THE IMMUNERESPONSE CORPORATION

8% CONVERTIBLE SECURED PROMISSORY NOTE

$819,000                                                                                                                 NewYork, New York

June 6, 2003

In consideration of thereceipt of $819,000, The Immune Response Corporation, a Delaware corporation(the “Issuer”), hereby unconditionally promises to pay to the order of CheshireAssociates LLC (the “Purchaser”), at the office of the Purchaser located at 535Madison Avenue, 18th Floor, New York, New York 10022, or such otheraddress designated by the Purchaser, in lawful money of the United States ofAmerica and in immediately available funds, on October 6, 2003 (the “NoteMaturity Date”) the principal amount of $819,000 and all accrued interest atthe rate of eight (8%) percent per annum based on a 365-day year (“InterestRate”).

Interest (other thaninterest accruing as a result of a failure by Issuer to pay any amount when dueas set forth below) in respect of this Note shall accrue until all amountsremaining owed under such Note shall be fully repaid, and shall be due andpayable in full on the Note Maturity Date. If all or a portion of the principal amount of the Note or any interestpayable thereon shall not be repaid when due whether on the applicablerepayment date, by acceleration or otherwise, such overdue amounts on such Noteshall bear interest at a rate per annum that is three (3%) percent above theInterest Rate (i.e., 11%) from the date of such non-payment until suchamount is paid in full (after as well as before judgment).  All payments to be made by the Issuerhereunder or pursuant to the Notes shall be made in lawful money of the UnitedStates by certified check or wire transfer in immediately available funds. Anyinterest owing on overdue amounts shall be payable on demand.

The obligation to makethe payments provided for in this Note is absolute and unconditional, and isnot subject to any defense, set-off, counterclaim, rescission, recoupment oradjustment whatsoever.

The obligations underthis Note shall be secured by that certain Intellectual Property SecurityAgreement, dated November 9, 2001 (the “Security Agreement”), by and betweenthe Issuer and Kevin Kimberlin Partners, L.P., a Delaware limited partnership(“KKP”), as amended by Amendment No. 1, dated February 26, 2002, by and betweenthe Issuer, KKP and Oshkim Limited Partnership (“Oshkim”), and as furtheramended by Amendment No. 2, dated July 11, 2002, by and between the Issuer,KKP, Oshkim and The Kimberlin Family 1998 Irrevocable Trust.

This Note (including allaccrued and unpaid interest) shall become convertible on the terms to bereasonably negotiated in good faith by the Purchaser and the Issuer.

Upon the occurrence ofany one or more of the Events of Default specified on Exhibit A attachedhereto, all amounts then remaining unpaid on this Note may be declared by thePurchaser to be immediately due and payable.

 

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This Note is freelytransferable and assignable, in whole or in part, by the Purchaser, and suchtransferee or assignee shall have the same rights hereunder as thePurchaser.  The Issuer may not assign ordelegate any of its obligations under this Note without the prior writtenconsent of the Purchaser (or its successor, transferee or assignee).

All parties now andhereafter liable with respect to this Note, whether maker, principal, surety,guarantor, endorser or otherwise, hereby waive presentment, demand, protest andall other notices of any kind.

The Issuer agrees to payall of the Purchaser’s expenses, including reasonable attorneys’ costs andfees, incurred in collecting sums due under this Note.

All or part of the Notemay be prepaid by Issuer upon at least five (5) days’ prior written notice tothe Purchaser thereof; provided, however, that any suchprepayment on such Note shall be first applied to accrued and unpaid interestof the outstanding Note and then against its outstanding principal.

This Note shall begoverned by, and construed and interpreted in accordance with, the laws of theState of New York.
|   | THE IMMUNE RESPONSE CORPORATION |
|--------|---------------------------------|
|   |                            |   |   |
|   | By:                             |   |
|   |                            | Name: |   |
|   |                            | Title: |   |

 

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**ExhibitA**

**Eventsof Default**.

                If any of the following events (each, an “Event ofDefault”) shall occur:

(i)            Issuer shall fail to pay anyprincipal or interest on the Note within three (3) business days after suchpayment becomes due in accordance with the terms thereof or hereof;

(ii)           Issuer shall default, in any materialrespect, in the observance or performance of any other agreement contained inthe Security Agreement and such default shall continue unremedied for a periodof ten (10) days after written notice to Issuer of such default; or

(iii)          (a) Issuer shall commence any case, proceeding or other action (x) under anyexisting or future law of any jurisdiction, domestic or foreign, relating tobankruptcy, insolvency, reorganization, conservatorship or relief of debtors,seeking to have an order for relief entered with respect to it, or seeking toadjudicate it bankrupt or insolvent, or seeking reorganization, arrangement,adjustment, winding-up, liquidation, dissolution, composition or other reliefwith respect to it or its debts or (y) seeking appointment of a receiver,trustee, custodian, conservator or other similar official for it or for all orany substantial part of its assets, or Issuer shall make a general assignmentfor the benefit of its creditors; or (b) there shall be commenced againstIssuer any case, proceeding or other action of a nature referred to in clause(a) above that (A) results in the entry of an order for relief of any suchadjudication or appointment or (B) remains undismissed, undischarged orunbonded for a period of sixty (60) days; or (c) there shall be commencedagainst Issuer any case, proceeding or other action seeking issuance of awarrant of attachment, execution, distrait or similar process against all orany substantial part of its assets that results in the entry of an order forany such relief that shall not have been vacated, discharged, or stayed orbonded pending appeal within sixty (60) days from the entry thereof; or (d)Issuer shall take any action in furtherance of, or indicating its consent to,approval of, or acquiescence in, any of the acts set forth in clauses (a), (b)or (c) above; or (e) Issuer shall generally not, or shall be unable to, orshall admit in writing its inability to, pay its debts as they become due;

then,and in any such event, (x) if such event is an Event of Default specified inclause (iii) above of with respect to Issuer, the Note (with all accrued andunpaid interest thereon) and all other amounts owing under any of thepromissory notes issued by the Issuer to the Purchaser or any related party ofthe Purchaser shall automatically and immediately become due and payable and(y) if such event is any other Event of Default, Purchaser may, by written noticeto Issuer, immediately declare the Note (with all accrued and unpaid interestthereon) to be due and payable forthwith, whereupon the same shall immediatelybecome due and payable.  Except asexpressly provided above, presentation, demand, protest and all other noticesof any kind are hereby expressly waived by Issuer.

 

 

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