Exhibit 10.187
THE IMMUNE RESPONSE CORPORATION
INDUCEMENT STOCK OPTION GRANT NOTICE
     THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the “Company”),
hereby grants to the Optionee an option to purchase the number of shares of the
Company’s Common Stock set forth below. This option is not intended to qualify
as an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), but is intended to qualify as an
“employee benefit plan” within the meaning of Rule 405 under the Securities Act
of 1933. This option is an “inducement grant” under Nasdaq Marketplace
Rule 4350(i)(1)(A)(iv) and is granted outside of, and is not subject to, the
Company’s 1989 Stock Plan or the Company’s 2003 Stock Plan.
     This option is subject to all of the terms and conditions set forth herein
and in the Inducement Stock Option Agreement, which is attached hereto as
Attachment I and incorporated herein in its entirety.

         
Optionee:
  Joseph F. O’Neill
 
       
Date of Grant:
  October 31, 2005
 
       
Vesting Commencement Date:
  October 31, 2005
 
       
Number of Shares Subject to Option:
    6,000,000  
 
       
Exercise Price (Per Share):
  $ 0.32  
 
       
Total Exercise Price:
  $ 1,920,000  
 
       
Expiration Date:
  October 31, 2015

     VESTING SCHEDULE: The Option shall vest with respect to 3,000,000 of the
underlying shares in 8 equal quarterly installments from the Vesting
Commencement Date and shall vest with respect to the other 3,000,000 shares in a
lump sum on October 31, 2012, all subject to the Optionee’s “Continuous Service
as CEO” (as defined in the attached Stock Option Agreement). It is understood
that Optionee and the Company may, in the future, mutually agree upon key
performance milestones relative to the “other” (7-year) 3,000,000 underlying
shares, and if they do so agree then this Grant Notice may be amended by the
parties in writing to provide for possible earlier vesting of some or all of
such underlying shares upon attainment of some or all of the milestones (but
always also subject to the backstop 7-year vesting).
     PAYMENT: Payment of the exercise price may be made in cash, check or any
other method provided in the Stock Option Agreement.
     ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice and the Stock
Option

 

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Agreement. This Option is granted pursuant to the Offer Letter (defined below)
and Optionee acknowledges that as of the Date of Grant, this Grant Notice and
the Stock Option Agreement set forth the entire understanding between Optionee
and the Company regarding the acquisition of stock in the Company and supersede
all prior oral and written agreements on that subject.
     OTHER AGREEMENTS: Offer Letter, dated October 26, 2005 (the “Offer
Letter”).

                  THE IMMUNE RESPONSE CORPORATION    
 
           
 
  By   /s/ Michael K. Green
 
   
 
  Title   Chief Operating Officer & Chief Financial Officer
 
   

OPTIONEE

     
/s/ Joseph F. O’Neill
 
   
Joseph F. O’Neill
   

[SIGNATURE PAGE TO INDUCEMENT STOCK OPTION GRANT NOTICE]

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Attachment I
THE IMMUNE RESPONSE CORPORATION
INDUCEMENT STOCK OPTION AGREEMENT
     Pursuant to your Inducement Stock Option Grant Notice (“Grant Notice”),
which incorporates this Inducement Stock Option Agreement, THE IMMUNE RESPONSE
CORPORATION, a Delaware corporation (the “Company”), has granted you an option
to purchase the number of shares of the Company’s common stock (“Common Stock”)
indicated in your Grant Notice at the exercise price indicated in your Grant
Notice. This option is not intended to qualify as an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”), but is intended to qualify as an “employee benefit plan”
within the meaning of Rule 405 under the Securities Act of 1933 (the “Securities
Act”). This option is an “inducement grant” under Nasdaq Marketplace Rule
4350(i)(1)(A)(iv) and is granted outside of, and is not subject to, the
Company’s 1989 Stock Plan or the Company’s 2003 Stock Plan.
     The details of your option are as follows:
     1. VESTING. Subject to the limitations contained herein, your option will
vest and become exercisable as provided in your Grant Notice, provided that
vesting will cease upon the termination of your Continuous Service as CEO (as
defined in Section 6 below).
     2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share are set forth in
your Grant Notice and may be adjusted from time to time for Capitalization
Adjustments, as provided in Section 9 below.
     3. FORM OF PAYMENT. When you submit your notice of exercise, you must
include payment of the option price for the shares you are purchasing. Payment
may be made in one (or a combination of two or more) of the following forms, to
the extent permitted now or hereafter by applicable law:
          (a) by personal check, a cashier’s check or money order; or
          (b) by cashless same-day-sale exercise, whereby you provide
irrevocable direction to a securities broker approved by the Company to sell
shares of common stock underlying the Option and to deliver part or all of the
sales proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes, provided that no such arrangement may result in the
Company extending or arranging for the extension of credit.
     4. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
     5. SECURITIES LAW COMPLIANCE; INVESTMENT INTENT.
          (a) Notwithstanding anything to the contrary contained herein, you may
not exercise your option unless the shares of Common Stock issuable upon such
exercise are then

 

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registered under the Securities Act, or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. The
exercise of your option must also comply with other applicable laws and
regulations governing your option, and you may not exercise your option if the
Company determines that such exercise would not be in compliance with such laws
and regulations.
          (b) You represent that you are acquiring this option and, when and if
you exercise this option, the shares of Common Stock issuable upon exercise of
this option for your own account and not with a view to, or for sale in
connection with, any distribution of such securities.
     6. TERM. The term of your option commences on the Date of Grant (as
specified in your Grant Notice) and expires on the earlier of the following:
          (a) For all vested but unexercised shares, three months after the
termination of your Continuous Service as CEO; provided that if during any part
of such three month period your option is not exercisable solely because of the
condition set forth in the preceding paragraph relating to “Securities Law
Compliance,” your option shall not expire until the earlier of the Expiration
Date indicated in your Grant Notice or until it shall have been exercisable for
an aggregate period of three months after the termination of your Continuous
Service as CEO;
          (b) the Expiration Date indicated in your Grant Notice.
          For purposes of this option, “Continuous Service as CEO” means that
your service as Chief Executive Officer of the Company is not interrupted or
terminated. Provided, that for the purpose of the preceding sentence, service as
President shall be deemed to constitute service as Chief Executive Officer, even
if you no longer formally hold the title of Chief Executive Officer. The Board
of Directors of the Company, in its sole discretion, shall determine whether
Continuous Service as CEO has been interrupted or terminated. Any such
interruption or termination, for any reason whatsoever, can break Continuous
Service as CEO. For the avoidance of doubt, there is no agreement entitling you
to continue to serve as Chief Executive Officer and/or President. The Board of
Directors has discretion whether or not to re-elect or remove you as Chief
Executive Officer and/or President.
     7. EXERCISE.
          (a) You may exercise the vested portion of your option during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
          (b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to

 

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which the shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
     8. TRANSFERABILITY. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option, subject to the terms and conditions otherwise applicable to the exercise
of this option, the issuance of Common Stock pursuant to such exercise and the
subsequent transfer of such Common Stock.
     9. CAPITALIZATION ADJUSTMENTS. If any change is made in the Common Stock
subject to this option without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), this Stock Option Agreement will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to the option. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities or net-exercise of any exercisable securities of
the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)
     10. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the
vesting of the Option shall be accelerated in full and all options so vested or
previously vested shall continue to be exercisable for a period of six months or
until the applicable expiration date of the options (in accordance with the
terms of the Grant Notice and this agreement), whichever period is shorter. For
purposes of this option, a “Change of Control” shall have the meaning set forth
in the Company’s offer letter to you, dated October 26, 2005 (the “Offer
Letter”). Notwithstanding anything herein to the contrary, in the event of a
Change of Control pursuant to which 100% of the outstanding stock of the Company
is acquired, you shall be entitled to receive, upon exercise during such period,
instead of the indicated number of shares of common stock of the Company,
whatever consideration was given in the Change of Control in exchange for such
number of shares of common stock of the Company.
     11. OPTION NOT A SERVICE CONTRACT. Nothing in your option shall obligate
the Company, its stockholders or the Board to continue your service as Chief
Executive Officer, President or a director or to continue any other relationship
that you might have with the Company.
     12. ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which the option may first be exercised or the
time during which the option or any part thereof will vest, notwithstanding the
provisions in the Grant Notice or this Stock Option Agreement stating the time
at which it may first be exercised or the time during which it will vest.

 

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     13. STOCKHOLDER RIGHTS. You shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common Stock
subject to the option unless and until you have satisfied all requirements for
exercise of the option pursuant to its terms.
     14. WITHHOLDING OBLIGATIONS.
          (a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from any amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a same-day-sale “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an affiliate of the Company, if any, which arise
in connection with your option.
          (b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a fair market value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
Notwithstanding the foregoing, the Company shall not be authorized to withhold
shares of Common Stock in excess of the minimum statutory withholding
requirements for federal and state tax purposes, including payroll taxes.
          (c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock.
     15. NOTICES. Any notices provided for in your option shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by mail by the Company to you, five days after deposit in the
United States mail, postage prepaid, addressed to you at the last address you
provided to the Company.
     16. CHOICE OF LAW. This option shall be governed by, and construed in
accordance with the laws of the State of California, as such laws are applied to
contracts entered into and performed in such State between California residents.

 

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     17. GOVERNING AUTHORITY. This option is subject to all interpretations,
amendments, rules and regulations that may from time to time be promulgated and
adopted by the Company. This authority shall be exercised by the Board, or by a
committee of one or more members of the Board in the event that the Board
delegates its authority to a committee. The Board, in the exercise of this
authority, may correct any defect, omission or inconsistency in this option in a
manner and to the extent the Board shall deem necessary or desirable. References
to the Board also include any committee appointed by the Board to administer and
interpret this option. Any interpretations, amendments, rules and regulations
promulgated by the Board shall be final and binding upon the Company and its
successors in interest as well as you and your heirs, assigns, and other
successors in interest.
     18. AMENDMENT OF OPTION. The Board at any time, and from time to time, may
amend the terms of this option; provided, however, that the rights under this
option shall not be impaired by any such amendment unless you consent in
writing.
*   *   *

 

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NOTICE OF EXERCISE
The Immune Response Corporation
5931 Darwin Court
Carlsbad, CA 92008
Date of Exercise:                          
Ladies and Gentlemen:
This constitutes notice under my non-statutory stock option that I elect to
purchase the number of shares for the price set forth below.
Stock option dated: October 31, 2005
Number of shares as to which option is exercised: _______________
Certificates to be issued in name of: _______________
Total exercise price: $______________
Cash payment delivered herewith: $______________
By this exercise, I agree (i) to provide such additional documents as you may
require and (ii) to provide for the payment by me to you (in the manner
designated by you) of your withholding obligation, if any, relating to the
exercise of this option.

         
 
  Very truly yours,    
 
       
 
 
 
Joseph F. O’Neill