AGREEMENT, dated
as of February 9, 2006, by THE IMMUNE RESPONSE CORPORATION, a
Delaware corporation (the “Company”) in favor of Hudson
Asset Partners, LLC, a Delaware limited liability company (the
“Agent”), acting in its capacity as agent for holders
from time to time (the “Purchasers”) of the 8% Senior
Secured Convertible Promissory Notes in the aggregate principal
amount of up to $5,000,000 (the “Purchaser Notes”), to
be issued by the Company to the Holders and for Qubit Holdings, LLC
(“Qubit”, and collectively with the Purchasers, the
“Holders”) in respect of the 8% senior secured
convertible promissory note in the principal amount of $250,000
(the “Qubit Note”, and collectively with the Purchaser
Notes, the “Notes”) issued by the Company to
Qubit.
WHEREAS, Qubit has
agreed to purchase the Qubit Note from the Company;
WHEREAS, the
Purchasers will agree to purchase the Purchaser Notes from the
Company pursuant to subscription agreements to be executed by each
Purchaser and the Company for the Notes (the “Subscription
Agreements”);
WHEREAS, to induce
the Holders to purchase the Notes, the Company has agreed to secure
its Obligations by granting to the Holders a security interest in
the Company’s assets described in Section 2 below;
and
WHEREAS, the
Company and the Holders desire to have the Agent hold the secured
assets, and the Company, the Holders and the Agent desire to enter
into an agreement setting forth the terms and conditions for the
holding of such assets and the duties of the Agent, as set forth
below:
NOW THEREFORE, in
consideration of the mutual conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1.1 Defined
Terms . In addition to the other terms defined in this
Agreement, whenever the following capitalized terms are used they
shall be defined as follows:
“
Collateral ” shall have the meaning ascribed to such
term in Section 2.1 and described in
Section 2.2.
“DEUCC” shall mean the Uniform Commercial Code
as in effect in the State of Delaware from time to time.
“ Event
of Default ” shall have the meaning ascribed to such term
under the Notes.
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“Existing Senior Debt” shall mean the
indebtedness owed by the Company to Cheshire Associates, LLC and
Cornell Capital Partners, L.P.
“
Financing Agreements ” shall mean, collectively, this
Agreement, the Notes and all other agreements, documents and
instruments now or at any time hereafter executed and/or delivered
by the Company, the Holders or the Agent in connection with the
grant of the security interest herein, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced; provided , however , that
Financing Agreements shall not mean nor include the certain Limited
Recourse Interest Agreement, dated as of the date hereof, among
Spencer Trask Intellectual Capital Company, LLC and the Company in
favor of the Agent.
“
Liens ” shall mean mortgages, liens, pledges, charges,
security interest, encumbrances or other third party interests of
any nature whatsoever.
“
Obligations ” shall mean any and all obligations of
every kind, nature and description arising under the Notes or this
Agreement owing by the Company to the Holders, including principal,
interest, costs and expenses, however evidenced. For avoidance of
doubt, the Obligations shall include the obligations of the Company
to pay the fees and expenses of the Agent and to provide indemnity
to the Agent pursuant to Section 8.4 hereof.
“
Person ” shall mean an individual, a partnership, a
corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or department, agency or
political subdivision thereof).
“
Requisite Holders ” shall mean the Holders holding a
majority of the aggregate principal amount then outstanding under
the Notes.
“
Successor Agent ” shall have the meaning ascribed to
such term in Section 8.4.
1.2 Other
Definitional Provisions, Construction . All terms used herein
and defined in the DEUCC shall have the same definitions as
specified therein. Unless otherwise specified,
“hereunder,” “herein,” hereto,”
“this Agreement” words of similar import refer to this
entire document; “including” is used by way of
illustration and not by way of limitation, unless the context
clearly indicates the contrary; the singular includes the plural,
and conversely.
2. GRANT
OF SECURITY INTEREST
2.1 Grant .
Subject to the terms and conditions of this Agreement, as
collateral security for the punctual payment and performance of the
Obligations by the Company, the Company hereby grants to the
Holders a continuing security interest in, and shall assign to the
Holders as security, the following property and interests in
property, whether presently owned or hereafter acquired or
existing, and wherever located described in Section 2.2
(collectively the “Collateral”).
2.2
Collateral . For purposes of this Agreement, the Collateral
shall consist of:
(a)
Accounts . All rights outstanding as of the date hereof and
future rights to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper,
and whether or not earned by performance.
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(b)
Contract Rights . All contract rights, general intangibles
(including, but not limited to, tax and duty refunds), and, chattel
paper, documents, instruments, letters of credit, bankers’
acceptances and guaranties outstanding as of the date hereof and
thereafter obtained.
(c)
Inventory . All of the Company’s owned, as of the date
hereof and thereafter existing or acquired, raw materials, work in
process, finished goods and all other inventory of whatsoever kind
or nature, wherever located.
(d)
Equipment . All of the Company’s owned, as of the date
hereof and thereafter acquired, equipment, machinery, computers and
computer hardware and software (whether owned or licensed),
vehicles, tools, furniture, fixtures, all attachments, accessions
and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever
located, except any leased property.
(e)
Intellectual Property . All patents, trademarks, and
copyrights owned by the Company, including all goodwill associated
therewith, all license and other rights in any third party product,
and all other tangible or intangible proprietary information and
materials owned by the Company that are currently used or being
developed for use in the business of the Company.
(f)
Records . All of the Company’s books as of the date
hereof and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral
or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are
stored.
(g)
Cash . All of the Company’s cash, including drafts,
acceptances, bank deposits, deposit accounts, checking accounts,
and cash now or hereafter owned by the Company, or in which the
Company may now have or may hereafter acquire any
interest
(h)
All Other Assets . All products and proceeds of the
foregoing, in any form, including, without limitation, insurance
proceeds and any claims against third parties for loss or damage to
or destruction of any or all of the foregoing.
3.1 Financing
Statements . The Company shall execute and file all financing
or continuation statements or amendments thereto, in form and
substance reasonably satisfactory to the Agent, in order to perfect
and preserve the security interests granted herein in the
Collateral. Upon the execution of this Agreement, the Company shall
deliver to the Agent Forms UCC-1, in form and substance reasonably
satisfactory to the Agent, for filing in the State of
Delaware.
4. USE OF
COLLATERAL . Prior to the occurrence of an Event of Default
which has not otherwise been waived, the Company shall have the
right to receive and retain any cash distributions declared and
paid with respect to the Collateral, the right to use, sell, lease
or replace the Collateral. After the occurrence and during the
continuation of an Event of Default, the Company shall not be
entitled to exercise any rights with respect to the Collateral, and
the Agent shall be entitled to exercise any such rights for the
benefit of the Holders. If any distributions, payments or proceeds
shall be received by the Company after the occurrence of
an
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Event of
Default which has not been otherwise waived in writing, the Company
shall immediately deliver the same to the Agent, accompanied, if
appropriate, by proper instruments of assignment and/or powers
executed by the Company in accordance with the Agent’s
instructions, to be held subject to the terms of this
Agreement.
5.
REPRESENTATIONS AND WARRANTIES . To induce the Holders to
enter into this Agreement and the Notes, the Company makes the
following representations and warranties to the Holders:
5.1
Authority . The Company has the authority to enter into this
Agreement and to grant the security interests provided herein, and
has obtained all necessary corporate approvals to execute, deliver
and perform its obligations under this Agreement.
5.2
Ownership . Except for the security interests of Existing
Senior Debt and the security interest granted to the Holders
pursuant to this Agreement, the Company owns the Collateral free
and clear of any Lien, and no adverse claims have been filed with
respect to any of the Collateral. Subject at all times to the
Intercreditor Agreement, the Company shall defend the Collateral
against all claims and demands of all persons at any time claiming
the same or any interest therein adverse to the Holders.
5.3
Priority . To the extent a security interest in the
Collateral can be perfected by the filing of a financing statement,
the filing of financing statements with respect to the Collateral
shall create a valid and perfected security interest in the
Collateral securing the payment of the Obligations, which, pursuant
to an intercreditor agreement of even date herewith, by and among
the Company, the Agent and the holders of the Existing Senior Debt
(the “Intercreditor Agreement”), shall be pari
passu with the security interests held by the holders of the
Existing Senior Debt and which shall be a first priority security
interest as to all other indebtedness of the Company, subject to
any limitations set forth in the Notes.
5.4 Maintenance
of Collateral . At the Company’s own expense, the Company
will keep the Collateral in good condition at all times (normal
wear and tear excepted) and maintain the same in accordance with
all manufacturer’s specifications and
requirements.
5.5 Third
Party . No authorization, approval or other action by, and no
notice to or filing with any governmental authority is required
either for the delivery by the Company of the Collateral pursuant
to this Agreement or for the execution, delivery or performance of
this Agreement by the Company except for (i) filings of Forms
UCC with the State of Delaware, or (ii) the remedies in respect of
the Collateral pursuant to this Agreement.
5.6 No
Violation . The execution, delivery and performance of this
Agreement will not violate any provision of any applicable law or
regulation or of any writ or decree of any court or governmental
instrumentality or of any indenture, contract, agreement or other
undertaking to which the Company is a party or which purports to be
binding upon the Company or upon any of its assets and will not
result in the creation or imposition of any Lien in any
of
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