8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): September 27, 2005

The Immune Response Corporation
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	000-18006	33-0255679
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
5931 Darwin Court, Carlsbad, California		92008
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (760) 431-7080

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On September 30, 2005, we entered into a Pledge and Escrow Agreement with Cornell Capital Partners, LP ("Cornell") and David Gonzalez, Esq. as escrow agent. In conjunction with the Secured Convertible Debenture in the amount of $1,000,000 issued by us to Cornell on August 4, 2005, we agreed to irrevocably pledge to Cornell 9,326,000 shares of our common stock as additional security for the Secured Convertible Debenture. This additional pledge of stock will result in Cornell’s release from pledge of 6,000,000 previously pledged shares of common stock owned by Cheshire Associates LLC ("Cheshire"). Cheshire is an affiliate of Kevin Kimberlin, a director and major stockholder of the Company. As inducement for Cheshire to pledge 6,000,000 shares of common stock, we will issue to Cheshire a warrant to purchase shares of our common stock. The number of shares subject to the warrant is to be calculated as the number of days Cheshire’s shares remained in pledge times 2,000. Because the Cheshire sha res will be released from pledge as of September 30, 2005, the number of shares for which Cheshire’s warrant is exercisable has been fixed as 114,000.

As of September 30, 2005, we have 78,568,184 shares of common stock issued and no shares of preferred stock outstanding. Included as part of the issued shares are the 9,326,000 shares pledged by us to Cornell, as described above and 4,959,705 shares previously pledged by us to Cornell in August 2005 upon the issuance of the Secured Convertible Debenture. Our outstanding shares of common stock net of the pledged shares would be 64,282,479. Th pledged shares do not have voting rights and are not eligible for dividends. Upon full satisfaction of the Secured Convertible Debenture, the pledged shares will be released and cancelled. The due date of the Secured Convertible Debenture is August 4, 2006.

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On September 27, 2005, we received a letter from the staff of The Nasdaq Stock Market, Inc., advising us that our securities are subject to delisting from The Nasdaq Capital Market under Marketplace Rule 4310(c)(2)(B)(ii) at the opening of business on October 6, 2005, because the market value of our listed securities is below the minimum requirement of $35,000,000. We intend to request an oral hearing before a Nasdaq Listing Qualifications Panel to review the staff’s determination pursuant to Marketplace Rule 4805. This request will stay the delisting pending a decision by the Panel.

Item 3.02 Unregistered Sales of Equity Securities.

Pursuant to our Standby Equity Distribution Agreement ("SEDA") dated July 15, 2005, we sold 675,828 shares of common stock to Cornell Capital Partners, LP ("Cornell Capital") on September 28, 2005. In accordance with the SEDA, the number of shares was calculated as $300,000 divided by $0.4439. We selected $300,000 as the gross advance for this particular SEDA transaction. The $0.4439 price per share was calculated, under the SEDA, by multiplying the lowest daily volume weighted average price (as quoted by Bloomberg L.P.) in the five-day trading period from September 21, 2005 to September 27, 2005 by 97%. From the indicated $300,000 gross advance, we actually received cash proceeds of $284,500, net of a 5% retainage fee and a $500 structuring fee.

We have stated in a SEC registration statement that the 3% discount and the 5% retainage fee constitute underwriting discounts, as does the $515,000 commitment fee (paid in the form of 725,353 shares of our common stock) which we paid to Cornell Capital i n respect of the entire $15,000,000 SEDA commitment on July 15, 2005. The 675,828 shares were issued to Cornell Capital pursuant to the Securities Act Section 4(2) registration exemption.

Item 9.01 Financial Statements and Exhibits.

Exhibit 10.185
Pledge and Escrow Agreement dated September 30, 2005, among The Immune Response Corporation, Cornell Capital Partners, LP and David Gonzalez, Esq.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	The Immune Response Corporation
October 3, 2005	By:	/s/ Michael K. Green
		Name: Michael K. Green
		Title: Vice President, Finance and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
10.185	Pledge and Escrow Agreement dated September 30, 2005, among The Immune Response Corporation, Cornell Capital Partners, LP and David Gonzalez, Esq.

EX-10.185

Exhibit 10.185

PLEDGE AND ESCROW AGREEMENT

THIS PLEDGE AND ESCROW AGREEMENT (the “Agreement”) is made and entered into as of September 30, 2005 (the “Effective Date”) by and among THE IMMUNE RESPONSE CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the “Pledgor”), CORNELL CAPITAL PARTNERS, LP (the “Pledgee”), and DAVID GONZALEZ, ESQ., as escrow agent (“Escrow Agent”).

RECITALS:

WHEREAS, in order to secure the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all of the Company’s obligations (the “Obligations”) to the Pledgee or any successor to the Pledgee under the Convertible Debenture (the “Convertible Debentures”) issued by the Company to the Pledgee on August 4, 2005 in the amount of One Million Dollars ($1,000,000) of principal, plus any interest, costs, fees, and other amounts owed to the Pledgee thereunder, the Pledgor has agreed to irrevocably pledge to the Pledgee Nine Million Three Hundred Twenty Six Thousand (9,326,000) shares (the “Pledged Shares”) of the Pledgor’s common stock, and

WHEREAS, the Pledgor and the Pledgee are also party to the Securities Purchase Agreement dated August 4, 2005 (the “Securities Purchase Agreement”), the Security Agreement dated August 4, 2005 (the “Security Agreement”), the Pledge and Escrow Agreement dated August 4, 2005, and all other contracts entered into between the parties hereto (collectively, together with this Agreement, the “Transaction Documents”).

NOW, THEREFORE, in consideration of the mutual covenants, agreements, warranties, and representations herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

TERMS AND CONDITIONS

1. Pledge and Transfer of Pledged Shares.

1.1. The Pledgor hereby grants to Pledgee a security interest in all Pledged Shares as security for Pledgor’s obligations under the Convertible Debentures. Simultaneously with the execution of this Agreement the Pledgor shall deliver to the Escrow Agent stock certificates made out in favor of the Pledgor representing the Pledged Shares, together with duly executed stock powers or other appropriate transfer documents executed in blank by the Pledgor (the “Transfer Document”), and such stock certificates and Transfer Documents shall be held by the Escrow Agent until the full payment of all amounts due to the Pledgee under the Convertible Debentures and through repayment in accordance with the terms of the Convertible Debentures, or the termination or expiration of this Agreement.

1.2. Upon receipt of the Transfer Documents, the Plegdee shall release from Pledge the 6,000,000 shares of Common Stock of the Pledgor pledged to the Pledgee by Cheshire Associates LLC.

2. Rights Relating to Pledged Shares. Upon the occurrence of an Event of Default (as defined herein) and transfer of some or all of the Pledged Shares to the Pledgee pursuant to the Pledgee’s entitlement, the Pledgee shall be entitled to vote such transfered Pledged Shares, to receive dividends and other distributions thereon, and to enjoy all other rights and privileges incident to the ownership of such transfered Pledged Shares.

3. Release of Pledged Shares from Pledge. Upon the payment of all amounts due to the Pledgee under the Convertible Debenture by repayment in accordance with the terms of the Note, the parties hereto shall notify the Escrow Agent to such effect in writing. Upon receipt of such written notice for payment of the amounts due to the Pledgee under the Convertible Debenture, the Escrow Agent shall return to the Pledgor the Transfer Documents and the certificates representing the Pledged Shares, (collectively the “Pledged Materials”), whereupon any and all rights of Pledgee in the Pledged Materials shall be terminated. Notwithstanding anything to the contrary contained herein, upon full payment of all amounts due to the Pledgee under the Convertible Debenture, by repayment in accordance with the terms of the Note, this Agreement and Pledgee’s security interest and rights in and to the Pledged Shares shall terminate.

4. Event of Default. An “Event of Default” shall be deemed to have occurred under this Agreement upon an Event of Default under the Convertible Debenture.

5. Remedies. Upon and anytime after the occurrence of an Event of Default, the Pledgee shall have the right to provide written notice of such Event of Default (the “Default Notice”) to the Escrow Agent, with a copy to the Pledgor. As soon as practicable after receipt of the Default Notice, the Escrow Agent shall deliver to Pledgee the Pledged Materials held by the Escrow Agent hereunder. Upon receipt of the Pledged Materials, the Pledgee shall have the right to (i) sell the Pledged Shares and to apply the proceeds of such sales, net of any selling commissions, to the Obligations owed to the Pledgee by the Pledgor under the Convertible Debenture, including, without limitation, outstanding principal, interest, legal fees, and any other amounts owed to the Pledgee, and exercise all other rights and (ii) any and all remedies of a secured party with respect to such property as may be available under the Uniform Commercial Code as in effect in the State of New Jersey. To the extent that the net proceeds received by the Pledgee are insufficient to satisfy the Obligations in full, the Pledgee shall be entitled to a deficiency judgment against the Pledgor for such amount. The Pledgee shall have the absolute right (subject to applicable securities laws) to sell or dispose of the Pledged Shares in any manner it sees fit and shall have no liability to the Pledgor or any other party for selling or disposing of such Pledged Shares even if other methods of sales or dispositions would or allegedly would result in greater proceeds than the method actually used. The Escrow Agent shall have the absolute right to disburse the Pledged Shares to the Pledgee in batches not to exceed 9.9% of the outstanding capital of the Pledgor (which limit may be waived by the Pledgee providing not less than 65 days’ prior written notice to the Escrow Agent).

5.1. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Transaction Document shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee of any one or more of the rights, powers or remedies provided for in this Agreement or any other Transaction Document or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee to any other further action in any circumstances without demand or notice. The Pledgee shall have the full power to enforce or to assign or contract its rights under this Agreement to a third party.

5.2. Demand Registration Rights. In addition to all other remedies available to the Pledgee, upon an Event of Default, the Pledgor shall promptly, but in no event more than thirty (30) days after the date of the Default Notice, file a registration statement to register with the Securities and Exchange Commission the Pledged Shares for the resale by the Pledgee. The Pledgor shall cause the registration statement to remain in effect until all of the Pledged Shares have been sold by the Pledgee.

6. Concerning the Escrow Agent.

6.1. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no implied duties or obligations shall be read into this Agreement against the Escrow Agent.

6.2. The Escrow Agent may act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine, may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions hereof has been duly authorized to do so. The Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner, and execution, or validity of any instrument deposited in this escrow, nor as to the identity, authority, or right of any person executing the same; and its duties hereunder shall be limited to the safekeeping of such certificates, monies, instruments, or other document received by it as such escrow holder, and for the disposition of the same in accordance with the written instruments accepted by it in the escrow.

6.3. Pledgee and the Pledgor hereby agree, to defend and indemnify the Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits, or proceedings at law or in equity, or any other expenses, fees, or charges of any character or nature which it may incur or with which it may be threatened by reason of its acting as Escrow Agent under this Agreement; and in connection therewith, to indemnify the Escrow Agent against any and all expenses, including attorneys’ fees and costs of defending any action, suit, or proceeding or resisting any claim (and any costs incurred by the Escrow Agent pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall be vested with a lien on all property deposited hereunder, for indemnification of attorneys’ fees and court costs regarding any suit, proceeding or otherwise, or any other expenses, fees, or charges of any character or nature, which may be incurred by the Escrow Agent by reason of disputes arising between the makers of this escrow as to the correct interpretation of this Agreement and instructions given to the Escrow Agent hereunder, or otherwise, with the right of the Escrow Agent, regardless of the instructions aforesaid, to hold said property until and unless said additional expenses, fees, and charges shall be fully paid. Any fees set forth herein and costs charged by the Escrow Agent for serving hereunder shall be paid by the Pledgor.

6.4. If any of the parties shall be in disagreement about the interpretation of this Agreement, or about the rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, at its sole discretion deposit the Pledged Materials with the Clerk of the United States District Court of New Jersey, sitting in Newark, New Jersey, and, upon notifying all parties concerned of such action, all liability on the part of the Escrow Agent shall fully cease and terminate. The Escrow Agent shall be indemnified by the Pledgor, the Company and Pledgee for all costs, including reasonable attorneys’ fees in connection with the aforesaid proceeding, and shall be fully protected in suspending all or a part of its activities under this Agreement until a final decision or other settlement in the proceeding is received.

6.5. The Escrow Agent may consult with counsel of its own choice (and the costs of such counsel shall be paid by the Pledgor and Pledgee) and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The Escrow Agent shall not be liable for any mistakes of fact or error of judgment, or for any actions or omissions of any kind, unless caused by its willful misconduct or gross negligence.

6.6. The Escrow Agent may resign upon ten (10) days’ written notice to the parties in this Agreement. If a successor Escrow Agent is not appointed within this ten (10) day period, the Escrow Agent may petition a court of competent jurisdiction to name a successor.

6.7 Conflict Waiver. The Pledgor hereby acknowledges that the Escrow Agent is general counsel to the Pledgee, a partner in the general partner of the Pledgee, and counsel to the Pledgee in connection with the transactions contemplated and referred herein. The Pledgor agrees that in the event of any dispute arising in connection with this Agreement or otherwise in connection with any transaction or agreement contemplated and referred herein, the Escrow Agent shall be permitted to continue to represent the Pledgee and the Pledgor will not seek to disqualify such counsel and waives any objection Pledgor might have with respect to the Escrow Agent acting as the Escrow Agent pursuant to this Agreement.

6.8 Notices. Unless otherwise provided herein, all demands, notices, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by overnight courier service, or mailed by certified mail, return receipt requested, addressed:

If to the Pledgor, 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 Pledgee:	Cornell Capital Partners, LP
	101 Hudson Street, Suite 3700
	Jersey City, NJ 07302
	Attention: Mark A. Angelo
	Telephone: (201) 985-8300
	Facsimile: (201) 985-8744
If to the Escrow Agent:	David Gonzalez, Esq.
	101 Hudson Street, Suite 3700
	Jersey City, NJ 07302
	Telephone: (201) 985-8300
	Facsimile: (201) 985-1964

Any such notice shall be effective (a) when delivered, if delivered by hand delivery or overnight courier service, or (b) five (5) days after deposit in the United States mail, as applicable.

7. Binding Effect. All of the covenants and obligations contained herein shall be binding upon and shall inure to the benefit of the respective parties, their successors and assigns.

8. Governing Law; Venue; Service of Process. The validity, interpretation and performance of this Agreement shall be determined in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed wholly within that state except to the extent that Federal law applies. The parties hereto agree that any disputes, claims, disagreements, lawsuits, actions or controversies of any type or nature whatsoever that, directly or indirectly, arise from or relate to this Agreement, including, without limitation, claims relating to the inducement, construction, performance or termination of this Agreement, shall be brought in the state superior courts located in Hudson County, New Jersey or Federal district courts located in Newark, New Jersey, and the parties hereto agree not to challenge the selection of that venue in any such proceeding for any reason, including, without limitation, on the grounds that such venue is an inconvenient forum. The parties hereto specifically agree that service of process may be made, and such service of process shall be effective if made, pursuant to Section 6.8 hereto.

9. Enforcement Costs. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, costs and expenses incident to appeals), incurred in that action or proceeding, in addition to any other relief to which such party or parties may be entitled.

10. Remedies Cumulative. No remedy herein conferred upon any party is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute, or otherwise. No single or partial exercise by any party of any right, power or remedy hereunder shall preclude any other or further exercise thereof.

11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument.

12. No Penalties. No provision of this Agreement is to be interpreted as a penalty upon any party to this Agreement.

13. JURY TRIAL. EACH OF THE PLEDGEE AND THE PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED HEREON, OR ARISING OUT OF, UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS BETWEEN PLEDGEE AND PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.

IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge and Escrow Agreement as of the date first above written.

Cornell Capital Partners, LP

By: Its:	Yorkville Advisors, LLC General Partner
By:	/s/ Mark Angelo
Name: Title:	Mark Angelo Portfolio Manager

The Immune Response Corporation

By:	/s/ Michael K. Green
Name: Title:	Michael K. Green Vice President, Finance and Chief Financial Officer
Escrow Agent
By:	/s/ David Gonzalez
Name:	David Gonzalez, Esq.