STANDBY EQUITY DISTRIBUTION AGREEMENT

 

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                                                                  Exhibit 10.170

 

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

 

      THIS AGREEMENT dated as of the 15th day of July 2005 (the "Agreement")

between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the

"Investor"), and THE IMMUNE RESPONSE CORPORATION, a corporation organized and

existing under the laws of the State of Delaware (the "Company").

 

      WHEREAS, the parties desire that, upon the terms and subject to the

conditions contained herein, the Company shall issue and sell to the Investor,

from time to time as provided herein, and the Investor shall purchase from the

Company up to Fifteen Million Dollars ($15,000,000) of the Company's common

stock, par value $0.0025 per share (the "Common Stock"); and

 

      WHEREAS, such investments will be made in reliance upon the provisions of

Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the

regulations promulgated thereunder (the "Securities Act"), and or upon such

other exemption from the registration requirements of the Securities Act as may

be available with respect to any or all of the investments to be made hereunder.

 

      WHEREAS, the Company has engaged Monitor Capital, Inc. (the "Placement

Agent"), to act as the Company's exclusive placement agent in connection with

the sale of the Company's Common Stock to the Investor hereunder pursuant to the

Placement Agent Agreement dated the date hereof by and among the Company, the

Placement Agent and the Investor (the "Placement Agent Agreement").

 

      NOW, THEREFORE, the parties hereto agree as follows:

 

                                   ARTICLE I.

                               CERTAIN DEFINITIONS

 

      Section 1.1. "Advance" shall mean the portion of the Commitment Amount

requested by the Company in the Advance Notice.

 

      Section 1.2. "Advance Date" shall mean the date the David Gonzalez

Attorney Trust Account is in receipt of the funds from the Investor and David

Gonzalez, Esq., is in possession of shares registered for resale from the

Company and therefore an Advance by the Investor to the Company can be made and

David Gonzalez, Esq. can release the shares registered for resale to the

Investor. The Advance Date shall be the first (1st) Trading Day after expiration

of the applicable Pricing Period for each Advance.

 

      Section 1.3. "Advance Notice" shall mean a written notice to the Investor

setting forth the Advance amount that the Company requests from the Investor and

the Advance Date.

 

      Section 1.4. "Advance Notice Date" shall mean each date the Company

delivers to the Investor an Advance Notice requiring the Investor to advance

funds to the Company, subject to

 

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the terms of this Agreement. No Advance Notice Date shall be less than five (5)

Trading Days after the prior Advance Notice Date.

 

      Section 1.5. "Bid Price" shall mean, on any date, the closing bid price

(as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or

if the Common Stock is not traded on a Principal Market, the highest reported

bid price for the Common Stock, as furnished by the National Association of

Securities Dealers, Inc.

 

      Section 1.6. "Closing" shall mean one of the closings of a purchase and

sale of Common Stock pursuant to Section 2.3.

 

      Section 1.7. "Commitment Amount" shall mean the aggregate amount of up to

Fifteen Million Dollars ($15,000,000) which the Investor has agreed to provide

to the Company in order to purchase the Company's Common Stock pursuant to the

terms and conditions of this Agreement, provided that so long as the Common

Stock is listed on the Nasdaq National Market, the Nasdaq SmallCap Market, or

the American Stock Exchange, the Company shall not have the right to request an

Advance if the issuance of the full number of shares of Common Stock issuable in

connection with such Advance would, together with all shares of Common Stock

previously issued under this Agreement, exceed 9,699,143 shares of Common Stock

(which is no more than 19.99% of at least 48,739,415 outstanding shares of

Common Stock as of the date of this Agreement) unless the necessary shareholder

approval or consent has been received prior to such request.

 

      Section 1.8. "Commitment Period" shall mean the period commencing on the

earlier to occur of (i) the Effective Date, or (ii) such earlier date as the

Company and the Investor may mutually agree in writing, and expiring on the

earliest to occur of (x) the date on which the Investor shall have made payment

of Advances pursuant to this Agreement in the aggregate amount of Fifteen

Million Dollars ($15,000,000), (y) the date this Agreement is terminated

pursuant to Section 2.4, or (z) the date occurring twenty-four (24) months after

the Effective Date.

 

      Section 1.9. "Common Stock" shall mean the Company's common stock, par

value $0.0025 per share.

 

      Section 1.10. "Condition Satisfaction Date" shall have the meaning set

forth in Section 7.2.

 

      Section 1.11. "Damages" shall mean any loss, claim, damage, liability,

costs and expenses (including, without limitation, reasonable attorney's fees

and disbursements and costs and expenses of expert witnesses and investigation).

 

      Section 1.12. "Effective Date" shall mean the date on which the SEC first

declares effective a Registration Statement registering the resale of the

Registrable Securities as set forth in Section 7.2(a).

 

      Section 1.13. "Escrow Agreement" shall mean the escrow agreement among the

Company, the Investor, and David Gonzalez, Esq., dated the date hereof.

 

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      Section 1.14. "Exchange Act" shall mean the Securities Exchange Act of

1934, as amended, and the rules and regulations promulgated thereunder.

 

      Section 1.15. "Material Adverse Effect" shall mean any condition,

circumstance, or situation that would prohibit or otherwise materially interfere

with the ability of the Company to enter into and perform any of its obligations

under this Agreement or the Registration Rights Agreement in any material

respect.

 

      Section 1.16. "Market Price" shall mean the lowest daily VWAP of the

Common Stock during the Pricing Period.

 

      Section 1.17. "Maximum Advance Amount" shall be Five Hundred Thousand

Dollars ($500,000) per Advance Notice, subject to the limitations set forth in

Section 1.7 of this Agreement.

 

      Section 1.18. "NASD" shall mean the National Association of Securities

Dealers, Inc.

 

      Section 1.19. "Person" shall mean an individual, a corporation, a

partnership, an association, a trust or other entity or organization, including

a government or political subdivision or an agency or instrumentality thereof.

 

      Section 1.20. "Placement Agent" shall mean Monitor Capital, Inc., a

registered broker-dealer.

 

      Section 1.21. "Pricing Period" shall mean the five (5) consecutive Trading

Days after the Advance Notice Date.

 

      Section 1.22. "Principal Market" shall mean the Nasdaq National Market,

the Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin Board

or the New York Stock Exchange, whichever is at the time the principal trading

exchange or market for the Common Stock.

 

      Section 1.23. "Purchase Price" shall be set at ninety seven percent (97%)

of the Market Price during the Pricing Period.

 

       Section 1.24. "Registrable Securities" shall mean the shares of Common

Stock to be issued hereunder (i) in respect of which the Registration Statement

has not been declared effective by the SEC, (ii) which have not been sold under

circumstances meeting all of the applicable conditions of Rule 144 (or any

similar provision then in force) under the Securities Act ("Rule 144") or (iii)

which have not been otherwise transferred to a holder who may trade such shares

without restriction under the Securities Act, and the Company has delivered a

new certificate or other evidence of ownership for such securities not bearing a

restrictive legend.

 

      Section 1.25. "Registration Rights Agreement" shall mean the Registration

Rights Agreement dated the date hereof, regarding the filing of the Registration

Statement for the resale of the Registrable Securities, entered into between the

Company and the Investor.

 

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      Section 1.26. "Registration Statement" shall mean a registration statement

on Form S-1 or SB-2 (if use of such form is then available to the Company

pursuant to the rules of the SEC and, if not, on such other form promulgated by

the SEC for which the Company then qualifies and which counsel for the Company

shall deem appropriate, and which form shall be available for the resale of the

Registrable Securities to be registered thereunder in accordance with the

provisions of this Agreement and the Registration Rights Agreement, and in

accordance with the intended method of distribution of such securities), for the

registration of the resale by the Investor of the Registrable Securities under

the Securities Act.

 

      Section 1.27. "Regulation D" shall have the meaning set forth in the

recitals of this Agreement.

 

      Section 1.28. "SEC" shall mean the Securities and Exchange Commission.

 

      Section 1.29. "Securities Act" shall have the meaning set forth in the

recitals of this Agreement.

 

      Section 1.30. "SEC Documents" shall mean Annual Reports on Form 10-K,

Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements

of the Company as supplemented to the date hereof, filed by the Company for a

period of at least twelve (12) months immediately preceding the date hereof or

the Advance Date, as the case may be, until such time as the Company no longer

has an obligation to maintain the effectiveness of a Registration Statement as

set forth in the Registration Rights Agreement.

 

      Section 1.31. "Trading Day" shall mean any day during which the New York

Stock Exchange shall be open for business.

 

      Section 1.32. "VWAP" shall mean the volume weighted average price of the

Company's Common Stock as quoted by Bloomberg, LP.

 

                                   ARTICLE II.

                                     ADVANCES

 

      Section 2.1. Investments.

 

            (a) Advances. Upon the terms and conditions set forth herein

(including, without limitation, the provisions of Article VII hereof), on any

Advance Notice Date the Company may request an Advance by the Investor by the

delivery of an Advance Notice. The number of shares of Common Stock that the

Investor shall receive for each Advance shall be determined by dividing the

amount of the Advance by the Purchase Price. No fractional shares shall be

issued. Fractional shares shall be rounded to the next higher whole number of

shares. The aggregate maximum amount of all Advances that the Investor shall be

obligated to make under this Agreement shall not exceed the Commitment Amount.

 

      Section 2.2. Mechanics.

 

            (a) Advance Notice. At any time during the Commitment Period, the

Company may deliver an Advance Notice to the Investor, subject to the conditions

set forth in

 

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Section 7.2; provided, however, the amount for each Advance as designated by the

Company in the applicable Advance Notice, shall not be more than the Maximum

Advance Amount. The aggregate amount of the Advances pursuant to this Agreement

shall not exceed the Commitment Amount. The Company acknowledges that the

Investor may sell shares of the Company's Common Stock corresponding with a

particular Advance Notice on the day the Advance Notice is received by the

Investor. There shall be a minimum of five (5) Trading Days between each Advance

Notice Date.

 

            (b) Date of Delivery of Advance Notice. An Advance Notice shall be

deemed delivered on (i) the Trading Day it is received by facsimile or otherwise

by the Investor if such notice is received prior to 12:00 noon Eastern Time, or

(ii) the immediately succeeding Trading Day if it is received by facsimile or

otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day

which is not a Trading Day. No Advance Notice may be deemed delivered on a day

that is not a Trading Day.

 

      Section 2.3. Closings. On each Advance Date, which shall be the first

(1st) Trading Day after expiration of the applicable Pricing Period for each

Advance, (i) the Company shall deliver to David Gonzalez, Esq. (the "Escrow

Agent") shares of the Company's Common Stock, representing the amount of the

Advance by the Investor pursuant to Section 2.1 herein, registered in the name

of the Investor which shall be delivered by the Escrow Agent to the Investor, or

otherwise in accordance with the Escrow Agreement and (ii) the Investor shall

deliver to Escrow Agent the amount of the Advance specified in the Advance

Notice by wire transfer of immediately available funds which shall be delivered

to the Company, or otherwise in accordance with the Escrow Agreement. In

addition, on or prior to the Advance Date, each of the Company and the Investor

shall deliver to the other through the Investor's counsel, all documents,

instruments and writings required to be delivered by either of them pursuant to

this Agreement in order to implement and effect the transactions contemplated

herein. Payment of funds to the Company and delivery of the Company's Common

Stock to the Investor shall occur in accordance with the conditions set forth

above and those contained in the Escrow Agreement; provided, however, that to

the extent the Company has not paid the fees, expenses, and disbursements of the

Investor, the Investor's counsel, or the Company's counsel in accordance with

Section 12.4, the amount of such fees, expenses, and disbursements may be

deducted by the Investor (and shall be paid to the relevant party) from the

amount of the Advance with no reduction in the amount of shares of the Company's

Common Stock to be delivered on such Advance Date.

 

       Section 2.4. Termination of Investment. The obligation of the Investor to

make an Advance to the Company pursuant to this Agreement shall terminate

permanently (including with respect to an Advance Date that has not yet

occurred) in the event that (i) there shall occur any stop order or suspension

of the effectiveness of the Registration Statement for an aggregate of fifty

(50) Trading Days, other than due to the acts of the Investor, during the

Commitment Period, or (ii) the Company shall at any time fail materially to

comply with the requirements of Article VI and such failure is not cured within

thirty (30) days after receipt of written notice from the Investor, provided,

however, that this termination provision shall not apply to any period

commencing upon the filing of a post-effective amendment to such Registration

Statement and ending upon the date on which such post effective amendment is

declared effective by the SEC.

 

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      Section 2.5. Agreement to Advance Funds. The Investor agrees to advance

the amount specified in the Advance Notice to the Company after the completion

of each of the following conditions and the other conditions set forth in this

Agreement:

 

            (a) the execution and delivery by the Company, and the Investor, of

this Agreement and the Exhibits hereto;

 

            (b) The Escrow Agent shall have received the shares of Common Stock

applicable to the Advance in accordance with Section 2.3. Such shares shall be

free of restrictive legends.

 

            (c) the Company's Registration Statement with respect to the resale

of the Registrable Securities in accordance with the terms of the Registration

Rights Agreement shall have been declared effective by the SEC;

 

            (d) the Company shall have obtained all material permits and

qualifications required by any applicable state for the offer and sale of the

Registrable Securities, or shall have the availability of exemptions therefrom.

The sale and issuance of the Registrable Securities shall be legally permitted

by all laws and regulations to which the Company is subject;

 

            (e) the Company shall have filed with the Commission in a timely

manner all reports, notices and other documents required of a "reporting

company" under the Exchange Act and applicable Commission regulations;

 

            (f) the fees as set forth in Section 12.4 below shall have been paid

or can be withheld as provided in Section 2.3; and

 

            (g) the conditions set forth in Section 7.2 shall have been

satisfied.

 

            (h) the Company shall have provided to the Investor an

acknowledgement, from the Company's independent certified public accountants as

to its ability to provide all consents required in order to file a registration

statement in connection with this transaction;

 

            (i) The Company's transfer agent shall be DWAC eligible.

 

      Section 2.6. Lock Up Period. On the date hereof, the Company shall obtain

from each officer and director a lock-up agreement, as defined below, in the

form annexed hereto as Schedule 2.6 agreeing to only sell in compliance with the

volume limitation of Rule 144.

 

      Section 2.7. Hardship. In the event the Investor sells shares of the

Company's Common Stock after receipt of an Advance Notice and the Company fails

to perform its obligations as mandated in Section 2.3, and specifically the

Company fails to deliver to the Escrow Agent on the Advance Date the shares of

Common Stock corresponding to the applicable Advance, the Company acknowledges

that the Investor shall suffer financial hardship and therefore shall be liable

for any and all losses, commissions, fees, or financial hardship caused to the

Investor.

 

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                                   ARTICLE III.

                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

      Investor hereby represents and warrants to, and agrees with, the Company

that the following are true and correct as of the date hereof and as of each

Advance Date:

 

       Section 3.1. Organization and Authorization. The Investor is duly

incorporated or organized and validly existing in the jurisdiction of its

incorporation or organization and has all requisite power and authority to

purchase and hold the securities issuable hereunder. The decision to invest and

the execution and delivery of this Agreement by such Investor, the performance

by such Investor of its obligations hereunder and the consummation by such

Investor of the transactions contemplated hereby have been duly authorized and

require no other proceedings on the part of the Investor. The undersigned has

the right, power and authority to execute and deliver this Agreement and all

other instruments (including, without limitations, the Registration Rights

Agreement), on behalf of the Investor. This Agreement has been duly executed and

delivered by the Investor and, assuming the execution and delivery hereof and

acceptance thereof by the Company, will constitute the legal, valid and binding

obligations of the Investor, enforceable against the Investor in accordance with

its terms.

 

      Section 3.2. Evaluation of Risks. The Investor has such knowledge and

experience in financial, tax and business matters as to be capable of evaluating

the merits and risks of, and bearing the economic risks entailed by, an

investment in the Company and of protecting its interests in connection with

this transaction. It recognizes that its investment in the Company involves a

high degree of risk.

 

      Section 3.3. No Legal Advice From the Company. The Investor acknowledges

that it had the opportunity to review this Agreement and the transactions

contemplated by this Agreement with its own legal counsel and investment and tax

advisors. The Investor is relying solely on such counsel and advisors and not on

any statements or representations of the Company or any of its representatives

or agents for legal, tax or investment advice with respect to this investment,

the transactions contemplated by this Agreement or the securities laws of any

jurisdiction.

 

      Section 3.4. Investment Purpose. The securities are being purchased by the

Investor for its own account, and for investment purposes. The Investor agrees

not to assign or in any way transfer the Investor's rights to the securities or

any interest therein and acknowledges that the Company will not recognize any

purported assignment or transfer except in accordance with applicable Federal

and state securities laws. No other person has or will have a direct or indirect

beneficial interest in the securities. The Investor agrees not to sell,

hypothecate or otherwise transfer the Investor's securities unless the

securities are registered under Federal and applicable state securities laws and

the applicable prospectus is delivered in connection with such sale,

hypothecation or other transfer or unless, in the opinion of counsel

satisfactory to the Company, an exemption from such laws is available.

 

      Section 3.5. Accredited Investor. The Investor is an "Accredited Investor"

as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

 

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      Section 3.6. Information. The Investor and its advisors (and its counsel),

if any, have been furnished with all materials relating to the business,

finances and operations of the Company and information it deemed material to

making an informed investment decision. The Investor and its advisors, if any,

have been afforded the opportunity to ask questions of the Company and its

management. Neither such inquiries nor any other due diligence investigations

conducted by such Investor or its advisors, if any, or its representatives shall

modify, amend or affect the Investor's right to rely on the Company's

representations and warranties contained in this Agreement. The Investor

understands that its investment involves a high degree of risk. The Investor is

in a position regarding the Company, which, based upon employment, family

relationship or economic bargaining power, enabled and enables such Investor to

obtain information from the Company in order to evaluate the merits and risks of

this investment. The Investor has sought such accounting, legal and tax advice,

as it has considered necessary to make an informed investment decision with

respect to this transaction.

 

      Section 3.7. Receipt of Documents. The Investor and its counsel have

received and read in their entirety: (i) this Agreement and the Exhibits annexed

hereto; (ii) all due diligence and other information necessary to verify the

accuracy and completeness of such representations, warranties and covenants;

(iii) the Company's Form 10-K for the year ended December 31, 2004 and Form 10-Q

for the period ended March 31, 2005; and (iv) answers to all questions the

Investor submitted to the Company regarding an investment in the Company; and

the Investor has relied on the information contained therein and has not been

furnished any other documents, literature, memorandum or prospectus.

 

      Section 3.8. Registration Rights Agreement and Escrow Agreement. The

parties have entered into the Registration Rights Agreement and the Escrow

Agreement, each dated the date hereof.

 

      Section 3.9. No General Solicitation. Neither the Company, nor any of its

affiliates, nor any person acting on its or their behalf, has engaged in any

form of general solicitation or general advertising (within the meaning of

Regulation D under the Securities Act) in connection with the offer or sale of

the shares of Common Stock offered hereby.

 

      Section 3.10. Not an Affiliate. The Investor is not an officer, director

or a person that directly, or indirectly through one or more intermediaries,

controls or is controlled by, or is under common control with the Company or any

"Affiliate" of the Company (as that term is defined in Rule 405 of the

Securities Act).

 

      Section 3.11. Trading Activities. The Investor's trading activities with

respect to the Company's Common Stock shall be in compliance with all applicable

federal and state securities laws, rules and regulations and the rules and

regulations of the Principal Market on which the Company's Common Stock is

listed or traded. Neither the Investor nor its affiliates has an open short

position in the Common Stock of the Company, the Investor agrees that it shall

not, and that it will cause its affiliates not to, engage in any short sales of

or hedging transactions with respect to the Common Stock, provided that the

Company acknowledges and agrees that upon receipt of an Advance Notice the

Investor has the right to sell the shares to be issued to the Investor pursuant

to the Advance Notice during the applicable Pricing Period.

 

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                                   ARTICLE IV.

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

      Except as stated below, on the disclosure schedules attached hereto or in

the SEC Documents (as defined herein), the Company hereby represents and

warrants to, and covenants with, the Investor that the following are true and

correct as of the date hereof:

 

      Section 4.1. Organization and Qualification. The Company is duly

incorporated or organized and validly existing in the jurisdiction of its

incorporation or organization and has all requisite corporate power to own its

properties and to carry on its business as now being conducted. Each of the

Company and its subsidiaries is duly qualified as a foreign corporation to do

business and is in good standing in every jurisdiction in which the nature of

the business conducted by it makes such qualification necessary, except to the

extent that the failure to be so qualified or be in good standing would not have

a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

 

      Section 4.2. Authorization, Enforcement, Compliance with Other

Instruments. (i) The Company has the requisite corporate power and authority to

enter into and perform this Agreement, the Registration Rights Agreement, the

Escrow Agreement, the Placement Agent Agreement and any related agreements, in

accordance with the terms hereof and thereof, (ii) the execution and delivery of

this Agreement, the Registration Rights Agreement, the Escrow Agreement, the

Placement Agent Agreement and any related agreements by the Company and the

consummation by it of the transactions contemplated hereby and thereby, have

been duly authorized by the Company's Board of Directors and no further consent

or authorization is required by the Company, its Board of Directors or its

stockholders, (iii) this Agreement, the Registration Rights Agreement, the

Escrow Agreement, the Placement Agent Agreement and any related agreements have

been duly executed and delivered by the Company, (iv) this Agreement, the

Registration Rights Agreement, the Escrow Agreement, the Placement Agent

Agreement and assuming the execution and delivery thereof and acceptance by the

Investor and any related agreements constitute the valid and binding obligations

of the Company enforceable against the Company in accordance with their terms,

except as such enforceability may be limited by general principles of equity or

applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or

similar laws relating to, or affecting generally, the enforcement of creditors'

rights and remedies.

 

       Section 4.3. Capitalization. As of the date hereof, the authorized capital

stock of the Company consists of 170,000,000 shares of Common Stock, par value

$0.0025 per share and 10,000,000 shares of Preferred Stock, $0.001 par value per

share ("Preferred Stock"), of which 49,846,544 shares of Common Stock and

688,146 shares of Series A convertible shares of Preferred Stock are issued and

outstanding. All of such outstanding shares have been validly issued and are

fully paid and nonassessable. Except as disclosed in the SEC Documents, no

shares of Common Stock are subject to preemptive rights or any other similar

rights or any liens or encumbrances suffered or permitted by the Company. Except

as disclosed in (or arising under plans disclosed in) the SEC Documents, as of

the date hereof, (i) there are no outstanding options, warrants, scrip, rights

to subscribe to, calls or commitments of any character whatsoever relating to,

or securities or rights convertible into, any shares of capital stock of the

Company or any of its subsidiaries, or contracts, commitments, understandings or

arrangements by which the

 

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Company or any of its subsidiaries is or may become bound to issue additional

shares of capital stock of the Company or any of its subsidiaries or options,

warrants, scrip, rights to subscribe to, calls or commitments of any character

whatsoever relating to, or securities or rights convertible into, any shares of

capital stock of the Company or any of its subsidiaries, (ii) there are no

outstanding debt securities (iii) there are no outstanding registration

statements other than on Form S-8 (iv) there are no agreements or arrangements

under which the Company or any of its subsidiaries is obligated to register the

sale of any of their securities under the Securities Act (except pursuant to the

Registration Rights Agreement), and (v) there are no securities or instruments

containing anti-dilution or similar provisions that will be triggered by this

Agreement or any related agreement or the consummation of the transactions

described herein or therein. The Company has furnished to the Investor true and

correct copies of the Company's Certificate of Incorporation, as amended and as

in effect on the date hereof (the "Certificate of Incorporation"), and the

Company's By-laws, as in effect on the date hereof (the "By-laws"), and the

terms of all securities convertible into or exercisable for Common Stock and the

material rights of the holders thereof in respect thereto.

 

       Section 4.4. No Conflict. The execution, delivery and performance of this

Agreement by the Company and the consummation by the Company of the transactions

contemplated hereby will not (i) result in a violation of the Certificate of

Incorporation, any certificate of designations of any outstanding series of

preferred stock of the Company or By-laws or (ii) conflict with or constitute a

default (or an event which with notice or lapse of time or both would become a

default) under, or give to others any rights of termination, amendment,

acceleration or cancellation of, any agreement, indenture or instrument to which

the Company or any of its subsidiaries is a party, or result in a violation of

any law, rule, regulation, order, judgment or decree (including federal and

state securities laws and regulations and the rules and regulations of the

Principal Market on which the Common Stock is quoted) applicable to the Company

or any of its subsidiaries or by which any material property or asset of the

Company or any of its subsidiaries is bound or affected and which would cause a

Material Adverse Effect. Except as disclosed in the SEC Documents, neither the

Company nor its subsidiaries is in violation of any term of or in default under

its Certificate of Incorporation or By-laws or their organizational charter or

by-laws, respectively, or any material contract, agreement, mortgage,

indebtedness, indenture, instrument, judgment, decree or order or any statute,

rule or regulation applicable to the Company or its subsidiaries. The business

of the Company and its subsidiaries is not being conducted in violation of any

material law, ordinance, regulation of any governmental entity. Except as

specifically contemplated by this Agreement and as required under the Securities

Act and any applicable state securities laws, the Company is not required to

obtain any consent, authorization or order of, or make any filing or

registration with, any court or governmental agency in order for it to execute,

deliver or perform any of its obligations under or contemplated by this

Agreement or the Registration Rights Agreement in accordance with the terms

hereof or thereof. All consents, authorizations, orders, filings and

regist