finders in connection therewith) where the Company or its stockholders own more than fifty (50%) percent of the voting power of the acquired, surviving, combined or successor company. (2) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES. Subject to Section 3.3(1)(D) hereof, in the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities, then the number of shares of Common Stock actually issued upon the exercise of such Options or, in the case of Convertible Securities, the actual conversion or exchange of such Convertible Securities, shall be Additional Shares of Common Stock. (3) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company, after the Original Issue Date, shall issue Additional Shares of Common Stock without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued by (y) the Conversion Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock so issued. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(3), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (4) Adjustment of Exercise Price Upon Adverse Market Conditions. Notwithstanding anything to the contrary contained herein, if at any time after the Original Issue Date, the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days (the "Ten-Day Average") shall be less than the product obtained by multiplying (x) seventy-five (75%) percent times (y) the Exercise Price otherwise then in effect (the "Adverse Market Price"), then such Ten-Day Average may, subject to the terms of this Section 3.3(4), become and constitute the adjusted Exercise Price (the "Adjusted Exercise Price"), and the Warrants may be exercised, in whole or in part, by the Warrant Holder at the Adjusted Exercise Price. To exercise all or any portion of the Warrants at the Adjusted Exercise Price, the Warrant Holder shall (i) deliver written notice (the "Adverse Market Price Notice") of such intent to the Company during such time as the Ten-Day Average shall remain equal to or below the Adverse Market Price and (ii) provide payment by cash or wire transfer of immediately available funds in respect of such Warrants to be exercised to the Company within five (5) trading days after delivery of the Adverse Market Price Notice. The Ten-Day Average based on the ten (10) consecutive trading days ending on the date that the Adverse Market Price Notice shall have been delivered by the Warrant Holder shall be the Adjusted Exercise Price, unless (A) the Warrant Holder shall not deliver the applicable payment by cash or wire transfer within the five (5) trading days following delivery of the Adverse Market Price Notice or (B) the Warrant Holder shall have provided a new Adverse Market Price Notice during such five (5) trading days period, in which case the Adjusted Exercise Price shall be adjusted based on the Ten-Day Average preceding such new Adverse Market Price Notice. The provisions of this Section 3.3(4) shall continue until all of the Warrants shall have been exercised. The number 4 of Warrant Shares shall not be adjusted as a result of any adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(4). (5) DETERMINATION OF CONSIDERATION. For purposes of this Section 3, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (A) CASH AND PROPERTY. Such consideration shall: (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company excluding expenses, discounts and commissions payable by the Company in connection with such issuance or sale and amounts paid or payable for accrued interest. (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as reasonably determined in good faith by the Board of Directors net of expenses as set forth in clause (i) above; and (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration that covers both cash and property other than cash, the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, shall be as reasonably determined in good faith by the Board of Directors. 5 (B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Company for Additional Shares of Common Stock issued pursuant to Section 3.3(2), relating to Options and Convertible Securities, shall be determined by dividing: (i) the total amount, if any, received by the Company as consideration for the issuance of such Options or Convertible Securities, plus the aggregate amount of additional consideration paid to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities (subject to any adjustments in the exercise price thereof), by (ii) the number of shares of Common Stock issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. 3.4 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 3, the Company, at its expense, shall promptly compute such adjustment or readjustment of the Exercise Price in accordance with the terms hereof and furnish to each Holder of Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or deemed to have been issued, (ii) the Exercise Price in effect immediately prior to such adjustment or readjustment, (iii) the number of Additional Shares of Common Stock issued or deemed to have been issued and (iv) the number of shares of Common Stock and the amount, if any, of other securities or property that at the time would be received upon the exercise of the Warrants. The Company shall, upon the written request at any time of any Holder of Warrants, furnish or cause to be furnished to such Holder a like certificate setting forth (x) all adjustments and readjustments of the Exercise Price since the Original Issue Date and (y) the Exercise Price then in effect. 3.5 ASSURANCES WITH RESPECT TO EXERCISE RIGHTS. The Company shall not, by amendment of its Certificate of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times, in good faith, assist in the carrying out of all the provisions of this Agreement and in taking of all such actions as may be necessary or appropriate in order to protect the exercise rights of the Warrant Holder against impairment or dilution. 4. TRANSFERS. 4.1 UNREGISTERED SECURITIES. The Warrant Holder hereby acknowledges and agrees that the Warrants and the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" under the Securities Act inasmuch as they are being acquired in a transaction not involving a public offering, and the Warrant Holder agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Warrants or any Shares issued upon exercise of the 6 Warrants in the absence of (a) an effective registration statement under the Act as to the Warrants or such Shares and registration and/or qualification of the Warrants or such Shares under any applicable Federal or state securities law then in effect or (b) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. 4.2 TRANSFERABILITY. Subject to the provisions of Section 4.1 hereof, the rights under this Agreement are freely transferable, in whole or in part, by the Warrant Holder, and such transferee shall have the same rights hereunder as the Warrant Holder. 4.3 WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Warrant Holders of the Warrants. Until any transfer of Warrants in accordance with this Agreement is reflected in the warrant register, the Company may treat the Warrant Holder as the absolute owner hereof for all purposes. Any Warrant Holder may change such Warrant Holder's address as shown on the warrant register by written notice to the Company requesting such change. 5. NO FRACTIONAL SHARES. Any adjustment in the number of Shares purchasable hereunder shall be rounded to the nearest whole share. 6. INVESTMENT REPRESENTATIONS. The Warrant Holder agrees and acknowledges that it is acquiring the Warrants and will be acquiring the Shares for its own account and not with a view to any resale or distribution other than in accordance with Federal and state securities laws. The Warrant Holder is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. 7. COVENANTS AS TO THE SHARES. The Company covenants and agrees that, subject to Sections 6.2(a) of the Note Purchase Agreement, the shares of Common Stock issuable upon exercise of the Warrants, will, upon issuance in accordance with the terms hereof, be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issuance thereof imposed by or through the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificates in respect of such shares in a name other than that of the Warrant Holder and the Company shall not be required to issue or deliver such certificates unless or until the person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or it shall be established to the satisfaction of the Company that such tax has been paid. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights imposed by or through the Company, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented under this Agreement. 8. LEGEND. Any certificate evidencing the Shares issuable upon exercise hereof will bear a legend indicating that such securities have not been registered under the Securities Act or under any state securities laws and may not be sold or offered for sale in the absence of an effective registration statement as to the securities under the Securities Act and any applicable state securities law or an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 7 9. RIGHTS APPLICABLE TO THE WARRANT SHARES. The parties hereby acknowledge and agree that the Shares, when issued in accordance with the terms hereof, shall be entitled to all of the same rights and privileges provided to the Company's capital stock issued upon conversion of the Note, as set forth in the Note Purchase Agreement. 10. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company shall, at any time prior to the exercise of all Warrants, declare a dividend (other than a dividend consisting solely of shares of Common Stock) or otherwise distribute to its stockholders any assets, properties, rights, evidence of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another, or any other thing of value, the Warrant Holder shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Warrant Holder would have been entitled to receive at the time of such dividend or distribution as if the Warrants had been exercised immediately prior to such dividend or distribution. At the time of any such dividend or distribution, the Company shall make (and maintain) appropriate reserves to ensure the timely performance of the provisions of this Section 10. 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS. This Agreement or any provisions hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the Company and by the Warrant Holder. 11.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 11.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to the Company: The Immune Response Corporation 5935 Darwin Court Carlsbad, CA 92008 Attention: President Facsimile: (760) 431-8636 With a copy (which copy shall not constitute notice) to: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Attention: Thomas E. Sparks, Esq. Facsimile: (415) 983-7396 8 (ii) If to the Warrant Holder: Oshkim Limited Partnership 535 Madison Avenue New York, NY 10022 Attention: Kevin Kimberlin and Bruno Lerer, Esq. Facsimile: (212) 486-7392 With a copy (which copy shall not constitute notice) to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas, 45th Floor New York, NY 10020-1104 Attention: Stephen R. Connoni, Esq./Sandip Kakar, Esq. Facsimile: (212) 536-3901 11.4 HEADINGS. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the terms hereof. 11.5 CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Shares issued or issuable upon the exercise of the Warrants in a manner that interferes with the timely exercise of the Warrants. 11.6 NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Subject to Section 6.2(a) of the Note Purchase Agreement, this Agreement shall not entitle the Warrant Holder hereof to any voting rights or other rights as a stockholder of the Company with respect to the Shares prior to the exercise of the Warrants. No provision of this Agreement, in the absence of affirmative action by the Warrant Holder to purchase the Shares, and no mere enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11.7 SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and transferees. 11.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. [SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. THE IMMUNE RESPONSE CORPORATION By:_________________________________________ Name:____________________________________ Title:___________________________________ OSHKIM LIMITED PARTNERSHIP By:_________________________________________ Name:____________________________________ Title:___________________________________ 10 EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be signed only on exercise of any of the Warrants) Dated:________________________ To: The Immune Response Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant Agreement, hereby irrevocably elects to (check one of the following): [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith makes a cash payment of $_____________, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith delivers ___________ shares of Common Stock having a Fair Market Value (as defined in such Warrant Agreement) as of the last trading day preceding the date hereof, of $______, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] acquire in a cashless exercise _____ shares of Common Stock pursuant to the terms of Section 2.1 of such Warrant Agreement. Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below. Signature:________________________________ Name (print):_____________________________ Title (if applicable):____________________ Company (if applicable):__________________ EX-99 5 exhibitthree.txt EXHIBIT 99.3 EXHIBIT 99.3 ------------ AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT ------------------------------------------ This AMENDMENT NO. 2 is made as of the 3rd day of May, 2002 (the "Amendment") by and between Kevin Kimberlin Partners, L.P., a Delaware limited partnership ("KKP"), The Immune Response Corporation, a Delaware corporation ("Seller"), and Oshkim Limited Partnership ("Oshkim"). WHEREAS, Seller, KKP and Oshkim entered into that certain Note Purchase Agreement dated as of November 9, 2001, as amended by Amendment No. 1 to Note Purchase Agreement dated as of February 14, 2002 (the "Agreement"). WHEREAS, Seller proposes to issue and sell Additional Securities to Oshkim and Oshkim wishes to purchase Additional Securities (as defined in the Agreement) from Seller. WHEREAS, the parties desire to amend the Agreement as set forth below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties hereby amend the Agreement and agree as follows: 1. Effective as of the date of this Amendment, the Agreement is hereby amended as follows: a. The third recital is hereby amended to substitute "$4,000,000" for "$2,000,000". b Section 6.2(a) is hereby amended to add a new last sentence which shall read in its entirety as follows: "Notwithstanding the foregoing, Seller and Oshkim acknowledge and accept that as of the date of Amendment No. 2 to this Agreement Seller does not have reserved and available out of its authorized but unissued shares of Common Stock sufficient shares of Common Stock for the purpose of issuing Common Stock upon the exercise in full of the Warrants issued to Oshkim on May 3, 2002. Seller shall promptly take all corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for reserving and making available shares of Common Stock issuable upon the exercise in full of the Warrants issued to Oshkim on May 3, 2002." 2. Except as specifically provided herein, the Agreement, as originally executed by the parties thereto and as amended hereby, shall remain in full force and effect. 3. Any defined terms not defined herein shall have the respective meanings set forth in the Agreement. 4. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such jurisdiction. -1- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. KEVIN KIMBERLIN PARTNERS, L.P. By:________________________________________ Name:________________________________ Title:_______________________________ OSHKIM LIMITED PARTNERSHIP By:________________________________________ Name:________________________________ Title:_______________________________ THE IMMUNE RESPONSE CORPORATION By:________________________________________ Name:________________________________ Title:_____________________________ -2- EX-99 6 exhibitfour.txt EXHIBIT 99.4 EXHIBIT 99.4 ------------ THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE IMMUNE RESPONSE CORPORATION 8% CONVERTIBLE SECURED PROMISSORY NOTE $1,000,000 New York, New York June 24, 2002 FOR the receipt of $1,000,000 the undersigned, The Immune Response Corporation, a Delaware corporation (the "Issuer"), hereby unconditionally promises to pay on the Note Maturity Date (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between the Purchaser, Kevin Kimberlin Partners, L.P., a Delaware limited partnership, and the Issuer, and as amended as of February 14, 2002 and further amended as of May 3, 2002 (the "Note Purchase Agreement")) to the order of Oshkim Limited Partnership, a Delaware limited partnership (the "Purchaser"), at the office of the Purchaser located at 535 Madison Avenue, 18th Floor, New York, New York 10022, or such other address designated by the Purchaser, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) One Million Dollars ($1,000,000) or (b) if less as a result of any voluntary conversion(s) of this Note in part in accordance with Section 3.4 of the Note Purchase Agreement or in part into Units as contemplated below, the aggregate unpaid principal amount of this Note. Subject to Section 3.4 of the Note Purchase Agreement, the Issuer further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time, from the date hereof, in like money, at the rate of eight (8%) percent per annum, as and at the dates specified in Section 3.3 of the Note Purchase Agreement. This Note is one of the promissory notes referred to in the Note Purchase Agreement, and is entitled to the benefits thereof, is secured as provided therein (and as provided in that certain Intellectual Property Security Agreement, dated November 9, 2001, executed by the Issuer and as amended as of February 14, 2002) and is subject to conversion as set forth therein. Notwithstanding the foregoing, this Note (including all accrued interest) is convertible, at the sole option of the Purchaser, in whole or in part, into Units (as defined in the Issuer's Definitive Proxy Statement dated May 15, 2002, the "Proxy") rather than common stock at the Closing Price (as defined in the Proxy), solely in the event that the Issuer is (i) able to obtain a written confirmation from The Nasdaq Stock Market that there is an applicable exemption to do so from all applicable subsections of the National Association of Security Dealers, Inc. ("NASD") Rule 4350(i) or (ii) able to obtain stockholder approval as required by NASD Rule 4350(i). In the event of any conflict between the Note Purchase Agreement and this Note, the terms and provisions of the Note Purchase Agreement shall govern. Upon the occurrence of (i) any one or more of the Events of Default specified in the Note Purchase Agreement, or (ii) if Issuer shall default in the payment of principal on any indebtedness (to any party other that the Purchaser or KKP) in excess of $200,000 beyond the period of grace, if any, provided in the instrument or agreement under which such indebtedness was created, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Note Purchase Agreement. Subject to the provisions of the legend above, this Note is freely transferable, in whole or in part, by the Purchaser, and such transferee shall have the same rights hereunder as the Purchaser. The Issuer may not assign or delegate any of its obligations under this Note without the prior written consent of the Purchaser (or its successor, transferee or assignee). All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Subject to Section 3.3 of the Note Purchase Agreement, the Issuer agrees to pay all of the Purchaser's expenses, including reasonable attorneys' costs and fees, incurred in collecting sums due under this Note. This Note shall be subject to prepayment only in accordance with the terms of the Note Purchase Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE IMMUNE RESPONSE CORPORATION By:__________________________ Name:______________________ Title:_____________________ EX-99 7 exhibitfive.txt EXHIBIT 99.5 EXHIBIT 99.5 ------------ WARRANT AGREEMENT ----------------- WARRANT AGREEMENT (this "Agreement"), dated as of June 24, 2002, by and between The Immune Response Corporation, a Delaware corporation (the "Company"), and Oshkim Limited Partnership, a Delaware limited partnership (the "Warrant Holder"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the parties have entered into that certain Note Purchase Agreement, dated as of November 9, 2001, by and between the Company and Kevin Kimberlin Partners, L.P., as amended by Amendment No. 1 to the Note Purchase Agreement dated as of February 14, 2002 and Amendment No. 2 dated as of May 3, 2002, each by and between the Company, Kevin Kimberlin Partners, L.P. and the Warrant Holder (the "Note Purchase Agreement"); and WHEREAS, pursuant to the Note Purchase Agreement, the Warrant Holder has agreed to loan to the Company One Million ($1,000,000) Dollars (the "Loan Amount"), subject to the issuance by the Company of a convertible secured promissory note (the "Note"), and the Company has agreed to issue to the Warrant Holder warrants (the "Warrants") to purchase 2,093,802 shares of the Company's common stock, par value $.0025 per share (the "Common Stock"), subject to the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. WARRANTS. The Company hereby grants to the Warrant Holder, subject to the terms set forth herein, the right to purchase from the Company at any time and from time to time after the date hereof until the earlier of (i) 5:00 p.m., New York City local time, on June 24, 2012 or (ii) the date on which the Warrant Holder fully converts, if at all, the Note, dated as of June 24, 2002, into Units (the "Expiration Date"), up to 2,093,802 fully paid and non-assessable shares of Common Stock, subject to adjustment pursuant to Section 3 hereof (the "Shares"), which number of Shares equals the Loan Amount divided by eighty (80%) percent of the Exercise Price. For purposes of this Agreement, the "Exercise Price" shall initially be $0.597, which is equal to the average of the closing bid prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date hereof, subject to any adjustments pursuant to Section 3 hereof. 2. EXERCISE OF WARRANTS. 2.1 EXERCISE. The Warrants may be exercised by the Warrant Holder, in whole or in part, by delivering the Notice of Exercise purchase form, attached as Exhibit A hereto, duly executed by the Warrant Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer or check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the "Purchase Price"). The Purchase Price may also be paid, in whole or in part, by delivery of such purchase form and of shares of Common Stock owned by the Warrant Holder having a Fair Market Value (as defined in Section 2.3 hereof) on the last trading day ending the day immediately preceding the Exercise Date (as defined below) equal to the portion of the Purchase Price being paid in such shares. In addition, the Warrants may be exercised, pursuant to a cashless exercise, except as set forth in Section 3.3(4) below, by providing irrevocable instructions to the Company, through delivery of the aforesaid purchase form with an appropriate reference to this Section 2.1 to issue the number of shares of the Common Stock equal to the product of (a) the number of shares as to which the Warrants are being exercised multiplied by (b) a fraction, the numerator of which is the Fair Market Value of a share of the Common Stock on the last business day preceding the Exercise Date less the Exercise Price therefore and the denominator of which is such Fair Market Value. For purposes hereof, "Exercise Date" shall mean the date on which all deliveries required to be made to the Company upon exercise of Warrants pursuant to this Section 2.1 shall have been made. 2.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of the Warrants (in whole or in part) in accordance with Section 2.1 hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Warrant Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of the Warrants not exercised by the Warrant Holder. The Warrant Holder shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2.1 hereof were delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.3 FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is The Nasdaq National Market or any other national securities exchange, the last sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market, or (b) if the principal market for the Common Stock is not a national securities exchange or The Nasdaq National Market and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the closing bid and the closing asked prices for the Common Stock on such day as quoted on such System, or (c) if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by Pink Sheets LLC; provided, however, that if none of (a), (b) or (c) above is applicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be reasonably determined, in good faith, by the Board of Directors of the Company (the "Board of Directors"). 3. ADJUSTMENTS. 3.1 STOCK SPLITS, STOCK DIVIDENDS AND COMBINATIONS. If the Company at any time subdivides the outstanding shares of the Common Stock or issues a 2 stock dividend (in Common Stock) on the outstanding shares of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately decreased, and the number of Shares subject hereto shall be proportionately increased, and if the Company at any time combines (by reverse stock split or otherwise) the outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject hereto shall be proportionately decreased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. 3.2 MERGER OR CONSOLIDATION. In the case of any consolidation of the Company with, or merger of the Company with or into another entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding capital stock of the Company), the entity formed by such consolidation or merger shall execute and deliver to the Warrant Holder a supplemental warrant agreement providing that the Warrant Holder of the Warrants then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrants) to receive, upon exercise of such Warrants, the kind and amount of shares of capital stock and other securities and property receivable upon such consolidation or merger by a holder of the number of Shares for which such Warrants might have been exercised immediately prior to such consolidation or merger. Such supplemental warrant agreement shall contain provisions which shall be identical to the adjustments provided in Section 3.1 hereof and to the provisions of Section 10 hereof. This Section 3.2 shall similarly apply to successive consolidations or mergers. 3.3 The Exercise Price shall also be subject to adjustment as follows: (1) SPECIAL DEFINITIONS. For purposes of this Section 3.3, the following definitions shall apply: (A) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (B) "Original Issue Date" shall mean the date of this Agreement. (C) "Convertible Securities" shall mean any evidence of indebtedness, shares of capital stock (other than Common Stock) or other securities convertible into or exchangeable for Common Stock. (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the Original Issue Date, other than shares of Common Stock issued at any time: (i) upon exercise of the Warrants (including any additional warrants issued to the Warrant Holder or Kevin Kimberlin Partners, L.P. in accordance with the terms and provisions of the Note Purchase Agreement); (ii) pursuant to the exercise of options, warrants or other Common Stock purchase rights issued (or to be issued) to 3 employees, officers or directors of, or consultants or advisors to, or any strategic ally of, the Company pursuant to any stock purchase or stock option plan or other arrangement approved by the Board of Directors; (iii) pursuant to the exercise of options, warrants or Convertible Securities outstanding as of the Original Issue Date; or (iv) in connection with the acquisition of all or part of another entity by stock acquisition, merger, consolidation or other reorganization, or by the purchase of all or part of the assets of such other entity (including securities issued to persons formerly employed by such other entity and subsequently hired by the Company and to any brokers or finders in connection therewith) where the Company or its stockholders own more than fifty (50%) percent of the voting power of the acquired, surviving, combined or successor company. (2) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES. Subject to Section 3.3(1)(D) hereof, in the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities, then the number of shares of Common Stock actually issued upon the exercise of such Options or, in the case of Convertible Securities, the actual conversion or exchange of such Convertible Securities, shall be Additional Shares of Common Stock. (3) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company, after the Original Issue Date, shall issue Additional Shares of Common Stock without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued by (y) the Conversion Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock so issued. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(3), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (4) ADJUSTMENT OF EXERCISE PRICE UPON ADVERSE MARKET CONDITIONS. Notwithstanding anything to the contrary contained herein, if at any time after the Original Issue Date, the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days (the "Ten-Day Average") shall be less than the product obtained by multiplying (x) seventy-five (75%) percent times (y) the Exercise Price otherwise then in effect (the "Adverse Market Price"), then such Ten-Day Average may, subject to the terms of this Section 3.3(4), become and constitute the adjusted Exercise Price (the "Adjusted Exercise Price"), and the Warrants may be exercised, in whole or in part, by the Warrant Holder at the Adjusted Exercise Price. To exercise all or any portion of the Warrants at the Adjusted Exercise Price, the Warrant Holder shall (i) deliver written notice (the "Adverse Market Price Notice") of such intent to the Company during such time as the Ten-Day Average shall remain equal to or below the Adverse Market Price and (ii) provide payment by cash or wire transfer of 4 immediately available funds in respect of such Warrants to be exercised to the Company within five (5) trading days after delivery of the Adverse Market Price Notice. The Ten-Day Average based on the ten (10) consecutive trading days ending on the date that the Adverse Market Price Notice shall have been delivered by the Warrant Holder shall be the Adjusted Exercise Price, unless (A) the Warrant Holder shall not deliver the applicable payment by cash or wire transfer within the five (5) trading days following delivery of the Adverse Market Price Notice or (B) the Warrant Holder shall have provided a new Adverse Market Price Notice during such five (5) trading days period, in which case the Adjusted Exercise Price shall be adjusted based on the Ten-Day Average preceding such new Adverse Market Price Notice. The provisions of this Section 3.3(4) shall continue until all of the Warrants shall have been exercised. The number of Warrant Shares shall not be adjusted as a result of any adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(4). (5) DETERMINATION OF CONSIDERATION. For purposes of this Section 3, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (A) CASH AND PROPERTY. Such consideration shall: (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company excluding expenses, discounts and commissions payable by the Company in connection with such issuance or sale and amounts paid or payable for accrued interest. (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as reasonably determined in good faith by the Board of Directors net of expenses as set forth in clause (i) above; and (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration that covers both cash and property other than cash, the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, shall be as reasonably determined in good faith by the Board of Directors. (B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Company for Additional Shares of Common Stock issued pursuant to Section 3.3(2), relating to Options and Convertible Securities, shall be determined by dividing: (i) the total amount, if any, received by the Company as consideration for the issuance of such Options or Convertible Securities, plus the aggregate amount of additional consideration paid to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, 5 the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities (subject to any adjustments in the exercise price thereof), by (ii) the number of shares of Common Stock issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. 3.4 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 3, the Company, at its expense, shall promptly compute such adjustment or readjustment of the Exercise Price in accordance with the terms hereof and furnish to each Holder of Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or deemed to have been issued, (ii) the Exercise Price in effect immediately prior to such adjustment or readjustment, (iii) the number of Additional Shares of Common Stock issued or deemed to have been issued and (iv) the number of shares of Common Stock and the amount, if any, of other securities or property that at the time would be received upon the exercise of the Warrants. The Company shall, upon the written request at any time of any Holder of Warrants, furnish or cause to be furnished to such Holder a like certificate setting forth (x) all adjustments and readjustments of the Exercise Price since the Original Issue Date and (y) the Exercise Price then in effect. 3.5 ASSURANCES WITH RESPECT TO EXERCISE RIGHTS. The Company shall not, by amendment of its Certificate of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times, in good faith, assist in the carrying out of all the provisions of this Agreement and in taking of all such actions as may be necessary or appropriate in order to protect the exercise rights of the Warrant Holder against impairment or dilution. 3.6 If the Warrant Holder converts, the Note, dated as of June 24, 2002, into Units, the number of Shares subject hereto shall be proportionately decreased to a number of Shares equal to the product of (a) the Shares (for which this Warrant is exercisable immediately before this calculation is performed) multiplied by (b) a fraction the numerator of which shall be (x) the remaining principal amount owed by the Company to the Warrant Holder under the Note and the Denominator of which shall be (y) equal to the original Loan Amount. 4. TRANSFERS. 4.1 UNREGISTERED SECURITIES. The Warrant Holder hereby acknowledges and agrees that the Warrants and the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" under the Securities Act inasmuch as they are being acquired in a transaction not involving a public offering, and the Warrant Holder agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Warrants or any Shares issued upon exercise of the Warrants in the absence of (a) an effective registration statement under the Act as to the Warrants or such Shares and registration and/or qualification of the 6 Warrants or such Shares under any applicable Federal or state securities law then in effect or (b) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. 4.2 TRANSFERABILITY. Subject to the provisions of Section 4.1 hereof, the rights under this Agreement are freely transferable, in whole or in part, by the Warrant Holder, and such transferee shall have the same rights hereunder as the Warrant Holder. 4.3 WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Warrant Holders of the Warrants. Until any transfer of Warrants in accordance with this Agreement is reflected in the warrant register, the Company may treat the Warrant Holder as the absolute owner hereof for all purposes. Any Warrant Holder may change such Warrant Holder's address as shown on the warrant register by written notice to the Company requesting such change. 5. NO FRACTIONAL SHARES. Any adjustment in the number of Shares purchasable hereunder shall be rounded to the nearest whole share. 6. INVESTMENT REPRESENTATIONS. The Warrant Holder agrees and acknowledges that it is acquiring the Warrants and will be acquiring the Shares for its own account and not with a view to any resale or distribution other than in accordance with Federal and state securities laws. The Warrant Holder is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. 7. COVENANTS AS TO THE SHARES. The Company covenants and agrees that, subject to Sections 6.2(a) of the Note Purchase Agreement, the shares of Common Stock issuable upon exercise of the Warrants, will, upon issuance in accordance with the terms hereof, be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issuance thereof imposed by or through the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificates in respect of such shares in a name other than that of the Warrant Holder and the Company shall not be required to issue or deliver such certificates unless or until the person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or it shall be established to the satisfaction of the Company that such tax has been paid. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights imposed by or through the Company, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented under this Agreement. 8. LEGEND. Any certificate evidencing the Shares issuable upon exercise hereof will bear a legend indicating that such securities have not been registered under the Securities Act or under any state securities laws and may not be sold or offered for sale in the absence of an effective registration statement as to the securities under the Securities Act and any applicable state securities law or an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 7 9. RIGHTS APPLICABLE TO THE WARRANT SHARES. The parties hereby acknowledge and agree that the Shares, when issued in accordance with the terms hereof, shall be entitled to all of the same rights and privileges provided to the Company's capital stock issued upon conversion of the Note, as set forth in the Note Purchase Agreement. 10. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company shall, at any time prior to the exercise of all Warrants, declare a dividend (other than a dividend consisting solely of shares of Common Stock) or otherwise distribute to its stockholders any assets, properties, rights, evidence of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another, or any other thing of value, the Warrant Holder shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Warrant Holder would have been entitled to receive at the time of such dividend or distribution as if the Warrants had been exercised immediately prior to such dividend or distribution. At the time of any such dividend or distribution, the Company shall make (and maintain) appropriate reserves to ensure the timely performance of the provisions of this Section 10. 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS. This Agreement or any provisions hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the Company and by the Warrant Holder. 11.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 11.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to the Company: The Immune Response Corporation 5935 Darwin Court Carlsbad, CA 92008 Attention: President Facsimile: (760) 431-8636 With a copy (which copy shall not constitute notice) to: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Attention: Thomas E. Sparks, Esq. Facsimile: (415) 983-7396 8 (ii) If to the Warrant Holder: Oshkim Limited Partnership 535 Madison Avenue New York, NY 10022 Attention: Kevin Kimberlin and Bruno Lerer, Esq. Facsimile: (212) 486-7392 With a copy (which copy shall not constitute notice) to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas, 45th Floor New York, NY 10020-1104 Attention: Stephen R. Connoni, Esq./Sandip Kakar, Esq. Facsimile: (212) 536-3901 11.4 HEADINGS. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the terms hereof. 11.5 CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Shares issued or issuable upon the exercise of the Warrants in a manner that interferes with the timely exercise of the Warrants. 11.6 NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Subject to Section 6.2(a) of the Note Purchase Agreement, this Agreement shall not entitle the Warrant Holder hereof to any voting rights or other rights as a stockholder of the Company with respect to the Shares prior to the exercise of the Warrants. No provision of this Agreement, in the absence of affirmative action by the Warrant Holder to purchase the Shares, and no mere enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11.7 SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and transferees. 11.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. [SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. THE IMMUNE RESPONSE CORPORATION By:_______________________________________ Name:__________________________________ Title:_________________________________ OSHKIM LIMITED PARTNERSHIP By:_______________________________________ Name:__________________________________ Title:_________________________________ 10 EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be signed only on exercise of any of the Warrants) Dated:________________________ To: The Immune Response Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant Agreement, hereby irrevocably elects to (check one of the following): [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith makes a cash payment of $_____________, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith delivers ___________ shares of Common Stock having a Fair Market Value (as defined in such Warrant Agreement) as of the last trading day preceding the date hereof, of $______, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] acquire in a cashless exercise _____ shares of Common Stock pursuant to the terms of Section 2.1 of such Warrant Agreement. Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below. Signature:________________________________ Name (print):_____________________________ Title (if applicable):____________________ Company (if applicable):__________________ EX-99 8 exhibitsix.txt EXHIBIT 99.6 EXHIBIT 99.6 ------------ THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE IMMUNE RESPONSE CORPORATION 8% CONVERTIBLE SECURED PROMISSORY NOTE -------------------------------------- $566,638 New York, New York July 11, 2002 FOR the receipt of $566,638 the undersigned, The Immune Response Corporation, a Delaware corporation (the "Issuer"), hereby unconditionally promises to pay on the Note Maturity Date (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between the Purchaser, Kevin Kimberlin Partners, L.P., a Delaware limited partnership, and the Issuer, and as amended as of February 14, 2002 and May 3, 2002, and as further amended as of July 11, 2002 (the "Note Purchase Agreement")) to the order of The Kimberlin Family 1998 Irrevocable Trust (the "Purchaser"), at the office of the Purchaser located at 535 Madison Avenue, 18th Floor, New York, New York 10022, or such other address designated by the Purchaser, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) Five Hundred Sixty-Six Thousand Six Hundred Thirty-Eight Dollars ($566,638) or (b) if less as a result of any voluntary conversion(s) of this Note in part in accordance with Section 3.4 of the Note Purchase Agreement or in part into Units as contemplated below, the aggregate unpaid principal amount of this Note. Subject to Section 3.4 of the Note Purchase Agreement, the Issuer further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time, from the date hereof, in like money, at the rate of eight (8%) percent per annum, as and at the dates specified in Section 3.3 of the Note Purchase Agreement. This Note is one of the promissory notes referred to in the Note Purchase Agreement, and is entitled to the benefits thereof, is secured as provided therein (and as provided in that certain Intellectual Property Security Agreement, dated November 9, 2001, executed by the Issuer and as amended as of February 14, 2002 and as further amended as of July 11, 2002) and is subject to conversion as set forth therein. Notwithstanding the foregoing, this Note (including all accrued interest) is convertible, at the sole option of the Purchaser, in whole or in part, into Units (as defined in the Issuer's Definitive Proxy Statement dated May 15, 2002, the "Proxy") rather than common stock at the Closing Price (as defined in the Proxy), solely in the event that the Issuer is (i) able to obtain a written confirmation from The Nasdaq Stock Market that there is an applicable exemption to do so from all applicable subsections of the National Association of Security Dealers, Inc. ("NASD") Rule 4350(i) or (ii) able to obtain stockholder approval as required by NASD Rule 4350(i). 12 In the event of any conflict between the Note Purchase Agreement and this Note, the terms and provisions of the Note Purchase Agreement shall govern. Upon the occurrence of any one or more of the Events of Default specified in the Note Purchase Agreement or if the Issuer is unable to obtain any stockholder approval required under NASD Rule 4350(i) by November 30, 2002, all amounts then remaining unpaid on this Note and/or any other Note shall become, or may be declared to be, immediately due and payable, all as provided in the Note Purchase Agreement. The Issuer shall use its reasonable best efforts to obtain by November 30, 2002, any stockholder approval required under NASD Rule 4350(i). Subject to the provisions of the legend above, this Note is freely transferable and assignable, in whole or in part, by the Purchaser, and such transferee or assignee shall have the same rights hereunder as the Purchaser. The Issuer may not assign or delegate any of its obligations under this Note without the prior written consent of the Purchaser (or its successor, transferee or assignee). All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Subject to Section 3.3 of the Note Purchase Agreement, the Issuer agrees to pay all of the Purchaser's expenses, including reasonable attorneys' costs and fees, incurred in collecting sums due under this Note. This Note shall be subject to prepayment only in accordance with the terms of the Note Purchase Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE IMMUNE RESPONSE CORPORATION By: __________________________ Name:_________________________ Title:________________________ EX-99 9 exhibitseven.txt EXHIBIT 99.7 EXHIBIT 99.7 ------------ WARRANT AGREEMENT WARRANT AGREEMENT (this "Agreement"), dated as of July 11, 2002, by and between The Immune Response Corporation, a Delaware corporation (the "Company"), and The Kimberlin Family 1998 Irrevocable Trust (the "Warrant Holder"). W I T N E S S E T H WHEREAS, the parties have entered into that certain Note Purchase Agreement, dated as of November 9, 2001, by and between the Company and Kevin Kimberlin Partners, L.P., as amended by Amendment No. 1 to the Note Purchase Agreement dated as of February 14, 2002, Amendment No. 2 dated as of May 3, 2002, each by and between the Company, Kevin Kimberlin Partners, L.P. and Oshkim Limited Partnership, a Nevada limited partnership, and Amendment No. 3 dated as of July 11, 2002, by and between the Company, Kevin Kimberlin Partners, L.P, Oshkim Limited Partnership and Warrant Holder (the "Note Purchase Agreement"); and WHEREAS, pursuant to the Note Purchase Agreement, the Warrant Holder has agreed to loan to the Company Five Hundred Sixty-Six Thousand Six Hundred Thirty-Eight Dollars ($566,638) (the "Loan Amount"), subject to the issuance by the Company of a convertible secured promissory note (the "Note"), and the Company has agreed to issue to the Warrant Holder warrants (the "Warrants") to purchase 1,419,433 shares of the Company's common stock, par value $.0025 per share (the "Common Stock"), subject to the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. WARRANTS. The Company hereby grants to the Warrant Holder, subject to the terms set forth herein, the right to purchase from the Company at any time and from time to time after the date hereof until the earlier of (i) 5:00 p.m., New York City local time, on July 11, 2012 or (ii) the date on which the Warrant Holder fully converts, if at all, the Note, dated as of July 11, 2002, into Units (the "Expiration Date"), up to 1,419,433 fully paid and non-assessable shares of Common Stock, subject to adjustment pursuant to Section 3 hereof (the "Shares"), which number of Shares equals the Loan Amount divided by eighty (80%) percent of the Exercise Price. For purposes of this Agreement, the "Exercise Price" shall initially be $0.499, which is equal to the average of the closing bid prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date hereof, subject to any adjustments pursuant to Section 3 hereof. 2. EXERCISE OF WARRANTS. 2.1 EXERCISE. The Warrants may be exercised by the Warrant Holder, in whole or in part, by delivering the Notice of Exercise purchase form, attached as EXHIBIT A hereto, duly executed by the Warrant Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer or check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the "Purchase Price"). The Purchase Price may also be paid, in whole or in part, by delivery of such purchase form and of shares of Common Stock owned by the Warrant Holder having a Fair Market Value (as defined in Section 2.3 hereof) on the last trading day ending the day immediately preceding the Exercise Date (as defined below) equal to the portion of the Purchase Price being paid in such shares. In addition, the Warrants may be exercised, pursuant to a cashless exercise, except as set forth in Section 3.3(4) below, by providing irrevocable instructions to the Company, through delivery of the aforesaid purchase form with an appropriate reference to this Section 2.1 to issue the number of shares of the Common Stock equal to the product of (a) the number of shares as to which the Warrants are being exercised multiplied by (b) a fraction, the numerator of which is the Fair Market Value of a share of the Common Stock on the last business day preceding the Exercise Date less the Exercise Price therefore and the denominator of which is such Fair Market Value. For purposes hereof, "Exercise Date" shall mean the date on which all deliveries required to be made to the Company upon exercise of Warrants pursuant to this Section 2.1 shall have been made. 2.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of the Warrants (in whole or in part) in accordance with Section 2.1 hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Warrant Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of the Warrants not exercised by the Warrant Holder. The Warrant Holder shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2.1 hereof were delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.3 FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is The Nasdaq National Market or any other national securities exchange, the last sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market, or (b) if the principal market for the Common Stock is not a national securities exchange or The Nasdaq National Market and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the closing bid and the closing asked prices for the Common Stock on such day as quoted on such System, or (c) if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by Pink Sheets LLC; PROVIDED, HOWEVER, that if none of (a), (b) or (c) above is applicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be reasonably determined, in good faith, by the Board of Directors of the Company (the "Board of Directors"). 3. ADJUSTMENTS. 2 3.1 STOCK SPLITS, STOCK DIVIDENDS AND COMBINATIONS. If the Company at any time subdivides the outstanding shares of the Common Stock or issues a stock dividend (in Common Stock) on the outstanding shares of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately decreased, and the number of Shares subject hereto shall be proportionately increased, and if the Company at any time combines (by reverse stock split or otherwise) the outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject hereto shall be proportionately decreased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. 3.2 MERGER OR CONSOLIDATION. In the case of any consolidation of the Company with, or merger of the Company with or into another entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding capital stock of the Company), the entity formed by such consolidation or merger shall execute and deliver to the Warrant Holder a supplemental warrant agreement providing that the Warrant Holder of the Warrants then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrants) to receive, upon exercise of such Warrants, the kind and amount of shares of capital stock and other securities and property receivable upon such consolidation or merger by a holder of the number of Shares for which such Warrants might have been exercised immediately prior to such consolidation or merger. Such supplemental warrant agreement shall contain provisions which shall be identical to the adjustments provided in Section 3.1 hereof and to the provisions of Section 10 hereof. This Section 3.2 shall similarly apply to successive consolidations or mergers. 3.3 The Exercise Price shall also be subject to adjustment as follows: (1) SPECIAL DEFINITIONS. For purposes of this Section 3.3, the following definitions shall apply: (A) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (B) "Original Issue Date" shall mean the date of this Agreement. (C) "Convertible Securities" shall mean any evidence of indebtedness, shares of capital stock (other than Common Stock) or other securities convertible into or exchangeable for Common Stock. (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the Original Issue Date, other than shares of Common Stock issued at any time: (i) upon exercise of the Warrants (including any additional warrants issued to the Warrant Holder or Kevin Kimberlin Partners, L.P. in accordance with the terms and provisions of the Note Purchase Agreement); 3 (ii) pursuant to the exercise of options, warrants or other Common Stock purchase rights issued (or to be issued) to employees, officers or directors of, or consultants or advisors to, or any strategic ally of, the Company pursuant to any stock purchase or stock option plan or other arrangement approved by the Board of Directors; (iii) pursuant to the exercise of options, warrants or Convertible Securities outstanding as of the Original Issue Date; or (iv) in connection with the acquisition of all or part of another entity by stock acquisition, merger, consolidation or other reorganization, or by the purchase of all or part of the assets of such other entity (including securities issued to persons formerly employed by such other entity and subsequently hired by the Company and to any brokers or finders in connection therewith) where the Company or its stockholders own more than fifty (50%) percent of the voting power of the acquired, surviving, combined or successor company. (2) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES. Subject to Section 3.3(1)(D) hereof, in the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities, then the number of shares of Common Stock actually issued upon the exercise of such Options or, in the case of Convertible Securities, the actual conversion or exchange of such Convertible Securities, shall be Additional Shares of Common Stock. (3) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company, after the Original Issue Date, shall issue Additional Shares of Common Stock without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued by (y) the Conversion Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock so issued. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(3), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (4) ADJUSTMENT OF EXERCISE PRICE UPON ADVERSE MARKET CONDITIONS. Notwithstanding anything to the contrary contained herein, if at any time after the Original Issue Date, the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days (the "Ten-Day Average") shall be less than the product obtained by multiplying (x) seventy-five (75%) 4 percent times (y) the Exercise Price otherwise then in effect (the "Adverse Market Price"), then such Ten-Day Average may, subject to the terms of this Section 3.3(4), become and constitute the adjusted Exercise Price (the "Adjusted Exercise Price"), and the Warrants may be exercised, in whole or in part, by the Warrant Holder at the Adjusted Exercise Price. To exercise all or any portion of the Warrants at the Adjusted Exercise Price, the Warrant Holder shall (i) deliver written notice (the "Adverse Market Price Notice") of such intent to the Company during such time as the Ten-Day Average shall remain equal to or below the Adverse Market Price and (ii) provide payment by cash or wire transfer of immediately available funds in respect of such Warrants to be exercised to the Company within five (5) trading days after delivery of the Adverse Market Price Notice. The Ten-Day Average based on the ten (10) consecutive trading days ending on the date that the Adverse Market Price Notice shall have been delivered by the Warrant Holder shall be the Adjusted Exercise Price, unless (A) the Warrant Holder shall not deliver the applicable payment by cash or wire transfer within the five (5) trading days following delivery of the Adverse Market Price Notice or (B) the Warrant Holder shall have provided a new Adverse Market Price Notice during such five (5) trading days period, in which case the Adjusted Exercise Price shall be adjusted based on the Ten-Day Average preceding such new Adverse Market Price Notice. The provisions of this Section 3.3(4) shall continue until all of the Warrants shall have been exercised. The number of Warrant Shares shall not be adjusted as a result of any adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(4). (5) Determination of Consideration. For purposes of this Section 3, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (A) CASH AND PROPERTY. Such consideration shall: (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company excluding expenses, discounts and commissions payable by the Company in connection with such issuance or sale and amounts paid or payable for accrued interest. (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as reasonably determined in good faith by the Board of Directors net of expenses as set forth in clause (i) above; and (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration that covers both cash and property other than cash, the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, shall be as reasonably determined in good faith by the Board of Directors. (B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Company for Additional Shares of Common Stock issued pursuant to Section 3.3(2), relating to Options and Convertible Securities, shall be determined by dividing: (i) the total amount, if any, received by the Company as consideration for the issuance of such Options or Convertible Securities, plus the aggregate amount of additional consideration paid to the 5 Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities (subject to any adjustments in the exercise price thereof), by (ii) the number of shares of Common Stock issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. 3.4 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 3, the Company, at its expense, shall promptly compute such adjustment or readjustment of the Exercise Price in accordance with the terms hereof and furnish to each Holder of Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or deemed to have been issued, (ii) the Exercise Price in effect immediately prior to such adjustment or readjustment, (iii) the number of Additional Shares of Common Stock issued or deemed to have been issued and (iv) the number of shares of Common Stock and the amount, if any, of other securities or property that at the time would be received upon the exercise of the Warrants. The Company shall, upon the written request at any time of any Holder of Warrants, furnish or cause to be furnished to such Holder a like certificate setting forth (x) all adjustments and readjustments of the Exercise Price since the Original Issue Date and (y) the Exercise Price then in effect. 3.5 ASSURANCES WITH RESPECT TO EXERCISE RIGHTS. The Company shall not, by amendment of its Certificate of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times, in good faith, assist in the carrying out of all the provisions of this Agreement and in taking of all such actions as may be necessary or appropriate in order to protect the exercise rights of the Warrant Holder against impairment or dilution. 3.6 If the Warrant Holder converts, the Note, dated as of July 11, 2002, into Units, the number of Shares subject hereto shall be proportionately decreased to a number of Shares equal to the product of (a) the Shares (for which this Warrant is exercisable immediately before this calculation is performed) multiplied by (b) a fraction the numerator of which shall be (x) the remaining principal amount owed by the Company to the Warrant Holder under the Note and the Denominator of which shall be (y) equal to the original Loan Amount. 4. TRANSFERS. 4.1 UNREGISTERED SECURITIES. The Warrant Holder hereby acknowledges and agrees that the Warrants and the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" under the Securities Act inasmuch as they are being acquired in a transaction not involving a public offering, and the Warrant 6 Holder agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Warrants or any Shares issued upon exercise of the Warrants in the absence of (a) an effective registration statement under the Act as to the Warrants or such Shares and registration and/or qualification of the Warrants or such Shares under any applicable Federal or state securities law then in effect or (b) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. 4.2 TRANSFERABILITY. Subject to the provisions of Section 4.1 hereof, the rights under this Agreement are freely transferable and assignable, in whole or in part, by the Warrant Holder, and such transferee or assignee shall have the same rights hereunder as the Warrant Holder. 4.3 WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Warrant Holders of the Warrants. Until any transfer of Warrants in accordance with this Agreement is reflected in the warrant register, the Company may treat the Warrant Holder as the absolute owner hereof for all purposes. Any Warrant Holder may change such Warrant Holder's address as shown on the warrant register by written notice to the Company requesting such change. 5. NO FRACTIONAL SHARES. Any adjustment in the number of Shares purchasable hereunder shall be rounded to the nearest whole share. 6. INVESTMENT REPRESENTATIONS. The Warrant Holder agrees and acknowledges that it is acquiring the Warrants and will be acquiring the Shares for its own account and not with a view to any resale or distribution other than in accordance with Federal and state securities laws. The Warrant Holder is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. 7. COVENANTS AS TO THE SHARES. The Company covenants and agrees that, subject to Sections 6.2(a) of the Note Purchase Agreement, the shares of Common Stock issuable upon exercise of the Warrants, will, upon issuance in accordance with the terms hereof, be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issuance thereof imposed by or through the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificates in respect of such shares in a name other than that of the Warrant Holder and the Company shall not be required to issue or deliver such certificates unless or until the person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or it shall be established to the satisfaction of the Company that such tax has been paid. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights imposed by or through the Company, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented under this Agreement. 8. LEGEND. Any certificate evidencing the Shares issuable upon exercise hereof will bear a legend indicating that such securities have not been registered under the Securities Act or under any state securities laws and may not be sold or offered for sale in the absence of an effective registration 7 statement as to the securities under the Securities Act and any applicable state securities law or an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 9. RIGHTS APPLICABLE TO THE WARRANT SHARES. The parties hereby acknowledge and agree that the Shares, when issued in accordance with the terms hereof, shall be entitled to all of the same rights and privileges provided to the Company's capital stock issued upon conversion of the Note, as set forth in the Note Purchase Agreement. 10. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company shall, at any time prior to the exercise of all Warrants, declare a dividend (other than a dividend consisting solely of shares of Common Stock) or otherwise distribute to its stockholders any assets, properties, rights, evidence of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another, or any other thing of value, the Warrant Holder shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Warrant Holder would have been entitled to receive at the time of such dividend or distribution as if the Warrants had been exercised immediately prior to such dividend or distribution. At the time of any such dividend or distribution, the Company shall make (and maintain) appropriate reserves to ensure the timely performance of the provisions of this Section 10. 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS. This Agreement or any provisions hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the Company and by the Warrant Holder. 11.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 11.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to the Company: The Immune Response Corporation 5935 Darwin Court Carlsbad, CA 92008 Attention: President Facsimile: (760) 431-8636 With a copy (which copy shall not constitute notice) to: Pillsbury Winthrop LLP 8 50 Fremont Street San Francisco, CA 94105 Attention: Thomas E. Sparks, Esq. Facsimile: (415) 983-7396 (ii) If to the Warrant Holder: Kimberlin Family 1998 Irrevocable Trust 535 Madison Avenue New York, NY 10022 Attention: Kevin Kimberlin and Bruno Lerer, Esq. Facsimile: (212) 486-7392 With a copy (which copy shall not constitute notice) to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas, 45th Floor New York, NY 10020-1104 Attention: Stephen R. Connoni, Esq./Sandip Kakar, Esq. Facsimile: (212) 536-3901 11.4 HEADINGS. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the terms hereof. 11.5 CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Shares issued or issuable upon the exercise of the Warrants in a manner that interferes with the timely exercise of the Warrants. 11.6 NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Subject to Section 6.2(a) of the Note Purchase Agreement, this Agreement shall not entitle the Warrant Holder hereof to any voting rights or other rights as a stockholder of the Company with respect to the Shares prior to the exercise of the Warrants. No provision of this Agreement, in the absence of affirmative action by the Warrant Holder to purchase the Shares, and no mere enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11.7 SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and transferees. 11.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. [SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. THE IMMUNE RESPONSE CORPORATION By:________________________________________ Name:___________________________________ Title:__________________________________ THE KIMBERLIN FAMILY 1998 IRREVOCABLE TRUST By:________________________________________ Name:___________________________________ Title:__________________________________ 10 EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be signed only on exercise of any of the Warrants) Dated:________________________ To: The Immune Response Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant Agreement, hereby irrevocably elects to (check one of the following): [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith makes a cash payment of $_____________, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith delivers ___________ shares of Common Stock having a Fair Market Value (as defined in such Warrant Agreement) as of the last trading day preceding the date hereof, of $______, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] acquire in a cashless exercise _____ shares of Common Stock pursuant to the terms of Section 2.1 of such Warrant Agreement. Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below. Signature:________________________________ Name (print):_____________________________ Title (if applicable):____________________ Company (if applicable):__________________ 11 EX-99 10 exhibiteight.txt EXHIBIT 99.8 EXHIBIT 99.8 ------------ AMENDMENT NO. 3 TO NOTE PURCHASE AGREEMENT ------------------------------------------ This AMENDMENT NO. 3 is made as of the 11th day of July, 2002 (the "Amendment") by and between Kevin Kimberlin Partners, L.P., a Delaware limited partnership ("KKP"), The Immune Response Corporation, a Delaware corporation ("Seller"), Oshkim Limited Partnership ("Oshkim") and The Kimberlin Family 1998 Irrevocable Trust (the "Trust"); WHEREAS, Seller, KKP and Oshkim entered into that certain Note Purchase Agreement dated as of November 9, 2001, as amended by Amendment No. 1 to Note Purchase Agreement dated as of February 14, 2002 and as further amended by Amendment No. 2 to Note Purchase Agreement dated as of May 3, 2002 (the "Agreement"); WHEREAS, the Seller proposes to issue and sell Additional Securities to the Trust and the Trust wishes to purchase Additional Securities from Seller. WHEREAS, the parties desire to amend the Agreement to add the Trust and any affiliates of KKP, Oshkim and/or the Trust as parties and in certain other respects as set forth below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties hereby amend the Agreement and agree as follows: 1. Effective as of the date of this Amendment, the Agreement is hereby amended as follows: a. The Trust and any affiliates of KKP, Oshkim and/or the Trust shall be parties to the Agreement. b. All references in the Agreement to "Buyer" for all purposes related to Additional Securities shall be deemed to refer to the Trust and any affiliates of KKP, Oshkim and/or the Trust. c. Section 9 is hereby amended to add subsections (v) and (vi) which shall read in their entirety as follows: "(v) if Seller shall default in the payment of principal on any indebtedness (to any party other than Buyer) in excess of $200,000 beyond the period of grace, if any, provided in the instrument or agreement under which such indebtedness was created," 2. Except as specifically provided herein, the Agreement, as originally executed by the parties thereto and as amended hereby, shall remain in full force and effect. 3. Any defined terms not defined herein shall have the respective meanings set forth in the Agreement. 4. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such jurisdiction. -1- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. KEVIN KIMBERLIN PARTNERS, L.P. By:_________________________________ Name:_________________________ Title:________________________ OSHKIM LIMITED PARTNERSHIP By:_________________________________ Name:_________________________ Title:________________________ THE KIMBERLIN FAMILY 1998 IRREVOCABLE TRUST By:_________________________________ Name:_________________________ Title:________________________ THE IMMUNE RESPONSE CORPORATION By:_________________________________ Name:_________________________ Title:________________________ -2- EX-99 11 exhibitnine.txt EXHIBIT 99.9 EXHIBIT 99.9 ------------ AMENDMENT NO. 2 TO INTELLECTUAL PROPERTY SECURITY AGREEMENT ----------------------------------------------------------- This AMENDMENT NO. 2 is made as of the 11th day of July, 2002 (the "Amendment") by and between Kevin Kimberlin Partners, L.P., a Delaware limited partnership ("KKP"), The Immune Response Corporation, a Delaware corporation ("Seller"), Oshkim Limited Partnership ("Oshkim"), and The Kimberlin Family 1998 Irrevocable Trust (the "Trust"). WHEREAS, the Seller and the KKP entered into that certain Intellectual Property Agreement, dated as of November 9, 2001, as amended by Amendment No. 1 to Intellectual Property Security Agreement, dated as of February 14, 2002, by and between KKP, Seller and Oshkim (the "IP Agreement"). WHEREAS, the Seller proposes to issue and sell Additional Securities (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between KKP and Seller and as amended) to the Trust and the Trust wishes to purchase Additional Securities from Seller. WHEREAS, the parties desire to amend the IP Agreement to add the Trust and any affiliates of KKP, Oshkim and/or the Trust as parties and in certain other respects as set forth below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties hereby amend the IP Agreement and agree as follows: 1. Effective as of the date of this Amendment, the IP Agreement is hereby amended as follows: a. The Trust and any affiliates of KKP, Oshkim and/or the Trust shall be parties to the IP Agreement. b. All references in the IP Agreement to "Lender" shall be deemed to refer to the Trust, Oshkim, KKP and any affiliates of the foregoing. 2. Except as specifically provided herein, the IP Agreement, as originally executed by the parties thereto and as amended hereby, shall remain in full force and effect. 3. Any defined terms not defined herein shall have the respective meanings set forth in the IP Agreement. 4. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such jurisdiction. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. KEVIN KIMBERLIN PARTNERS, L.P. By:_________________________________ Name:_________________________ Title:________________________ OSHKIM LIMITED PARTNERSHIP By:_________________________________ Name:_________________________ Title:________________________ THE KIMBERLIN FAMILY 1998 IRREVOCABLE TRUST By:_________________________________ Name:_________________________ Title:________________________ THE IMMUNE RESPONSE CORPORATION By:_________________________________ Name:_________________________ Title:________________________ EX-99 12 exhibitten.txt EXHIBIT 99.10 EXHIBIT 99.10 ------------- THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE IMMUNE RESPONSE CORPORATION 8% CONVERTIBLE SECURED PROMISSORY NOTE $637,189 New York, New York July 30, 2002 FOR the receipt of $637,189 the undersigned, The Immune Response Corporation, a Delaware corporation (the "Issuer"), hereby unconditionally promises to pay on the Note Maturity Date (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between the Purchaser, Kevin Kimberlin Partners, L.P., a Delaware limited partnership, and the Issuer, and as amended as of February 14, 2002 and May 3, 2002, and as further amended as of July 11, 2002 (the "Note Purchase Agreement")) to the order of The Kimberlin Family 1998 Irrevocable Trust (the "Purchaser"), at the office of the Purchaser located at 535 Madison Avenue, 18th Floor, New York, New York 10022, or such other address designated by the Purchaser, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) Six Hundred Thirty-Seven Thousand One Hundred Eighty-Nine Dollars ($637,189) or (b) if less as a result of any voluntary conversion(s) of this Note in part in accordance with Section 3.4 of the Note Purchase Agreement or in part into Units as contemplated below, the aggregate unpaid principal amount of this Note. Subject to Section 3.4 of the Note Purchase Agreement, the Issuer further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time, from the date hereof, in like money, at the rate of eight (8%) percent per annum, as and at the dates specified in Section 3.3 of the Note Purchase Agreement. This Note is one of the promissory notes referred to in the Note Purchase Agreement, and is entitled to the benefits thereof, is secured as provided therein (and as provided in that certain Intellectual Property Security Agreement, dated November 9, 2001, executed by the Issuer, as amended as of February 14, 2002, and as further amended as of July 11, 2002) and is subject to conversion as set forth therein. Notwithstanding the foregoing, up to $433,362 of this Note is convertible, at the sole option of the Purchaser, in whole or in part, into Units (as defined in the Issuer's Definitive Proxy Statement dated May 15, 2002, the "Proxy") rather than common stock at the Closing Price (as defined in the Proxy), solely in the event that the Issuer is (i) able to obtain a written confirmation from The Nasdaq Stock Market that there is an applicable exemption to do so from all applicable subsections of the National Association of Security Dealers, Inc. ("NASD") Rule 4350(i) or (ii) able to obtain stockholder approval as required by NASD Rule 4350(i). In the event of any conflict between the Note Purchase Agreement and this Note, the terms and provisions of the Note Purchase Agreement shall govern. Upon the occurrence of any one or more of the Events of Default specified in the Note Purchase Agreement or if the Issuer is unable to obtain any stockholder approval required under NASD Rule 4350(i) by November 30, 2002, all amounts then remaining unpaid on this Note and/or any other Note shall become, or may be declared to be, immediately due and payable, all as provided in the Note Purchase Agreement. The Issuer shall use its reasonable best efforts to obtain by November 30, 2002, any stockholder approval required under NASD Rule 4350(i). Subject to the provisions of the legend above, this Note is freely transferable and assignable, in whole or in part, by the Purchaser, and such transferee or assignee shall have the same rights hereunder as the Purchaser. The Issuer may not assign or delegate any of its obligations under this Note without the prior written consent of the Purchaser (or its successor, transferee or assignee). All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Subject to Section 3.3 of the Note Purchase Agreement, the Issuer agrees to pay all of the Purchaser's expenses, including reasonable attorneys' costs and fees, incurred in collecting sums due under this Note. This Note shall be subject to prepayment only in accordance with the terms of the Note Purchase Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE IMMUNE RESPONSE CORPORATION By: ________________________________ Name:_______________________________ Title:______________________________ EX-99 13 exhibiteleven.txt EXHIBIT 99.11 EXHIBIT 99.11 ------------- WARRANT AGREEMENT ----------------- WARRANT AGREEMENT (this "Agreement"), dated as of July 30, 2002, by and between The Immune Response Corporation, a Delaware corporation (the "Company"), and The Kimberlin Family 1998 Irrevocable Trust (the "Warrant Holder"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the parties have entered into that certain Note Purchase Agreement, dated as of November 9, 2001, by and between the Company and Kevin Kimberlin Partners, L.P., as amended by Amendment No. 1 to the Note Purchase Agreement dated as of February 14, 2002, Amendment No. 2 dated as of May 3, 2002, each by and between the Company, Kevin Kimberlin Partners, L.P. and Oshkim Limited Partnership, a Nevada limited partnership, and Amendment No. 3 dated as of July 11, 2002, by and between the Company, Kevin Kimberlin Partners, L.P, Oshkim Limited Partnership and Warrant Holder (the "Note Purchase Agreement"); and WHEREAS, pursuant to the Note Purchase Agreement, the Warrant Holder has agreed to loan to the Company Six Hundred Thirty-Seven Thousand One Hundred Eighty-Nine Dollars ($637,189) (the "Loan Amount"), subject to the issuance by the Company of a convertible secured promissory note (the "Note"), and the Company has agreed to issue to the Warrant Holder warrants (the "Warrants") to purchase 1,720,272 shares of the Company's common stock, par value $.0025 per share (the "Common Stock"), subject to the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. WARRANTS. The Company hereby grants to the Warrant Holder, subject to the terms set forth herein, the right to purchase from the Company at any time and from time to time after the date hereof until the earlier of (i) 5:00 p.m., New York City local time, on July 30, 2012 (the "Expiration Date"), up to 1,720,272 fully paid and non-assessable shares of Common Stock, subject to adjustment pursuant to Section 3 hereof (the "Shares"), which number of Shares equals the Loan Amount divided by eighty (80%) percent of the Exercise Price. For purposes of this Agreement, the "Exercise Price" shall initially be $0.463, which is equal to the average of the closing bid prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date hereof, subject to any adjustments pursuant to Section 3 hereof. 2. EXERCISE OF WARRANTS. 2.1 EXERCISE. The Warrants may be exercised by the Warrant Holder, in whole or in part, by delivering the Notice of Exercise purchase form, attached as EXHIBIT A hereto, duly executed by the Warrant Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer or check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the "Purchase Price"). The Purchase Price may also be paid, in whole or in part, by delivery of such purchase form and of shares of Common Stock owned by the Warrant Holder having a Fair Market Value (as defined in Section 2.3 hereof) on the last trading day ending the day immediately preceding the Exercise Date (as defined below) equal to the portion of the Purchase Price being paid in such shares. In addition, the Warrants may be exercised, pursuant to a cashless exercise, except as set forth in Section 3.3(4) below, by providing irrevocable instructions to the Company, through delivery of the aforesaid purchase form with an appropriate reference to this Section 2.1 to issue the number of shares of the Common Stock equal to the product of (a) the number of shares as to which the Warrants are being exercised multiplied by (b) a fraction, the numerator of which is the Fair Market Value of a share of the Common Stock on the last business day preceding the Exercise Date less the Exercise Price therefore and the denominator of which is such Fair Market Value. For purposes hereof, "Exercise Date" shall mean the date on which all deliveries required to be made to the Company upon exercise of Warrants pursuant to this Section 2.1 shall have been made. 2.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of the Warrants (in whole or in part) in accordance with Section 2.1 hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Warrant Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of the Warrants not exercised by the Warrant Holder. The Warrant Holder shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2.1 hereof were delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.3 FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is The Nasdaq National Market or any other national securities exchange, the last sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market, or (b) if the principal market for the Common Stock is not a national securities exchange or The Nasdaq National Market and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the closing bid and the closing asked prices for the Common Stock on such day as quoted on such System, or (c) if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by Pink Sheets LLC; provided, however, that if none of (a), (b) or (c) above is applicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be reasonably determined, in good faith, by the Board of Directors of the Company (the "Board of Directors"). 3. ADJUSTMENTS. 2 3.1 STOCK SPLITS, STOCK DIVIDENDS AND COMBINATIONS. If the Company at any time subdivides the outstanding shares of the Common Stock or issues a stock dividend (in Common Stock) on the outstanding shares of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately decreased, and the number of Shares subject hereto shall be proportionately increased, and if the Company at any time combines (by reverse stock split or otherwise) the outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject hereto shall be proportionately decreased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. 3.2 MERGER OR CONSOLIDATION. In the case of any consolidation of the Company with, or merger of the Company with or into another entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding capital stock of the Company), the entity formed by such consolidation or merger shall execute and deliver to the Warrant Holder a supplemental warrant agreement providing that the Warrant Holder of the Warrants then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrants) to receive, upon exercise of such Warrants, the kind and amount of shares of capital stock and other securities and property receivable upon such consolidation or merger by a holder of the number of Shares for which such Warrants might have been exercised immediately prior to such consolidation or merger. Such supplemental warrant agreement shall contain provisions which shall be identical to the adjustments provided in Section 3.1 hereof and to the provisions of Section 10 hereof. This Section 3.2 shall similarly apply to successive consolidations or mergers. 3.3 The Exercise Price shall also be subject to adjustment as follows: (1) SPECIAL DEFINITIONS. For purposes of this Section 3.3, the following definitions shall apply: (A) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (B) "Original Issue Date" shall mean the date of this Agreement. (C) "Convertible Securities" shall mean any evidence of indebtedness, shares of capital stock (other than Common Stock) or other securities convertible into or exchangeable for Common Stock. (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the Original Issue Date, other than shares of Common Stock issued at any time: (i) upon exercise of the Warrants (including any additional warrants issued to the Warrant Holder or Kevin Kimberlin Partners, L.P. in accordance with the terms and provisions of the Note Purchase Agreement); 3 (ii) pursuant to the exercise of options, warrants or other Common Stock purchase rights issued (or to be issued) to employees, officers or directors of, or consultants or advisors to, or any strategic ally of, the Company pursuant to any stock purchase or stock option plan or other arrangement approved by the Board of Directors; (iii) pursuant to the exercise of options, warrants or Convertible Securities outstanding as of the Original Issue Date; or (iv) in connection with the acquisition of all or part of another entity by stock acquisition, merger, consolidation or other reorganization, or by the purchase of all or part of the assets of such other entity (including securities issued to persons formerly employed by such other entity and subsequently hired by the Company and to any brokers or finders in connection therewith) where the Company or its stockholders own more than fifty (50%) percent of the voting power of the acquired, surviving, combined or successor company. (2) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES. Subject to Section 3.3(1)(D) hereof, in the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities, then the number of shares of Common Stock actually issued upon the exercise of such Options or, in the case of Convertible Securities, the actual conversion or exchange of such Convertible Securities, shall be Additional Shares of Common Stock. (3) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company, after the Original Issue Date, shall issue Additional Shares of Common Stock without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued by (y) the Conversion Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock so issued. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(3), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (4) ADJUSTMENT OF EXERCISE PRICE UPON ADVERSE MARKET CONDITIONS. Notwithstanding anything to the contrary contained herein, if at any time after the Original Issue Date, the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days (the "Ten-Day Average") shall be less than the product obtained by multiplying (x) seventy-five (75%) -4- percent times (y) the Exercise Price otherwise then in effect (the "Adverse Market Price"), then such Ten-Day Average may, subject to the terms of this Section 3.3(4), become and constitute the adjusted Exercise Price (the "Adjusted Exercise Price"), and the Warrants may be exercised, in whole or in part, by the Warrant Holder at the Adjusted Exercise Price. To exercise all or any portion of the Warrants at the Adjusted Exercise Price, the Warrant Holder shall (i) deliver written notice (the "Adverse Market Price Notice") of such intent to the Company during such time as the Ten-Day Average shall remain equal to or below the Adverse Market Price and (ii) provide payment by cash or wire transfer of immediately available funds in respect of such Warrants to be exercised to the Company within five (5) trading days after delivery of the Adverse Market Price Notice. The Ten-Day Average based on the ten (10) consecutive trading days ending on the date that the Adverse Market Price Notice shall have been delivered by the Warrant Holder shall be the Adjusted Exercise Price, unless (A) the Warrant Holder shall not deliver the applicable payment by cash or wire transfer within the five (5) trading days following delivery of the Adverse Market Price Notice or (B) the Warrant Holder shall have provided a new Adverse Market Price Notice during such five (5) trading days period, in which case the Adjusted Exercise Price shall be adjusted based on the Ten-Day Average preceding such new Adverse Market Price Notice. The provisions of this Section 3.3(4) shall continue until all of the Warrants shall have been exercised. The number of Warrant Shares shall not be adjusted as a result of any adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(4). (5) DETERMINATION OF CONSIDERATION. For purposes of this Section 3, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (A) CASH AND PROPERTY. Such consideration shall: (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company excluding expenses, discounts and commissions payable by the Company in connection with such issuance or sale and amounts paid or payable for accrued interest. (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as reasonably determined in good faith by the Board of Directors net of expenses as set forth in clause (i) above; and (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration that covers both cash and property other than cash, the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, shall be as reasonably determined in good faith by the Board of Directors. (B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Company for Additional Shares of Common Stock issued pursuant to Section 3.3(2), relating to Options and Convertible Securities, shall be determined by dividing: (i) the total amount, if any, received by the Company as consideration for the issuance of such Options or Convertible Securities, plus the aggregate amount of additional consideration paid to the -5- Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities (subject to any adjustments in the exercise price thereof), by (ii) the number of shares of Common Stock issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. 3.4 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 3, the Company, at its expense, shall promptly compute such adjustment or readjustment of the Exercise Price in accordance with the terms hereof and furnish to each Holder of Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or deemed to have been issued, (ii) the Exercise Price in effect immediately prior to such adjustment or readjustment, (iii) the number of Additional Shares of Common Stock issued or deemed to have been issued and (iv) the number of shares of Common Stock and the amount, if any, of other securities or property that at the time would be received upon the exercise of the Warrants. The Company shall, upon the written request at any time of any Holder of Warrants, furnish or cause to be furnished to such Holder a like certificate setting forth (x) all adjustments and readjustments of the Exercise Price since the Original Issue Date and (y) the Exercise Price then in effect. 3.5 ASSURANCES WITH RESPECT TO EXERCISE RIGHTS. The Company shall not, by amendment of its Certificate of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times, in good faith, assist in the carrying out of all the provisions of this Agreement and in taking of all such actions as may be necessary or appropriate in order to protect the exercise rights of the Warrant Holder against impairment or dilution. 3.6 If the Warrant Holder converts up to $433,362 of the Note, dated as of July 30, 2002, into Units, the number of Shares subject hereto shall be proportionately decreased to a number of Shares equal to the product of (a) the Shares (for which this Warrant is exercisable immediately before this calculation is performed) multiplied by (b) a fraction the numerator of which shall be (x) the remaining principal amount owed by the Company to the Warrant Holder under the Note and the Denominator of which shall be (y) equal to the original Loan Amount. 4. TRANSFERS. 4.1 UNREGISTERED SECURITIES. The Warrant Holder hereby acknowledges and agrees that the Warrants and the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" under the Securities Act inasmuch as they are -6- being acquired in a transaction not involving a public offering, and the Warrant Holder agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Warrants or any Shares issued upon exercise of the Warrants in the absence of (a) an effective registration statement under the Act as to the Warrants or such Shares and registration and/or qualification of the Warrants or such Shares under any applicable Federal or state securities law then in effect or (b) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. 4.2 TRANSFERABILITY. Subject to the provisions of Section 4.1 hereof, the rights under this Agreement are freely transferable and assignable, in whole or in part, by the Warrant Holder, and such transferee or assignee shall have the same rights hereunder as the Warrant Holder. 4.3 WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Warrant Holders of the Warrants. Until any transfer of Warrants in accordance with this Agreement is reflected in the warrant register, the Company may treat the Warrant Holder as the absolute owner hereof for all purposes. Any Warrant Holder may change such Warrant Holder's address as shown on the warrant register by written notice to the Company requesting such change. 5. NO FRACTIONAL SHARES. Any adjustment in the number of Shares purchasable hereunder shall be rounded to the nearest whole share. 6. INVESTMENT REPRESENTATIONS. The Warrant Holder agrees and acknowledges that it is acquiring the Warrants and will be acquiring the Shares for its own account and not with a view to any resale or distribution other than in accordance with Federal and state securities laws. The Warrant Holder is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. 7. COVENANTS AS TO THE SHARES. The Company covenants and agrees that, subject to Sections 6.2(a) of the Note Purchase Agreement, the shares of Common Stock issuable upon exercise of the Warrants, will, upon issuance in accordance with the terms hereof, be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issuance thereof imposed by or through the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificates in respect of such shares in a name other than that of the Warrant Holder and the Company shall not be required to issue or deliver such certificates unless or until the person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or it shall be established to the satisfaction of the Company that such tax has been paid. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights imposed by or through the Company, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented under this Agreement. 8. LEGEND. Any certificate evidencing the Shares issuable upon exercise hereof will bear a legend indicating that such securities have not been registered under the Securities Act or under any state securities laws and may not be sold or offered for sale in the absence of an effective registration -7- statement as to the securities under the Securities Act and any applicable state securities law or an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 9. RIGHTS APPLICABLE TO THE WARRANT SHARES. The parties hereby acknowledge and agree that the Shares, when issued in accordance with the terms hereof, shall be entitled to all of the same rights and privileges provided to the Company's capital stock issued upon conversion of the Note, as set forth in the Note Purchase Agreement. 10. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company shall, at any time prior to the exercise of all Warrants, declare a dividend (other than a dividend consisting solely of shares of Common Stock) or otherwise distribute to its stockholders any assets, properties, rights, evidence of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another, or any other thing of value, the Warrant Holder shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Warrant Holder would have been entitled to receive at the time of such dividend or distribution as if the Warrants had been exercised immediately prior to such dividend or distribution. At the time of any such dividend or distribution, the Company shall make (and maintain) appropriate reserves to ensure the timely performance of the provisions of this Section 10. 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS. This Agreement or any provisions hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the Company and by the Warrant Holder. 11.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 11.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to the Company: The Immune Response Corporation 5935 Darwin Court Carlsbad, CA 92008 Attention: President Facsimile: (760) 431-8636 With a copy (which copy shall not constitute notice) to: Pillsbury Winthrop LLP -8- 50 Fremont Street San Francisco, CA 94105 Attention: Thomas E. Sparks, Esq. Facsimile: (415) 983-7396 (ii) If to the Warrant Holder: Kimberlin Family 1998 Irrevocable Trust 535 Madison Avenue New York, NY 10022 Attention: Kevin Kimberlin and Bruno Lerer, Esq. Facsimile: (212) 486-7392 With a copy (which copy shall not constitute notice) to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas, 45th Floor New York, NY 10020-1104 Attention: Stephen R. Connoni, Esq./Sandip Kakar, Esq. Facsimile: (212) 536-3901 11.4 HEADINGS. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the terms hereof. 11.5 CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Shares issued or issuable upon the exercise of the Warrants in a manner that interferes with the timely exercise of the Warrants. 11.6 NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Subject to Section 6.2(a) of the Note Purchase Agreement, this Agreement shall not entitle the Warrant Holder hereof to any voting rights or other rights as a stockholder of the Company with respect to the Shares prior to the exercise of the Warrants. No provision of this Agreement, in the absence of affirmative action by the Warrant Holder to purchase the Shares, and no mere enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11.7 SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and transferees. 11.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. [SIGNATURE PAGE FOLLOWS] -9- IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. THE IMMUNE RESPONSE CORPORATION By:_______________________________________ Name:__________________________________ Title:_________________________________ THE KIMBERLIN FAMILY 1998 IRREVOCABLE TRUST By:_______________________________________ Name:__________________________________ Title:_________________________________ -10- EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be signed only on exercise of any of the Warrants) Dated:________________________ To: The Immune Response Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant Agreement, hereby irrevocably elects to (check one of the following): [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith makes a cash payment of $_____________, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith delivers ___________ shares of Common Stock having a Fair Market Value (as defined in such Warrant Agreement) as of the last trading day preceding the date hereof, of $______, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] acquire in a cashless exercise _____ shares of Common Stock pursuant to the terms of Section 2.1 of such Warrant Agreement. Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below. Signature:_________________________________ Name (print):______________________________ Title (if applicable):_____________________ Company (if applicable):___________________ EX-99 14 exhibit99-12.txt EXHIBIT 99.12 Dated as of August 8, 2002 LETTER AGREEMENT ---------------- The Immune Response Corporation 5935 Darwin Court Carlsbad , CA 92008 Attention: Michael L. Jeub Re: Nasdaq Compliance Restrictions ------------------------------ Dear Michael: The undersigned, each a security holder and an affiliate of a director of The Immune Response Corporation, a Delaware corporation (the "Company"), understand that the Nasdaq National Market ("Nasdaq") has contacted the Company regarding an alleged violation of National Association of Security Dealers ("NASD") Rule 4350(i)(1)(A) (the "Insider Rule"), Rule 4350(i)(1)(B) (the "Change in Control Rule") and Rule 4350(i)(1)(D) (the "20% Rule") in connection with the sale of Notes and Warrants to the undersigned pursuant to the Note Purchase Agreement dated as of November 9, 2001, by and between the Company and the Kevin Kimberlin Partners, L.P., a Delaware limited partnership ("KKP"), as amended by Amendment No. 1 to the Note Purchase Agreement dated as of February 14, 2002, Amendment No. 2 to the Note Purchase Agreement, dated as of May 3, 2002, each by and between the Company, KKP and Oshkim Limited Partnership, a Nevada limited partnership ("Oshkim") and Amendment No. 3 to the Note Purchase Agreement, dated as of July 11, 2002, by and between the Company, KKP, Oshkim and The Kimberlin Family 1998 Irrevocable Trust (the "Agreement"). While neither the Company nor the undersigned believe that the transactions pursuant to the Agreement violated the Insider Rule, the Change in Control Rule or the 20% Rule, all parties agree that, as requested by Nasdaq in order to ensure compliance with the Insider Rule, it is in the best interest of the Company and the undersigned to agree to certain restrictions with respect to the Common Stock of the Company underlying the Notes and Warrants issued in May, June and July, 2002, pursuant to the Agreement. In recognition of the benefit that continued listing of the Company's Common Stock on Nasdaq would confer upon the undersigned as security holders of the Company and to enable the Company and the undersigned to engage in future financing pursuant to the Agreement, the undersigned and the Company agree that until either (i) the Company obtains stockholder approval (which approval the Company shall use its best efforts to obtain by November 30, 2002) of the transactions for purposes of compliance with the Insider Rule, the Change in Control Rule and the 20% Rule or (ii) at such time as a proposed merger, sale of assets or similar transaction, or tender or exchange offer is under consideration by our Board of Directors, the restrictions will lapse, the undersigned will not, without the prior written consent of the Company, directly or indirectly: (i) vote any shares of the Common Stock issuable upon the conversion or exercise of the respective Notes and Warrants issued in May, June and July, 2002; (ii) offer, pledge, sell, or otherwise dispose of or transfer any shares of the Common Stock issuable upon the conversion or exercise of the respective Notes and Warrants issued in May, June and July, 2002; (iii) receive any additional shares of capital sock (or securities convertible into or exchangeable for capital stock) issuable by the Company via a stock dividend or stock distribution paid with respect to its Common Stock ("Dividends") issuable upon the conversion or exercise of the respective Notes and Warrants issued in May, June and July, 2002; (iv) convert or exercise any of the respective Notes and Warrants issued in May, June and July, 2002. Notwithstanding subsection (ii), the undersigned may transfer or assign shares of the Common Stock issuable upon the conversion or exercise of the respective Notes and Warrants issued pursuant to the Agreement (i) as a bona fide gift or gifts, provided that the donee or donees thereof enter into a Letter Agreement on terms identical to the terms of this Letter Agreement, or (ii) to any trust for the direct or indirect benefit of the undersigned, provided that the trustee of the trust enter into a Letter Agreement on terms identical to the terms of this Letter Agreement, and provided further that any such transfer shall not involve a disposition for value. In addition, notwithstanding the foregoing, the undersigned may transfer or assign the capital stock of the Company to any partner of the undersigned or affiliate of such partner; provided, however, that in any such case, it shall be a condition to the transfer or assignment that the transferee or assignee enter into a Letter Agreement on terms identical to the terms of this Letter Agreement and there shall be no further transfer of such capital stock except in accordance with this Letter Agreement, and provided further that any such transfer shall not involve a disposition for value. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company's transfer agent and registrar against the transfer of the undersigned's securities except in compliance with the foregoing restrictions. Notwithstanding subsection (iii), any Dividends which the undersigned would have the right to receive shall be held in escrow for the undersigned by the Chief Financial Officer of the Company until obtaining stockholder approval for the transaction for purposes of compliance with the Insider Rule, the Change in Control Rule or the 20% Rule. Very truly yours, OSHKIM LIMITED PARTNERSHIP -------------------------------------------- By: Its: THE KIMBERLIN FAMILY 1998 IRREVOCABLE TRUST -------------------------------------------- By: Its: Agreed and accepted: THE IMMUNE RESPONSE CORPORATION ___________________________________________________ Michael L. Jeub Vice President, Finance and Chief Financial Officer EX-99 15 exhibit99-13.txt EXHIBIT 99.13 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE IMMUNE RESPONSE CORPORATION 8% CONVERTIBLE SECURED PROMISSORY NOTE $4,849,453.79 New York, New York November 8, 2002 FOR the receipt of $220,000 ($200,000 in cash and $20,000 which is deemed to have been previously received) and the cancellation of $4,566,836 of principal indebtedness plus $62,617.70 of interest represented by the (i) 8% Secured Promissory Note dated August 13, 2002 from The Immune Response Corporation, a Delaware corporation (the "Issuer"), to The Kimberlin Family 1998 Irrevocable Trust (the "Kimberlin Trust"), (ii) 8% Secured Promissory Note dated August 23, 2002 from the Issuer to the Kimberlin Trust, (iii) 8% Secured Promissory Note dated August 29, 2002 from the Issuer to the Kimberlin Trust, (iv) 8% Secured Promissory Note dated September 3, 2002 from the Issuer to the Kimberlin Trust, (v) 8% Secured Promissory Note dated September 6, 2002 from the Issuer to the Kimberlin Trust, (vi) 8% Secured Promissory Note dated September 16, 2002 from the Issuer to the Kimberlin Trust, (vii) 8% Secured Promissory Note dated September 19, 2002 from the Issuer to the Kimberlin Trust, (viii) 8% Secured Promissory Note dated September 26, 2002 from the Issuer to the Kimberlin Trust, (ix) 8% Secured Promissory Note dated October 11, 2002 from the Issuer to Oshkim Limited Partnership ("Oshkim"), (x) 8% Secured Promissory Note dated October 28, 2002 from the Issuer to the Cheshire Associates LLC, the Issuer hereby unconditionally promises to pay on the Note Maturity Date (as defined in that certain Note Purchase Agreement, dated November 9, 2001, by and between the KKP and the Issuer, and as amended by Amendment No. 1, dated as of February 14, 2002 and Amendment No. 2, dated as of May 3, 2002, each by and between the Issuer, KKP and Oshkim and as further amended by Amendment No. 3, dated as of July 11, 2002, by and between the Issuer, KKP, Oshkim and the Kimberlin Trust (the "Note Purchase Agreement")) to the order of Cheshire Associates LLC (the "Purchaser"), at the office of the Purchaser located at 535 Madison Avenue, 18th Floor, New York, New York 10022, or such other address designated by the Purchaser, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) $4,849,453.79 or (b) if less as a result of any voluntary conversion(s) of this Note in part in accordance with Section 3.4 of the Note Purchase Agreement, the aggregate unpaid principal amount of this Note. Subject to Section 3.4 of the Note Purchase Agreement, the Issuer further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time, from the date hereof, in like money, at the rate of eight (8%) percent per annum, as and at the dates specified in Section 3.3 of the Note Purchase Agreement. This Note is one of the promissory notes referred to in the Note Purchase Agreement, and is entitled to the benefits thereof, is secured as provided therein (and as provided in that certain Intellectual Property Security Agreement, dated November 9, 2001, by and between the Issuer and KKP, as amended by Amendment No. 1, dated February 26, 2002, by and between the Issuer, KKP and Oshkim, and as further amended by Amendment No. 2, dated July 11, 2002, by and between the Issuer, KKP, Oshkim and the Kimberlin Trust) and is subject to conversion as set forth therein. In the event of any conflict between the Note Purchase Agreement and this Note, the terms and provisions of the Note Purchase Agreement shall govern. Upon the occurrence of any one or more of the Events of Default specified in the Note Purchase Agreement, all amounts then remaining unpaid on this Note and all amounts then remaining unpaid on any note issued by the Issuer to the Purchaser or to any affiliate and/or related party of the Purchaser shall become, or may be declared to be, immediately due and payable. Subject to the provisions of the legend above, this Note is freely transferable, in whole or in part, by the Purchaser, and such transferee shall have the same rights hereunder as the Purchaser. The Issuer may not assign or delegate any of its obligations under this Note without the prior written consent of the Purchaser (or its successor, transferee or assignee). All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Subject to Section 3.3 of the Note Purchase Agreement, the Issuer agrees to pay all of the Purchaser's expenses, including reasonable attorneys' costs and fees, incurred in collecting sums due under this Note. This Note shall be subject to prepayment only in accordance with the terms of the Note Purchase Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE IMMUNE RESPONSE CORPORATION By: --------------------------- Name: --------------------- Title: -------------------- - 2 - EX-99 16 exhibit99-14.txt EXHIBIT 99.14 WARRANT AGREEMENT WARRANT AGREEMENT (this "Agreement"), dated as of November 12, 2002, by and between The Immune Response Corporation, a Delaware corporation (the "Company"), and Cheshire Associates LLC, a Delaware limited liability company (the "Warrant Holder"). W I T N E S S E T H WHEREAS, the parties have entered into that certain Note Purchase Agreement, dated as of November 9, 2001, by and between the Company and Kevin Kimberlin Partners, L.P. ("KKP"), as amended by Amendment No. 1 to the Note Purchase Agreement, dated as of February 14, 2002 and Amendment No. 2 dated as of May 3, 2002, each by and between the Company, KKP and Oshkim Limited Partnership ("Oshkim") and as further amended by Amendment No. 3 by and between the Company, KKP, Oshkim and The Kimberlin Family 1998 Irrevocable Trust (the "Note Purchase Agreement"); and WHEREAS, pursuant to the Note Purchase Agreement, the Warrant Holder has agreed to loan to the Company $4,849,453.79 Dollars (the "Loan Amount"), subject to the issuance by the Company of a convertible secured promissory note (the "Note"), and the Company has agreed to issue to the Warrant Holder warrants (the "Warrants") to purchase 4,243,354 shares of the Company's common stock, par value $.0025 per share (the "Common Stock"), which equals the Loan Amount divided by eighty (80%) percent of the Exercise Price (as defined in Section 1 hereof), subject to the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. WARRANTS. The Company hereby grants to the Warrant Holder, subject to the terms set forth herein, the right to purchase from the Company at any time and from time to time after the date hereof until 5:00 p.m., New York City local time, on November 8, 2012 (the "Expiration Date"), up to 4,243,354 fully paid and non-assessable shares of Common Stock, subject to adjustment pursuant to Section 3 hereof (the "Shares"), which number of Shares equals the Loan Amount divided by eighty (80%) percent of the Exercise Price. Notwithstanding the foregoing, the Warrants shall only be exercisable to the extent that shares of Common Stock issuable on exercise of the Warrants, when aggregated with (i) the Company's outstanding shares of Common Stock as of the date hereof and (ii) shares of Common Stock issuable on conversion or exercise, as the case may be, of notes, warrants and stock options outstanding as of the date hereof, would not exceed the number of shares authorized under the Company's Restated Certificate of Incorporation, as amended. The Company shall promptly cause its Restated Certificate of Incorporation, as amended, to be further amended to increase the number of shares of Common Stock authorized thereunder as shall be sufficient for reserving and making available shares of Common Stock issuable upon the exercise in full of the Warrants issued to the Warrant holder hereunder. For purposes of this Agreement, the "Exercise Price" shall initially be $1.428, which is equal to the average of the closing bid prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date hereof, subject to any adjustments pursuant to Section 3 hereof. 2. Exercise of Warrants. -------------------- 2.1 EXERCISE. The Warrants may be exercised by the Warrant Holder, in whole or in part, by delivering the Notice of Exercise purchase form, attached as Exhibit A hereto, duly executed by the Warrant Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer or check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the "Purchase Price"). The Purchase Price may also be paid, in whole or in part, by delivery of such purchase form and of shares of Common Stock owned by the Warrant Holder having a Fair Market Value (as defined in Section 2.3 hereof) on the last trading day ending the day immediately preceding the Exercise Date (as defined below) equal to the portion of the Purchase Price being paid in such shares. In addition, the Warrants may be exercised, pursuant to a cashless exercise, except as set forth in Section 3.3(4) below, by providing irrevocable instructions to the Company, through delivery of the aforesaid purchase form with an appropriate reference to this Section 2.1 to issue the number of shares of the Common Stock equal to the product of (a) the number of shares as to which the Warrants are being exercised multiplied by (b) a fraction, the numerator of which is the Fair Market Value of a share of the Common Stock on the last business day preceding the Exercise Date less the Exercise Price therefore and the denominator of which is such Fair Market Value. For purposes hereof, "Exercise Date" shall mean the date on which all deliveries required to be made to the Company upon exercise of Warrants pursuant to this Section 2.1 shall have been made. 2.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of the Warrants (in whole or in part) in accordance with Section 2.1 hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Warrant Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Warrant Holder shall be entitled upon such exercise and (if applicable) (ii) a new warrant agreement of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of the Warrants not exercised by the Warrant Holder. The Warrant Holder shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2.1 hereof were delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.3 FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is The Nasdaq National Market or any other national securities exchange, the last sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market, or (b) if the principal market for the Common Stock is not a national securities exchange or The Nasdaq National Market and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System, the mean between the closing bid and the closing asked prices for the Common Stock on such day as quoted on such System, or (c) if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotations 2 System, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by Pink Sheets LLC; provided, however, that if none of (a), (b) or (c) above is applicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be reasonably determined, in good faith, by the Board of Directors of the Company (the "Board of Directors"). 3. Adjustments. ----------- 3.1 STOCK SPLITS, STOCK DIVIDENDS AND COMBINATIONS. If the Company at any time subdivides the outstanding shares of the Common Stock or issues a stock dividend (in Common Stock) on the outstanding shares of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately decreased, and the number of Shares subject hereto shall be proportionately increased, and if the Company at any time combines (by reverse stock split or otherwise) the outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject hereto shall be proportionately decreased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. 3.2 MERGER OR CONSOLIDATION. In the case of any consolidation of the Company with, or merger of the Company with or into another entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding capital stock of the Company), the entity formed by such consolidation or merger shall execute and deliver to the Warrant Holder a supplemental warrant agreement providing that the Warrant Holder of the Warrants then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrants) to receive, upon exercise of such Warrants, the kind and amount of shares of capital stock and other securities and property receivable upon such consolidation or merger by a holder of the number of Shares for which such Warrants might have been exercised immediately prior to such consolidation or merger. Such supplemental warrant agreement shall contain provisions which shall be identical to the adjustments provided in Section 3.1 hereof and to the provisions of Section 10 hereof. This Section 3.2 shall similarly apply to successive consolidations or mergers. 3.3 The Exercise Price shall also be subject to adjustment as follows: (1) Special Definitions. For purposes of this Section 3.3, the following definitions shall apply: (A) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (B) "Original Issue Date" shall mean the date of this Agreement. (C) "Convertible Securities" shall mean any evidence of indebtedness, shares of capital stock (other than Common Stock) or other securities convertible into or exchangeable for Common Stock. 3 (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company on or after the Original Issue Date, other than shares of Common Stock issued at any time: (i) pursuant to the exercise of options, warrants or other Common Stock purchase rights issued (or to be issued) to employees, officers or directors of, or consultants or advisors to, or any strategic ally of, the Company pursuant to any stock purchase or stock option plan or other arrangement approved by the Board of Directors; (ii) pursuant to the exercise of options, warrants or Convertible Securities outstanding as of the Original Issue Date; or (iii) in connection with the acquisition of all or part of another entity by stock acquisition, merger, consolidation or other reorganization, or by the purchase of all or part of the assets of such other entity (including securities issued to persons formerly employed by such other entity and subsequently hired by the Company and to any brokers or finders in connection therewith) where the Company or its stockholders own more than fifty (50%) percent of the voting power of the acquired, surviving, combined or successor company. (2) ISSUANCE OF OPTIONS AND CONVERTIBLE SECURITIES. In the event the Company at any time or from time to time after the Original Issue Date shall issue any Options (other than any additional warrants issued to the Warrant Holder or any affiliate thereof in accordance with the terms and provisions of the Note Purchase Agreement) or Convertible Securities without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received or to be received by the Company for the total number of Additional Shares of Common Stock issuable upon the exercise, conversion or exchange of such Options or Convertible Securities by (y) the Exercise Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock issuable upon the exercise, conversion or exchange of such Options or Convertible Securities. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(2), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (3) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Company, after the Original Issue Date, shall issue Additional Shares of Common Stock without consideration or for a consideration per share less than the then-applicable Exercise Price, then and in such event, such Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the 4 then-applicable Exercise Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the quotient obtained by dividing (x) the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued by (y) the Exercise Price, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding (on a fully-diluted basis) immediately prior to such issuance plus the number of Additional Shares of Common Stock so issued. Upon each such adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(3), the number of Warrant Shares purchasable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (4) ADJUSTMENT OF EXERCISE PRICE UPON ADVERSE MARKET CONDITIONS. Notwithstanding anything to the contrary contained herein, if at any time after the Original Issue Date, the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days (the "Ten-Day Average") shall be less than the product obtained by multiplying (x) seventy-five (75%) percent times (y) the Exercise Price otherwise then in effect (the "Adverse Market Price"), then such Ten-Day Average may, subject to the terms of this Section 3.3(4), become and constitute the adjusted Exercise Price (the "Adjusted Exercise Price"), and the Warrants may be exercised, in whole or in part, by the Warrant Holder at the Adjusted Exercise Price. To exercise all or any portion of the Warrants at the Adjusted Exercise Price, the Warrant Holder shall (i) deliver written notice (the "Adverse Market Price Notice") of such intent to the Company during such time as the Ten-Day Average shall remain equal to or below the Adverse Market Price and (ii) provide payment by cash or wire transfer of immediately available funds in respect of such Warrants to be exercised to the Company within five (5) trading days after delivery of the Adverse Market Price Notice. The Ten-Day Average based on the ten (10) consecutive trading days ending on the date that the Adverse Market Price Notice shall have been delivered by the Warrant Holder shall be the Adjusted Exercise Price, unless (A) the Warrant Holder shall not deliver the applicable payment by cash or wire transfer within the five (5) trading days following delivery of the Adverse Market Price Notice or (B) the Warrant Holder shall have provided a new Adverse Market Price Notice during such five (5) trading days period, in which case the Adjusted Exercise Price shall be adjusted based on the Ten-Day Average preceding such new Adverse Market Price Notice. The provisions of this Section 3.3(4) shall continue until all of the Warrants shall have been exercised. The number of Warrant Shares shall not be adjusted as a result of any adjustment of the then-applicable Exercise Price pursuant to the provisions of this Section 3.3(4). (5) DETERMINATION OF CONSIDERATION. For purposes of this Section 3, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (A) CASH AND PROPERTY. Such consideration shall: (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company excluding expenses, discounts 5 and commissions payable by the Company in connection with such issuance or sale and amounts paid or payable for accrued interest. (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as reasonably determined in good faith by the Board of Directors net of expenses as set forth in clause (i) above; and (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration that covers both cash and property other than cash, the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, shall be as reasonably determined in good faith by the Board of Directors. (B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Company for the issuance of Options or Convertible Securities pursuant to Section 3.3(2) shall be determined by dividing: (i) the total amount, received by the Company as consideration for the issuance of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities (subject to any adjustments in the exercise price thereof), by (ii) the number of shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. 3.4 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 3, the Company, at its expense, shall promptly compute such adjustment or readjustment of the Exercise Price in accordance with the terms hereof and furnish to each Holder of Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or deemed to have been issued, (ii) the Exercise Price in effect immediately prior to such adjustment or readjustment, (iii) the number of Additional Shares of Common Stock issued or deemed to have been issued and (iv) the number of shares of Common Stock and the amount, if any, of other securities or property that at the time would be received upon the exercise of the Warrants. The Company shall, upon the written request at any time of any Holder of Warrants, furnish or cause to be furnished to such Holder a like certificate setting forth (x) all adjustments and readjustments of the Exercise Price since the Original Issue Date and (y) the Exercise Price then in effect. 3.5 ASSURANCES WITH RESPECT TO EXERCISE RIGHTS. The Company shall not, by amendment of its Certificate of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the 6 observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times, in good faith, assist in the carrying out of all the provisions of this Agreement and in taking of all such actions as may be necessary or appropriate in order to protect the exercise rights of the Warrant Holder against impairment or dilution. 4. TRANSFERS. 4.1 UNREGISTERED SECURITIES. The Warrant Holder hereby acknowledges and agrees that the Warrants and the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" under the Securities Act inasmuch as they are being acquired in a transaction not involving a public offering, and the Warrant Holder agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Warrants or any Shares issued upon exercise of the Warrants in the absence of (a) an effective registration statement under the Act as to the Warrants or such Shares and registration and/or qualification of the Warrants or such Shares under any applicable Federal or state securities law then in effect or (b) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. 4.2 TRANSFERABILITY. Subject to the provisions of Section 4.1 hereof, the rights under this Agreement are freely transferable, in whole or in part, by the Warrant Holder, and such transferee shall have the same rights hereunder as the Warrant Holder. 4.3 WARRANT REGISTER. The Company will maintain a register containing the names and addresses of the Warrant Holders of the Warrants. Until any transfer of Warrants in accordance with this Agreement is reflected in the warrant register, the Company may treat the Warrant Holder as the absolute owner hereof for all purposes. Any Warrant Holder may change such Warrant Holder's address as shown on the warrant register by written notice to the Company requesting such change. 5. NO FRACTIONAL SHARES. Any adjustment in the number of Shares purchasable hereunder shall be rounded to the nearest whole share. 6. INVESTMENT REPRESENTATIONS. The Warrant Holder agrees and acknowledges that it is acquiring the Warrants and will be acquiring the Shares for its own account and not with a view to any resale or distribution other than in accordance with Federal and state securities laws. The Warrant Holder is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. 7. COVENANTS AS TO THE SHARES. The Company covenants and agrees that, subject to Sections 6.2(a) of the Note Purchase Agreement, the shares of Common Stock issuable upon exercise of the Warrants, will, upon issuance in accordance with the terms hereof, be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issuance thereof imposed by or through the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificates in respect of such shares in a name other than that of the Warrant Holder and the Company 7 shall not be required to issue or deliver such certificates unless or until the person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or it shall be established to the satisfaction of the Company that such tax has been paid. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights imposed by or through the Company, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented under this Agreement. 8. LEGEND. Any certificate evidencing the Shares issuable upon exercise hereof will bear a legend indicating that such securities have not been registered under the Securities Act or under any state securities laws and may not be sold or offered for sale in the absence of an effective registration statement as to the securities under the Securities Act and any applicable state securities law or an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 9. RIGHTS APPLICABLE TO THE WARRANT SHARES. The parties hereby acknowledge and agree that the Shares, when issued in accordance with the terms hereof, shall be entitled to all of the same rights and privileges provided to the Company's capital stock issued upon conversion of the Note, as set forth in the Note Purchase Agreement. 10. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company shall, at any time prior to the exercise of all Warrants, declare a dividend (other than a dividend consisting solely of shares of Common Stock) or otherwise distribute to its stockholders any assets, properties, rights, evidence of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another, or any other thing of value, the Warrant Holder shall thereafter be entitled, in addition to the shares of Common Stock or other securities and property receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Warrant Holder would have been entitled to receive at the time of such dividend or distribution as if the Warrants had been exercised immediately prior to such dividend or distribution. At the time of any such dividend or distribution, the Company shall make (and maintain) appropriate reserves to ensure the timely performance of the provisions of this Section 10. 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS. This Agreement or any provisions hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the Company and by the Warrant Holder. 11.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 11.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to the Company: 8 The Immune Response Corporation 5935 Darwin Court Carlsbad, CA 92008 Attention: President Facsimile: (760) 431-8636 With a copy (which copy shall not constitute notice) to: Pillsbury Winthrop LLP 50 Fremont Street San Francisco, CA 94105 Attention: Thomas E. Sparks, Esq. Facsimile: (415) 983-7396 (ii) If to the Warrant Holder: Oshkim Limited Partnership 535 Madison Avenue New York, NY 10022 Attention: Kevin Kimberlin and Bruno Lerer, Esq. Facsimile: (212) 486-7392 With a copy (which copy shall not constitute notice) to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas, 45th Floor New York, NY 10020-1104 Attention: Stephen R. Connoni, Esq./Sandip Kakar, Esq. Facsimile: (212) 536-3901 11.4 HEADINGS. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the terms hereof. 11.5 CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Shares issued or issuable upon the exercise of the Warrants in a manner that interferes with the timely exercise of the Warrants. 11.6 NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Subject to Section 6.2(a) of the Note Purchase Agreement, this Agreement shall not entitle the Warrant Holder hereof to any voting rights or other rights as a stockholder of the Company with respect to the Shares prior to the exercise of the Warrants. No provision of this Agreement, in the absence of affirmative action by the Warrant Holder to purchase the Shares, and no mere enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11.7 SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and transferees. 9 11.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. [SIGNATURE PAGE FOLLOWS] 10 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. THE IMMUNE RESPONSE CORPORATION By: --------------------------------------- Name: --------------------------------- Title: -------------------------------- CHESHIRE ASSOCIATES LLC By: --------------------------------------- Name: --------------------------------- Title: -------------------------------- EXHIBIT A --------- NOTICE OF EXERCISE ------------------ (To be signed only on exercise of any of the Warrants) Dated:________________________ To: The Immune Response Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant Agreement, hereby irrevocably elects to (check one of the following): [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith makes a cash payment of $_____________, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] purchase ____________ shares of Common Stock covered by such Warrant Agreement and herewith delivers ___________ shares of Common Stock having a Fair Market Value (as defined in such Warrant Agreement) as of the last trading day preceding the date hereof, of $______, representing the full purchase price for such shares at the price per share provided for in such Warrant Agreement. [ ] acquire in a cashless exercise _____ shares of Common Stock pursuant to the terms of Section 2.1 of such Warrant Agreement. Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below. Signature:___________________________ Name (print):________________________ Title (if applicable):_________________ Company (if applicable):_______________ -----END PRIVACY-ENHANCED MESSAGE-----