EX-10.175






Exhibit 10.175




Dated: August 4, 2005





NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.



No. CCP-1 $1,000,000



THE IMMUNE RESPONSE CORPORATION




Secured Convertible Debenture




Due August 4, 2006




This Secured Convertible Debenture (the “Debenture”) is issued by THE IMMUNE RESPONSE
CORPORATION, a Delaware corporation (the “Obligor”), to CORNELL CAPITAL PARTNERS, LP (the
“Holder”), pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”) of even date herewith.



FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or its successors and
assigns the principal sum of One Million Dollars ($1,000,000) together with accrued but unpaid
interest on or before August 4, 2006 (the “Maturity Date”) in accordance with the following
terms:



Interest. Interest shall accrue on the outstanding principal balance hereof at an
annual rate equal to twelve percent (12%). Interest shall be calculated on the basis of a 360-day
year and the actual number of days elapsed, to the extent permitted by applicable law. Prior to
the first Scheduled Payment (as defined below), the Obligor shall make monthly payments of accrued
and unpaid interest. The first such payment shall be due and payable on the one month anniversary
of the date hereof, and each subsequent payment shall be due and payable on the same day of each
subsequent calendar month until the first Scheduled Payment is due. Interest hereunder will be
paid to the Holder or its assignee (as defined in Section 4) in whose name this Debenture is
registered on the records of the Obligor regarding registration and transfers of Debentures (the
“Debenture Register”).



Monthly Payments. The Obligor shall make monthly scheduled payments (“Scheduled
Payments”) consisting of principal and accrued interest. The first Scheduled Payment shall be
due and payable on the earlier of (a) the first day of the first month immediately following the
date that the Underlying Shares Registration Statement is declared effective by the Commission, or
(b) the date ninety (90) days from the date hereof. After the first Scheduled Payment, each
subsequent Scheduled Payment shall be due and payable on the same day of each subsequent calendar
month until the Maturity Date. The principal amount of each Scheduled Payment shall be determined
by dividing the outstanding principal amount of this Debenture as of the date of such Scheduled
Payment by the number of Scheduled Payments remaining until the Maturity Date. For example, if on
the date of the first Scheduled Payment the outstanding principal balance of this Debenture is
$1,000,000 and there are 10 Scheduled Payments remaining prior to the Maturity Date then the first
Scheduled Payment would consist of $100,000 of principal plus accrued and unpaid interest at the
interest rate specified above. All payments in respect of the indebtedness evidenced hereby shall
be made in collected funds, and shall be applied to principal, accrued interest and charges and
expenses owing under or in connection with this Debenture in such order as the Holder elects,
except that payments shall be applied to accrued interest before principal. Notwithstanding the
foregoing, this Debenture shall become due and immediately payable, including all accrued but
unpaid interest, upon an Event of Default (as defined in Section 2 hereof).



Right of Redemption. The Obligor at its option shall have the right, with three (3)
business days advance written notice, to redeem a portion or all amounts outstanding under this
Debenture prior to the Maturity Date or any Scheduled Payment due date. In the event that the
Closing Bid Price of the Common Stock on any date that the Obligor provides advance written notice
of redemption is greater than the Conversion Price then in effect, the Obligor shall pay a
redemption premium of twenty percent (20%) (“Redemption Premium”) of the amount redeemed in
addition to such redemption.



Security Agreements. This Debenture is secured by a Security Agreement (the
“Security Agreement”) of even date herewith between the Obligor and the Holder, a pledge
of_4,959,705 shares of Common Stock (“Pledged Shares”) by the Obligor in accordance with a
Pledge and Escrow Agreement (the “Pledge Agreement”) of even date herewith among the
Obligor, the Holder, and the Escrow Agent, and an Insider Pledge and Escrow Agreement (the
“Insider Pledge Agreement”) of even date herewith among the Obligor, the Holder, Cheshire
Associates LLC and the Escrow Agent.



Consent of Holder to Sell Capital Stock or Grant Security Interests. Except for the
capital stock to be issued pursuant to the Standby Equity Distribution Agreement of even date
herewith between the Obligor and Cornell Capital Partners, LP, so long as any of the principal
amount or interest on this Debenture remains unpaid and unconverted, the Obligor shall not, without
the prior consent of the Holder which shall not be unreasonably withheld, and except for grants of
stock awards and stock options under the Obligor’s current equity incentive plan (including a
future increase of up to 5,000,000 shares in the share reserve) and except for exercises or
conversions of currently outstanding derivative securities, (i) issue or sell any common stock or
preferred stock with or without consideration, (ii) issue or sell any preferred stock, warrant,
option, right, contract, call, or other security or instrument granting the holder thereof the
right to acquire common stock with or without consideration, (iii) enter into any security
instrument granting the holder a security interest in any of the assets of the Obligor, unless such
security interest is junior to that of the Holder, or (iv) other than with regard to allowed
increases in the equity incentive plan share reserve set forth above, file any registration
statements on Form S-8.



This Debenture is subject to the following additional provisions:



Section 1. This Debenture is exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder surrendering the same.
No service charge will be made for such registration of transfer or exchange.



Section 2. Events of Default.



(a) An “Event of Default”, wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or effected by operation of
law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):



(i) Any default in the payment of the principal of, interest on or other charges in respect of
this Debenture, free of any claim of subordination, as and when the same shall become due and
payable (whether on a Scheduled Payment due date, a Conversion Date or the Maturity Date or by
acceleration or otherwise);



(ii) The Obligor shall fail to observe or perform in any material respect any other covenant,
agreement or warranty contained in, or otherwise commit any breach or default of any provision of
this Debenture (except as may be covered by Section 2(a)(i) hereof) or any Transaction Document (as
defined in Section 4) which is not cured with in the time prescribed;



(iii) The Obligor or any subsidiary of the Obligor shall commence, or there shall be commenced
against the Obligor or any subsidiary of the Obligor under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or the Obligor or any subsidiary of
the Obligor commences any other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Obligor or any subsidiary of the Obligor or
there is commenced against the Obligor or any subsidiary of the Obligor any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of 61 days; or the Obligor or
any subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Obligor or any subsidiary of the
Obligor suffers any appointment of any custodian, private or court appointed receiver or the like
for it or any substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor makes a general
assignment for the benefit of creditors; or the Obligor or any subsidiary of the Obligor shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as
they become due; or the Obligor or any subsidiary of the Obligor shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the
Obligor or any subsidiary of the Obligor shall by any act or failure to act expressly indicate its
consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action
is taken by the Obligor or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;



(iv) The Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture or any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness for borrowed money or money due under any long term leasing
or factoring arrangement of the Obligor or any subsidiary of the Obligor in an amount exceeding
$100,000, whether such indebtedness now exists or shall hereafter be created and such default
actually results in such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;



(v) The Common Stock shall cease to be quoted for trading or listed for trading on either the
Nasdaq OTC Bulletin Board (“OTC”), Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a “Subsequent Market”) and
shall not again be quoted or listed for trading thereon within five (5) Trading Days of such
delisting;



(vi) The Obligor or any subsidiary of the Obligor shall be a party to any Change of Control
Transaction (as defined in Section 4);



(vii) The Obligor shall fail to file the Underlying Shares Registration Statement (as defined
in Section 4) with the Commission (as defined in Section 4), or the Underlying Shares Registration
Statement shall not have been declared effective by the Commission, in each case within the time
periods set forth in the Registration Rights Agreement of even date herewith between the Obligor
and the Holder;



(viii) If the effectiveness of the Underlying Shares Registration Statement lapses for any
reason or the Holder shall not be permitted to resell the shares of Common Stock underlying this
Debenture under the Underlying Shares Registration Statement, in either case (other than allowable
blackout periods), for more than five (5) consecutive Trading Days or an aggregate of eight Trading
Days (which need not be consecutive Trading Days);



(ix) The Obligor shall fail for any reason to deliver Common Stock certificates to a Holder
prior to the fifth (5th) Trading Day after a Conversion Date or the Obligor shall
provide notice to the Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of this Debenture in accordance with the
terms hereof;



(x) The Obligor shall fail for any reason to deliver the payment in cash pursuant to a Buy-In
(as defined herein) within three (3) days after notice is claimed delivered hereunder;



(b) During the time that any portion of this Debenture is outstanding, if any Event of Default
has occurred, the full principal amount of this Debenture, together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the Holder’s election,
immediately due and payable in cash, provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Obligor. If an Event of
Default occurs and remains uncured, the Conversion Price shall be reduced to $0.1579. In addition
to any other remedies, the Holder shall have the right (but not the obligation) to convert this
Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price then in-effect.



The Holder need not provide and the Obligor hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.



	 	 	 	 	 
	Section 3.

	 	 	 	Conversion.
	 
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	(a)

	 	(i)
	 	Conversion at Option of Holder.
	
 
	 	 	 	 






(A) This Debenture shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as
defined in Section 4) (subject to the limitations on conversion set forth in Section 3(a)(ii)
hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the
quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be
converted by (y) the Conversion Price (as defined in Section 3(c)(i)). The Obligor shall deliver
Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a
Conversion Date.



(B) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1)
the number of shares of Common Stock at the time authorized, unissued and unreserved for all
purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in
shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a
Subsequent Market; (3) the Obligor has failed to timely satisfy its conversion; then, at the option
of the Holder, the Obligor, in lieu of delivering shares of Common Stock pursuant to Section
3(a)(i)(A), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an
amount in cash equal to the product of the outstanding principal amount to be converted plus any
interest due therein divided by the Conversion Price and multiplied by the highest closing price of
the stock from date of the conversion notice till the date that such cash payment is made.



Further, if the Obligor shall not have delivered any cash due in respect of conversion of this
Debenture or as payment of interest thereon by the fifth (5th) Trading Day after the
Conversion Date, the Holder may, by notice to the Obligor, require the Obligor to issue shares of
Common Stock pursuant to Section 3(c), except that for such purpose the Conversion Price applicable
thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price
on the date of such Holder demand. Any such shares will be subject to the provisions of this
Section.



(C) The Holder shall effect conversions by delivering to the Obligor a completed notice in the
form attached hereto as Exhibit A (a “Conversion Notice”). The date on which a Conversion
Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire
principal amount outstanding under this Debenture, the Holder is not required to physically
surrender this Debenture to the Obligor in order to effect conversions. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Debenture plus all
accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and
the Obligor shall maintain records showing the principal amount converted and the date of such
conversions. In the event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.



(ii) Certain Conversion Restrictions.



(A) A Holder may not convert this Debenture or receive shares of Common Stock as payment of
interest hereunder to the extent such conversion or receipt of such interest payment would result
in the Holder, together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess
of 4.9% of the then issued and outstanding shares of Common Stock, including shares issuable upon
conversion of, and payment of interest on, this Debenture held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Obligor the number of shares
of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue
would result in the issuance of shares of Common Stock in excess of 4.9% of the then outstanding
shares of Common Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine
whether the restriction contained in this Section will limit any particular conversion hereunder
and to the extent that the Holder determines that the limitation contained in this Section applies,
the determination of which portion of the principal amount of this Debenture is convertible shall
be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion
Notice for a principal amount of this Debenture that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Obligor shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 3(a)(i)(A) and, at the option of the Holder,
either retain any principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the Holder (i.e., treat
the excess amount as if it had never been tendered for conversion). The provisions of this Section
may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65
days prior notice to the Obligor. Other Holders shall be unaffected by any such waiver.



(B) The Holder shall not be entitled to convert this debenture into any shares of Common
Stock, if after taking into account such conversion, the total number of shares issued to the
Holder, or its affiliates or assigns, under this Debenture (and any other Debenture of like tenor)
and the Pledge Agreement would exceed 4,959,705, unless and until the holders of Common Stock
approve the issuance of shares under the Transaction Documents.



(b) (i) The Holder shall have the right to pursue actual damages or declare an Event of
Default pursuant to Section 2 herein for the Obligor ‘s failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified herein and such
Holder shall have the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief, in each case without
the need to post a bond or provide other security. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.



(ii) In addition to any other rights available to the Holder, if the Obligor fails to deliver
to the Holder such certificate or certificates pursuant to Section 3(a)(i)(A) by the fifth
(5th) Trading Day after the Conversion Date, and if after such fifth (5th)
Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a “Buy-In”), then the Obligor shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the
market price of the Common Stock at the time of the sale giving rise to such purchase obligation
and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to
the principal amount of the attempted conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Obligor timely complied with its delivery
requirements under Section 3(a)(i)(A). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of
Debentures with respect to which the market price of the Underlying Shares on the date of
conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the
Obligor shall be required to pay the Holder $1,000. The Holder shall provide the Obligor written
notice indicating the amounts payable to the Holder in respect of the Buy-In.



(c) (i) The conversion price (the “Conversion Price”) in effect on any Conversion Date
shall be equal to $0.6315, which may be adjusted pursuant to the other terms of this Debenture.



(ii) If the Obligor, at any time while this Debenture is outstanding, shall (a) pay a stock
dividend or otherwise make a distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d)
issue by reclassification of shares of the Common Stock any shares of capital stock of the Obligor,
then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.



(iii) If the Obligor, at any time while this Debenture is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than the Closing Bid
Price at the record date mentioned below, then the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the
number of additional shares of Common Stock offered for subscription or purchase), and of which the
numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants, plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase at such Closing
Bid Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any such right, option
or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment
in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire
and shall not have been exercised, the Conversion Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the price which it would
have been (but reflecting any other adjustments in the Conversion Price made pursuant to the
provisions of this Section after the issuance of such rights or warrants) had the adjustment of the
Conversion Price made upon the issuance of such rights, options or warrants been made on the basis
of offering for subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such rights, options or warrants actually exercised.



(iv) If the Obligor or any subsidiary thereof, as applicable, with respect to Common Stock
Equivalents (as defined below), at any time while this Debenture is outstanding, shall issue shares
of Common Stock or rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any
Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at a price per share
which is less than the Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be
adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Obligor shall notify the
Holder in writing, no later than one (1) business day following the issuance of any Common Stock or
Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price,
or of applicable reset price, exchange price, conversion price and other pricing terms. No
adjustment under this Section shall be made as a result of (1) issuances and exercises of options
to purchase shares of Common Stock issued for compensatory purposes pursuant to any of the
Obligor’s stock option or stock purchase plans, (2) issuances of up to 1,000,000 shares of Common
Stock or Common Stock Equivalents issued to financial institutions or lessors in connection with
commercial credit arrangements, equipment financings, commercial property lease transactions or
similar transactions, (3) Common Stock Equivalents of the Obligor issued prior to, and outstanding
on, the Original Issuance Date and Common Stock issuable on exercise or conversion of such Common
Stock Equivalents, provided such Common Stock Equivalents are not amended after the Original Issue
Date, (4) any issuance by the Obligor of securities to an entity which is not an “Affiliate” of the
Obligor (as defined in Rule 144 of the Securities Act) as a component of any business relationship
with such entity for the purpose of (x) joint venture, technology licensing, or development
activities, (y) distribution, supply or manufacture of the Company’s products or services, or (z)
any other arrangement involving corporate partners that are primarily for purposes other than to
raise equity capital, or (5) any issuance by the Obligor of securities as consideration for a
merger or consolidation or the acquisition of a business, product, license, or other assets of
another person or entity which is not an “Affiliate” of the Obligor.



(v) If the Obligor, at any time while this Debenture is outstanding, shall distribute to all
holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security, then in each such case the Conversion Price
at which this Debenture shall thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the denominator shall be
the Closing Bid Price determined as of the record date mentioned above, and of which the numerator
shall be such Closing Bid Price on such record date less the then fair market value at such record
date of the portion of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to the Holder of the portion
of assets or evidences of indebtedness so distributed or such subscription rights applicable to one
share of Common Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.



(vi) In case of any reclassification of the Common Stock (but not including a stock split or
reverse stock split) or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder shall have the right thereafter to,
at its option, (A) convert the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the
shares of stock and other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange, and the Holder of
this Debenture shall be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Obligor into which the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such reclassification or
share exchange would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts due and payable thereon.
The entire prepayment price shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.



(vii) The Obligor shall maintain a share reserve of not less than 100% of the shares of Common
Stock issuable upon conversion of this Debenture; and within three (3) Business Days following the
receipt by the Obligor of a Holder’s notice that such minimum number of Underlying Shares is not so
reserved, the Obligor shall promptly reserve a sufficient number of shares of Common Stock to
comply with such requirement.



(viii) All calculations under this Section 3 shall be rounded up to the nearest $0.001 of a
share.



(ix) Whenever the Conversion Price is adjusted pursuant to Section 3 hereof, the Obligor shall
promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Notwithstanding the above
provisions of this Section 3, the number of shares of Common Stock issuable upon conversion of this
Debenture shall in no event be adjusted to an amount such that the Total Transaction Shares (as
defined below) shall be equal to or greater than 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 execution of the
Standby Equity Distribution Agreement between the Company and the Holder dated July 15, 2005
(“SEDA”)), until the holders of Common Stock approve the issuance of the Total Transaction
Shares. “Total Transaction Shares” shall mean, in the aggregate, the shares of Common
Stock issued to the Holder or its affiliates, and transferees, subsequent transferees, or any other
party pursuant to the Securities Purchase Agreement of even date herewith among the Company and
Holder (“Securities Purchase Agreement”), the Pledge and Escrow Agreement of even date
herewith among the Company, the Holder, and David Gonzalez, Esq. (the “Pledge Agreement”), the
Placement Agent Agreement dated as of July 15, 2005 among the Company, the Holder and Monitor
Capital, Inc., and the SEDA, the Warrants issued to the Holder pursuant to the Securities Purchase
Agreement, together with the Conversion Shares.



(x) If (A) the Obligor shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock; (C) the Obligor shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Obligor shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which the Obligor is a
party, any sale or transfer of all or substantially all of the assets of the Obligor, of any
compulsory share exchange whereby the Common Stock is converted into other securities, cash or
property; or (E) the Obligor shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Obligor; then, in each case, the Obligor shall cause to be
filed at each office or agency maintained for the purpose of conversion of this Debenture, and
shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books
of the Obligor, at least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required to be specified in
such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period
commencing the date of such notice to the effective date of the event triggering such notice.



(xi) In case of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any subsidiary of the Obligor of
more than one-half of the assets of the Obligor in one or a series of related transactions, a
Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the
aggregate amount of this Debenture then outstanding into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and such Holder shall be entitled upon such event or series of
related events to receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the
case of a merger or consolidation, require the surviving entity to issue to the Holder a
convertible Debenture with a principal amount equal to the aggregate principal amount of this
Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have terms identical (including with
respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights
and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to
which this Debentures were issued. In the case of clause (C), the conversion price applicable for
the newly issued convertible Debentures shall be based upon the amount of securities, cash and
property that each share of Common Stock would receive in such transaction and the Conversion Price
in effect immediately prior to the effectiveness or closing date for such transaction. The terms of
any such merger, sale or consolidation shall include such terms so as to continue to give the
Holder the right to receive the securities, cash and property set forth in this Section upon any
conversion or redemption following such event. This provision shall similarly apply to successive
such events.



(d) The Obligor covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion
of this Debenture and payment of interest on this Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons other than the Holder,
not less than such number of shares of the Common Stock as shall (subject to any additional
requirements of the Obligor as to reservation of such shares set forth in this Debenture) be
issuable (taking into account the adjustments and restrictions of Sections 2(b) and 3(c)) upon the
conversion of the outstanding principal amount of this Debenture and payment of interest hereunder.
The Obligor covenants that all shares of Common Stock that shall be so issuable shall, upon issue,
be duly and validly authorized, issued and fully paid, nonassessable and, if the Underlying Shares
Registration Statement has been declared effective under the Securities Act, registered for public
resale in accordance with such Underlying Shares Registration Statement.



(e) Upon a conversion hereunder the Obligor shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If
the Obligor elects not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common Stock.



(f) The issuance of certificates for shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such certificate, provided that
the Obligor 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 such certificate upon conversion in a name other than
that of the Holder of such Debenture so converted and the Obligor shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the issuance thereof
shall have paid to the Obligor the amount of such tax or shall have established to the satisfaction
of the Obligor that such tax has been paid.



(g) Any notices, consents, waivers or other communications required or permitted to be given
under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:



	 	 	 	 	 
	If to the Company, to:
	 	The Immune Response Corporation

	 
	 	5391 Darwin Court
	 
	 	Carlsbad, CA 92008

	 
	 	Attention: Michael K. Green

	 
	 	Facsimile: (760) 431-8636

	With a copy to:
	 	Heller Ehrman LLP

	 
	 	4530 La Jolla Village Drive, 7th Floor
	 
	 	San Diego, CA 92122

	 
	 	Attention: Hayden J. Trubitt, Esq.

	 
	 	Facsimile: (858) 587-5903

	If to the Holder:
	 	Cornell Capital Partners, LP

	 
	 	101 Hudson Street, Suite 3700
	 
	 	Jersey City, NJ  07303

	 
	 	Attention: Mark Angelo

	 
	 	Telephone: (201) 985-8300

	With a copy to:
	 	David Gonzalez, Esq.

	 
	 	101 Hudson Street – Suite 3700
	 
	 	Jersey City, NJ 07302

	 
	 	Telephone: (201) 985-8300

	 
	 	Facsimile: (201) 985-8266







or at such other address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party three (3) business
days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the
recipient of such notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (iii) provided by a
nationally recognized overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.



Section 4. Definitions. For the purposes hereof, the following terms shall
have the following meanings:



“Business Day” means any day except Saturday, Sunday and any day which shall be a
federal legal holiday in the United States or a day on which banking institutions are authorized or
required by law or other government action to close.



“Change of Control Transaction” means the occurrence of (a) an acquisition after the
date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Obligor, by contract or otherwise) of in excess of fifty percent
(50%) of the voting securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a
replacement at one time or over time of more than one-half of the members of the board of directors
of the Obligor which is not approved by a majority of those individuals who are members of the
board of directors on the date hereof (or by those individuals who are serving as members of the
board of directors on any date whose nomination to the board of directors was approved by a
majority of the members of the board of directors who are members on the date hereof), (c) the
merger, consolidation or sale of fifty percent (50%) or more of the assets of the Obligor or any
subsidiary of the Obligor in one or a series of related transactions with or into another entity,
or (d) the execution by the Obligor of an agreement to which the Obligor is a party or by which it
is bound, providing for any of the events set forth above in (a), (b) or (c).



“Commission” means the Securities and Exchange Commission.



“Common Stock” means the common stock, par value $0.0025, of the Obligor and stock of
any other class into which such shares may hereafter be changed or reclassified.



“Exchange Act” means the Securities Exchange Act of 1934, as amended.



“Original Issue Date” shall mean the date of the first issuance of this Debenture
regardless of the number of transfers and regardless of the number of instruments, which may be
issued to evidence such Debenture.



“Closing Bid Price” means the price per share in the last reported trade of the Common
Stock on the Nasdaq SmallCap Market or on the exchange which the Common Stock is then listed as
quoted by Bloomberg, LP.



“Person” means a corporation, an association, a partnership, organization, a business,
an individual, a government or political subdivision thereof or a governmental agency.



“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.



“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or
quoted or traded on such Subsequent Market on which the shares of Common Stock are then quoted or
listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then
Trading Day shall mean a Business Day.



“Transaction Documents” means the Securities Purchase Agreement or any other agreement
delivered in connection with the Securities Purchase Agreement, including, without limitation, the
Security Agreement, the Pledge Agreement, the Insider Pledge Agreement, and the Investor
Registration Rights Agreement.



“Underlying Shares” means the shares of Common Stock issuable upon conversion of this
Debenture or as payment of interest in accordance with the terms hereof.



“Underlying Shares Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement, covering among other things the resale
of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.



Section 5. Except as expressly provided herein, no provision of this Debenture shall
alter or impair the obligations of the Obligor, which are absolute and unconditional, to pay the
principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the
Obligor. This Debenture ranks pari passu with all other Debentures now or hereafter issued under
the terms set forth herein. As long as this Debenture is outstanding, the Obligor shall not and
shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its certificate
of incorporation, bylaws or other charter documents so as to adversely affect any rights of the
Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares to the extent
permitted or required under the Transaction Documents; or (iii) enter into any agreement with
respect to any of the foregoing.



Section 6. This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Obligor, including without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any
other proceedings of the Obligor, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.



Section 7. If this Debenture is mutilated, lost, stolen or destroyed, the Obligor
shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Obligor.



Section 8. No indebtedness of the Obligor is senior to this Debenture in right of
payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.
Without the Holder’s consent, the Obligor will not and will not permit any of their subsidiaries
to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness
of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or
any interest therein or any income or profits there from that is senior in any respect to the
obligations of the Obligor under this Debenture.



Section 9. This Debenture shall be governed by and construed in accordance with the
laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the
parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in
Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in
Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives,
to the maximum extent permitted by law, any objection, including any objection based on
forum non conveniens to the bringing of any such proceeding in such
jurisdictions.



Section 10. If the Obligor fails to strictly comply with the terms of this Debenture,
then the Obligor shall reimburse the Holder promptly for all fees, costs and expenses, including,
without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection
with this Debenture, including, without limitation, those incurred: (i) during any workout,
attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s
rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii)
defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv)
the protection, preservation or enforcement of any rights or remedies of the Holder.



Section 11. Any waiver by the Holder of a breach of any provision of this Debenture
shall not operate as or be construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Debenture. The failure of the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to that term or any
other term of this Debenture. Any waiver must be in writing.



Section 12. If any provision of this Debenture is invalid, illegal or unenforceable,
the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other persons and
circumstances. If it shall be found that any interest or other amount deemed interest due hereunder
shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of interest. The Obligor covenants (to
the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Obligor from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of this indenture,
and the Obligor (to the extent it may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay
or impeded the execution of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.



Section 13. Whenever any payment or other obligation hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding Business Day.



Section 14. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.



[REMAINDER OF PAGE INTENTIONLLY LEFT BLANK]





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IN WITNESS WHEREOF, the Obligor has caused this Secured Convertible Debenture to be duly
executed by a duly authorized officer as of the date set forth above.



	 	 	 	 	 
	THE IMMUNE RESPONSE CORPORATION







	 
	By:

	 

	Name:

	Title:







2



EXHIBIT “A”




NOTICE OF CONVERSION




(To be executed by the Holder in order to convert the Debenture)




	 
	 

	TO:







The undersigned hereby irrevocably elects to convert $ of the principal amount of the
above Debenture into Shares of Common Stock of The Immune Response Corporation, according to the
conditions stated therein, as of the Conversion Date written below.



	 
	 

	Conversion Date:

	 

	Applicable Conversion Price:

	 

	Signature:

	 

	Name:

	 

	Address:

	 

	Amount to be converted:

	 

	Amount of Debenture unconverted:

	 

	Conversion Price per share:

	 

	Number of shares of Common Stock to be issued:

	 

	Please issue the shares of Common Stock in the following name and to the

following address:

	 

	Issue to:

	 

	Authorized Signature:

	 

	Name:

	 

	Title:

	 

	Phone Number:

	 

	Broker DTC Participant Code:

	 

	Account Number:

	 








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