AGREEMENT, made
this 9th day of February, 2006, by and among The Immune Response
Corporation, a Delaware corporation (the “Company”),
Cheshire Associates, LLC, a Delaware limited liability company
(“Cheshire”), Cornell Capital Partners, L.P., a
Delaware limited partnership (“Cornell”), and Hudson
Asset Partners, LLC, a Delaware limited liability company (the
“Agent”), as agent for the holders from time to time of
the Company’s 8% Senior Secured Convertible Notes and for
Qubit Holdings, LLC (“Qubit”) in respect of the 8%
senior secured convertible promissory note in the principal amount
of $250,000 issued by the Company to Qubit on the same date hereof
(the “Qubit Note”). Cheshire, Cornell and the Agent
shall each be referred to herein as a “Secured Party”
and shall collectively be referred to as the “Secured
Parties”.
WHEREAS, Cheshire has made a loan in the aggregate principal
amount of $5,740,928 to the Company which came to be evidenced by a
8% Convertible Secured Promissory Note, effective April 29, 2005
(the “Cheshire Note”) pursuant to certain agreements by
and between the Company and Cheshire and Cheshire’s assignors
(together with the Cheshire Note the “Cheshire
Agreements”); and
WHEREAS , Cornell has made a loan in the original principal
amount of $1,000,000 to the Company pursuant to a Secured
Convertible Debenture bearing interest at 12% per annum, effective
August 4, 2005 (the “Cornell Debenture”) and a
Securities Purchase Agreement of even date therewith, by and
between the Company and Cornell (together with the Cornell
Debenture the “Cornell Agreements”); and
WHEREAS, the Company, pursuant to the terms of a certain
Confidential Private Placement Memorandum (the
“Memorandum”), will, from time to time, issue to
certain investors (the “Investors”), 8% Senior Secured
Convertible Promissory Notes (the “Investor Notes”), in
the principal amount of up to Five Million Dollars ($5,000,000);
and
WHEREAS , the Company has issued the Qubit Note to Qubit
(except where the context forbids, Qubit shall be considered an
“Investor” hereunder and the Qubit Note shall be deemed
to be an “Investor Note”); and
WHEREAS, the Company, pursuant to the Investor Notes and a
Security Agreement of even date herewith, by and between the
Company and the Agent (the “Security Agreement”), will
grant to the Investors a security interest in all of the assets of
the Company (together with the collateral securing the Cheshire
Note and the Cornell Debenture, the “Collateral”);
and
WHEREAS , Cheshire and Cornell each hereby consent to the
grant by the Company of the security interests of the Investors and
agree that such security interests shall not constitute a default
or Event of Default under the Cheshire Agreements or the Cornell
Agreements.
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NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Secured Parties hereby
agree with each other as follows:
1.
Company’s Title; Liens and Encumbrances . The Company
represents and warrants that it is the owner of its Collateral,
having good and marketable title thereto, free from any and all
liens, security interests, encumbrances and claims. The Company
will not create or assume or permit to exist any lien, security
interest, encumbrance or claim on or against the Collateral that is
senior to the Cheshire Note, the Cornell Debenture or the Investor
Notes (collectively, the “Notes”) except as created by
this Agreement and as permitted by the Notes, and the Company will
promptly notify the Secured Parties of any such other claim, lien,
security interest or other encumbrance made or asserted against the
Collateral and will defend the Collateral against any such claim,
lien, security interest or other encumbrance.
2.
Location of Collateral and Records . The Company represents
and warrants that it has no place of business, offices where the
Company’s books of account and records are kept, or places
where the Collateral is used, stored or located, except as set
forth on Schedule I annexed hereto. The Company shall at all
times maintain its records as to the Collateral at its chief place
of business at the address referred to on Schedule I and at
none other. The Company further covenants that except for
Collateral delivered to the Secured Parties, the Company will not
store, use or locate any of the Collateral at any place other than
as listed on Schedule I hereto.
3.
Perfection of Security Interest . The Company will join with
the Secured Parties in executing one or more financing statements
or amendments to existing financing statements, as necessary,
pursuant to the Uniform Commercial Code or other notices
appropriate under applicable law in form satisfactory to each of
the Secured Parties and will pay all filing or recordings costs
with respect thereto, and all costs of filing or recording this
Agreement or any other instrument, agreement or document executed
and delivered pursuant hereto or to the Notes (including the costs
of all Federal, state or local mortgage, documentary, stamp or
other taxes), in each case, in all public offices where filing or
recording is deemed by the Secured Party to be necessary or
desirable. The Company hereby authorizes each Secured Party to take
all action (including, without limitation, the filing of any
Uniform Commercial Code Financing Statements or amendments thereto
without the signature of the Company) which such Secured Party may
deem necessary or desirable to perfect or otherwise protect the
liens and security interests created hereunder and to obtain the
benefits of this Agreement.
4.
General Covenants . The Company shall:
a. furnish
to each Secured Party from time to time, at each Secured
Party’s request, written statements and schedules further
identifying and describing the Collateral in such detail as the
Secured Party may reasonably require;
b. advise
each Secured Party promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any
event which would have an adverse effect on the value of the
Collateral or on such Secured Party’s security interest
therein;
c. comply
with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the
Collateral or any part thereof or to the
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operation of
the Company’s business; provided , that the Company
may contest any acts, rules, regulations, orders and directions of
such bodies or officials in any reasonable manner which will not,
in each Secured Party’s opinion, adversely affect their
rights or the priority of their security interest in the
Collateral;
d. perform
and observe all covenants, restrictions and conditions contained in
the Notes, including, without limitation, those providing for
payment of taxes, maintenance of insurance and otherwise relating
to the Collateral, as though all such covenants, restrictions and
conditions were fully set forth in this Agreement; and
e. promptly
execute and deliver to the Secured Parties such further deeds,
mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and
take such further action as the Secured Parties may, from time to
time, in their discretion, deem necessary to perfect, protect or
enforce its security interest in the Collateral or otherwise to
effectuate the intent of this Agreement and the Notes including,
without limitation, appropriate documents and instruments to grant
the Secured Parties a first lien and security interest in any and
all assets of any subsidiaries formed or acquired subsequent to the
date hereof.
5.
Fixtures . It is the intent of the Company and the Secured
Parties that none of the Collateral is or shall be fixtures, as
that term is used or defined in Article 9 of the Uniform
Commercial Code, and the Company represents and warrants that it
has not made and is not bound by any lease or other agreement which
is inconsistent with such intent. Nevertheless, if the Collateral
or any part thereof is or is to become attached or affixed to any
real estate, the Company will, upon request by the Secured Parties,
use its best efforts to cause all persons having an interest in the
real estate to which the Collateral is attached or affixed to
furnish the Secured Parties with a disclaimer or subordination, in
form satisfactory to the Secured Parties, of its interest in the
Collateral, and the Company, upon request by the Secured Parties,
will furnish the Secured Parties with the names and addresses of
the record owners of, and all other persons having interest in, and
a general description of, such real estate.
6.
Collections . From and after the date of any event of
default under any of the Notes, the Company will immediately upon
receipt of all checks, drafts, cash or other remittances in payment
of any of its accounts, contract rights or general intangibles
constituting part of the Collateral, or in payment for any
Collateral sold, transferred, leased or otherwise disposed of, or
in payment or on account of its accounts, contracts, contract
rights, notes, drafts, acceptances, general intangibles, choses in
action and all other forms of obligations relating to any of the
Collateral so sold, transferred or otherwise disposed of, deliver
any such items to the Secured Parties accompanied by a remittance
report in form supplied or approved by the Secured Parties, such
items to be delivered to the Secured Parties in the same form
received, endorsed or otherwise assigned by the Company where
necessary to permit collection of items and, regardless of the form
of such endorsement, the Company hereby waives presentment, demand,
notice of dishonor, protest, notice of protest and all other
notices with respect thereto. All such remittances shall be applied
and credited by the Secured Parties first to satisfaction of the
obligations of every kind, nature and description owing by the
Company to the Secured Parties, including, without limitation,
principal, interest, costs and expenses, however evidenced, as
arising under the Investor Notes, the Security Agreement, the
Cheshire Agreements and the Cornell Agreements (collectively, the
“Obligations”) pursuant to paragraph 8 below, or as
otherwise required by applicable law, and to the extent not so
credited or applied, shall be paid
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7.
Rights and Remedies on Default . In the event of the
occurrence of any event of default as defined or specified in the
Investors Notes, the Security Agreement, the Cheshire Agreements,
or the Cornell Agreements, the Secured Parties shall at any time
thereafter have the right, with or without notice to the Company,
as to any or all of the Collateral, by any
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