Exhibit 10.142

 

PURCHASE AGREEMENT

 

PURCHASE AGREEMENT (this “Agreement”) is made as of the 23rd day of June 2003,
by and between The Immune Response Corporation, a corporation organized under
the laws of the State of Delaware (the “Company”), with its principal offices at
5931 Darwin Court, Carlsbad, California 92008, and individuals and entities
listed on Exhibit A (the “Purchasers”) who become parties to this Agreement by
executing and delivering a financing signature page in the form attached hereto
as Exhibit B (the “Financing Signature Page”).

 

W I T N E S S E T H :

 

WHEREAS, the Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D (“Regulation D”), as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “Securities Act”) and Section 4(2) of the Securities
Act; and

 

WHEREAS, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to purchase, severally and not jointly, 12% promissory notes
in the aggregate principal amount of One Million Dollars ($1,000,000),
substantially in the form attached to this Agreement as Exhibit C (“Note(s)”)
and 166,665 shares of the Company’s common stock (“Common Stock”), par value
$0.0025 per share (“Shares”).  The amount of Notes and Shares purchased by each
Purchaser is set forth on Exhibit A;

 

WHEREAS, contemporaneous with the execution and delivery of this Agreement, the
Company and the Purchasers are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit D (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
“piggyback” registration rights for the Shares and Contingent Shares (as
hereinafter defined) under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws; and

 

WHEREAS, contemporaneous with the execution and delivery of this Agreement, the
Company shall execute an Escrow Agreement, in the form attached hereto as
Exhibit E (the “Escrow Agreement”), pursuant to which the Company shall deposit
166,665 shares of its Common Stock representing the number of Pre-Payment
Penalty Shares (as hereinafter defined) which may be issued to Purchasers in
accordance with the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:

 

SECTION 1. Purchase and Sale of Notes and Shares

 

1.01                           Issuance and Sale of the Notes and Shares. 
Subject to the terms and conditions of this Agreement, the Purchasers agree to
purchase at the Closing (as hereafter defined), and the Company agrees to issue
and sell to the Purchasers at the Closing, the Notes and 166,665 Shares,

 

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in the aggregate, of Common Stock for an aggregate purchase price of One Million
Dollars ($1,000,000) (the “Purchase Price”).

 

1.02                           Terms of the Notes.  The principal of each Note
shall bear interest at a rate of twelve (12%) percent per annum (the “Principal
Amount”).  The Principal Amount and any accrued but unpaid interest shall become
due and payable in one equal payment upon the earlier of: (i) September 30, 2003
or (ii) upon the closing of a sale (or series of related sales) by the Company
of its equity securities or warrant exercise resulting in net proceeds to the
Company of not less than One Million Three Hundred Thousand Dollars ($1,300,000)
(“Maturity Date”).  Interest on the Notes shall be paid monthly.  The Company
shall have the right to pre-pay the Principal Amount and any accrued and unpaid
interest thereon at any time.  In the event the Notes and any accrued and unpaid
interest thereon are not pre-paid on or before July 31, 2003, an additional
166,665 shares, in the aggregate, of Common Stock shall be issued and delivered
to the Purchasers on a pro rata basis (“Pre-Payment Penalty Shares”).  If the
Principal Amount and/or the interest on the Notes is not paid by the Maturity
Date, then the Principal Amount shall bear interest at the annual rate of 18%
and all payments of the Principal Amount, accrued interest thereon, and other
amounts payable under the Notes, shall be immediately due and payable. 
Furthermore, upon such default, an additional 333,330 shares, in the aggregate,
of Common Stock shall be issued and delivered to the Purchasers, on a pro rata
basis, on the date of default (“Default Shares,” and together with the
Pre-Payment Penalty Shares, the “Contingent Shares”).

 

SECTION 2.    Closing.     At the Closing (as defined in Section 3 hereof), the
Company will sell to the Purchasers, and the Purchasers will purchase from the
Company, upon the terms and conditions hereinafter set forth, the Notes in the
Principal Amounts and the number of Shares set forth on Exhibit A.  The
issuance, sale and purchase of the Notes and Shares shall occur at a closing
(the “Closing”) to be held at the offices of Littman Krooks LLP, 655 Third
Avenue, New York, New York 10016, at such time as may be mutually agreed upon by
the Company and the Purchasers, but no later than June 23, 2003.  The date of
Closing is hereinafter referred to as the “Closing Date.”

 

SECTION 3.    Delivery of the Notes and Shares at the Closing. On the Closing
Date, the Company shall issue and sell to each Purchaser, and each Purchaser
severally (but not jointly) agrees to purchase from the Company, such Notes and
Shares for the Purchase Price.  Each Purchaser’s obligation to purchase a Note
and Shares hereunder is distinct and separate from each other Purchaser’s
obligation to purchase, and no Purchaser shall be required to purchase hereunder
more than the amount set forth opposite such Purchaser’s name on Exhibit A
hereto, notwithstanding any failure by any other Purchaser to purchase Notes and
Shares hereunder, nor shall any Purchaser have any liability by reason of any
such failure by any other Purchaser.

 

At the Closing, the Company shall deliver to each Purchasers one or more stock
certificates and a Note registered in the name of such Purchaser, or in such
nominee name(s) as designated by such Purchaser in writing, representing the
number of Shares and Principal Amount of the Note set forth opposite such
Purchaser’s name on Exhibit A hereto and each bearing an appropriate legend
indicating that the Notes and Shares were sold in reliance upon the exemptions
from registration under the Securities provided by Section 4(2) thereof and
Rule 506 thereunder.  The name(s) in which the certificates are to be registered
are set forth in the Stock

 

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Certificate Questionnaire attached hereto as part of Appendix I.  The Company’s
obligation to complete the sale of the Notes and Shares and deliver such stock
certificate(s) and Notes to the Purchasers at the Closing shall be subject to
the following conditions only, any one or more of which may be waived in writing
by the Company: (a) the receipt by the Company of same-day funds in the full
amount of the purchase price for the Notes and Shares being purchased hereunder
and (b) the accuracy of the representations and warranties made herein by the
Purchasers as of the date hereof and the fulfillment of the undertakings of the
Purchasers set forth in this Agreement to be fulfilled by them prior to the
Closing.  The Purchaser’s obligation to accept delivery of such stock and
certificate(s) and Notes and to pay for the Notes and Shares evidenced thereby
shall be subject to the following conditions only: (a) the accuracy of the
representations and warranties made herein by the Company as of the date hereof
and as of the Closing Date as if made on such date and (b) the fulfillment of
the undertakings of the Company set forth in this Agreement to be fulfilled by
it prior to Closing.

 

SECTION 4.  Representations, Warranties and Covenants of the Company.  The
Company hereby represents and warrants to, and covenants with, the Purchasers as
follows that, except as disclosed or incorporated by reference in, (i) the SEC
Reports (as defined in Section 4.014 hereof) or (ii) the Disclosure Schedule to
be delivered by the Company prior to the execution and delivery of this
Agreement (the “Disclosure Schedule”):

 

4.01                           Organization and Qualification.               
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.  The Company is qualified to
do business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify could not reasonably be expected
to have a material adverse effect upon the business, financial condition,
properties or operations of the Company taken as a whole (a “Material Adverse
Effect”).  The only subsidiaries of the Company are as set forth on Section 4.01
of the Disclosure Schedule.

 

Section 4.01 of the Disclosure Schedule discloses all Special Purpose Entities
(as defined below) owned directly or indirectly, in whole or in part, by the
Company or any of its affiliates or in or with respect to which the Company or
its affiliates have a direct or indirect business relationship or interest of
any kind, in whole or in part, including any equity interest, any leasing
relationship, any loan or other financing relationship, any other contractual
relationship or any other economic interest, relationship or arrangement of any
kind, where such interest or interests are directly or indirectly related to, or
part of, the business or the assets owned by or the liabilities of the Company. 
Section 4.01 of the Disclosure Schedule hereto separately discloses any
guarantees by the Company, its subsidiaries or other affiliates of the
liabilities of or with respect to any Special Purpose Entities.  “Special
Purpose Entities” has the meaning given that term under U.S. accounting rules
governing consolidation, including proposed rules and interpretations of the
FASB, such as those contained in guidance (as proposed or as finally adopted)
interpreting Statement of Financial Accounting Standard 94, Consolidation of all
Majority-Owned Subsidiaries and Accounting Research Bulletin No. 51,
Consolidated Financial Statements.

 

4.02                           Authorized Capital Stock.     The capitalization
of the Company as of March 31, 2003, including the authorized capital stock, the
number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to stock option plans, the number

 

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of shares issuable and reserved for issuance pursuant to securities exercisable
for, or convertible into or exchangeable for any shares of capital stock, is set
forth in Section 4.02 of the Disclosure Schedule.  All of such outstanding
shares of capital stock have been, or upon issuance will be, validly issued,
fully paid and nonassessable.  No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances, pursuant to the Company’s Certificate
of Incorporation or bylaws or any agreement to which the Company is a party. 
Except as set forth in Section 4.02 of the Disclosure Schedule, as of the date
of this Agreement, (i) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, and (ii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
its or their securities under the Securities Act (except the Registration Rights
Agreement).  There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Shares and/or
Contingent Shares, if applicable, in accordance with the terms of this
Agreement.  The Company has furnished to each Purchaser or made available to
each Purchaser true and correct copies of the Company’s Certificate of
Incorporation as in effect on the date hereof, the Company’s By-laws as in
effect on the date hereof, and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company.  As of the date hereof, 166,665 shares of Common Stock representing
the Pre-Payment Penalty Shares shall have been deposited into and held in an
escrow account and subject to and in accordance with the terms of that certain
Escrow Agreement.  The Pre-Payment Penalty Shares have been duly authorized and,
upon release from the escrow account in accordance with the terms of the Escrow
Agreement, shall be validly issued, fully paid and nonassessable.

 

4.03                           No Other Registration
Rights.                              Except (a) as set forth in Section 4.03 of
the Disclosure Schedule and (b) as contemplated by Registration Rights
Agreement, no holder of any security of the Company has any demand, “piggy-back”
or other right to require the Company to register the sale of any security owned
by such holder under the Securities Act or any right to join or participate in
any such registration of the Company’s securities (including such registrations
contemplated by the Registration Rights Agreement).

 

4.04                          
Authority.                                         The Company has all requisite
corporate power and authority and has all necessary approvals, licenses, permits
and authorizations to own, operate or lease its properties and to carry its
business as now conducted, except where the failure to have any such approval,
license, permit or authorization could not reasonably be expected to have a
Material Adverse Effect.

 

4.05                           Due Execution, Delivery and Performance of
Agreements.                          The Company has all requisite corporate
power and authority to enter into this Agreement and the Notes, the Registration
Rights Agreement and the Escrow Agreement (hereinafter collectively referred to
as the “Transaction Documents”) and to perform the transactions contemplated
hereby and thereby.  As of the date hereof, this Agreement and the Transaction
Documents have been duly authorized, executed and delivered by the Company.  The
execution, delivery and performance of this

 

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Agreement and the Transaction Documents by the Company and the consummation of
the transactions contemplated hereby and thereby will not (i) violate any
provision of the organizational documents of the Company or (ii) result in the
creation of any lien, charge, security interest, adverse claim or encumbrance
upon any assets or properties of the Company pursuant to the terms or provisions
of, or conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
(A) any material agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other material instrument to which the Company is a party
or by which the Company or any of its assets or properties may be otherwise
bound or affected or (B) any statute or any judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its properties.  No
material consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the Transaction Documents or
the consummation of the transactions contemplated by this Agreement or the
Transaction Documents, except for compliance with the “blue sky” laws and
Federal securities laws applicable to the (i) Offering, (ii) resale of the
Shares and (iii) the issuance of the Contingency Shares.  Upon the execution and
delivery by the Company of this Agreement and the Transaction Documents, and
assuming the valid execution and delivery thereof by the Purchasers, this
Agreement and the Transaction Documents constitute valid and binding obligations
of the Company, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Company in Section 7.02 hereof may be held violative of public policy and
therefore legally unenforceable.

 

4.06                           Accountants.                         BDO Seidman,
LLP, the Company’s independent accountants, are independent accountants as
required by the Securities Act and the rules and regulations promulgated
thereunder (the “Rules and Regulations”).

 

4.07                           No Defaults.                             Except
as set forth in Section 4.07 of the Disclosure Schedule, the Company is not in
violation or default of any provision of its Certificate of Incorporation or any
provision of its bylaws, and, except for defaults, violations and breaches
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect, it is not in breach of or default with respect
to any provision of any agreement, judgment, decree, order, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
it is a party or by which it or any of its assets or properties are bound; and
there does not exist any state of fact known to the Company which, with notice
or lapse of time or both, would constitute an event of default or breach on the
part of the Company as provided in such documents, except such defaults which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

4.08                           No Actions.                                
Except as set forth in Section 4.08 of the Disclosure Schedule, there are no
legal or governmental actions, suits or proceedings pending or threatened in
writing to which the Company is a party or of which any property owned or leased
by the Company is the subject, which actions, suits or proceedings, individually
or in the aggregate, prevent or could

 

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reasonably be expected to materially and adversely affect the transactions
contemplated by this Agreement or the Transaction Documents or to have a
Material Adverse Effect; no material labor disturbance by the employees of the
Company exists or, to the best knowledge of the Company, is imminent; and the
Company is not party to or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body.

 

4.09                           No Material Change.                           
Except as set forth on Section 4.09 of the Disclosure Schedule, since March 31,
2003, (i) the Company has not incurred any known material liabilities or
obligations, indirect or contingent, or entered into any material verbal or
written agreement or other transaction which was not in the ordinary course of
business or which could reasonably be expected to have a Material Adverse
Effect; (ii) the Company has not sustained any material loss or interference
with its businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iii) the Company has not paid, made or
declared any dividends or other distribution with respect to its capital stock;
(iv) there has not been any change in the capital stock of the Company or
increase in indebtedness material to the Company; and (v) the Company has not
incurred or sustained any other event or change that could reasonably be
expected to have a Material Adverse Effect.

 

4.010                     Intellectual Property.

 

(a)                                  Except as set forth on Section 4.010 of the
Disclosure Schedule, the Company has ownership, license or legal right to use
all material patent, copyright, trade secret and trademark rights necessary to
the conduct of the business of the Company as now conducted (collectively,
“Intellectual Property”), other than intellectual property generally available
on commercial terms from other sources.

 

(b)                                 All material licenses or other material
agreements under which (i) the Company is granted rights in Intellectual
Property, other than intellectual property generally available on commercial
terms from other sources, or (ii) the Company has granted rights to others in
Intellectual Property owned or licensed by the Company, are in full force and
effect and there is no material default or breach thereof by the Company or, to
the best knowledge of the Company, any other party thereto.

 

(c)                                  The Company has taken all steps reasonably
required in accordance with sound business practice and business judgment to
establish and preserve its ownership of all material patent, copyright, trade
secret and other proprietary rights with respect to its operations, product
developments, projects and technology.

 

(d)                                 The business, activities and products of the
Company do not materially infringe any intellectual property of any other
person. The Company is not, to its best knowledge, making unauthorized use of
any confidential information or trade secrets of any other person. The
activities of the Company and, to its best knowledge, any of its employees on
behalf of the Company do not violate any material agreements or material
arrangements which the Company has with other persons.

 

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(e)                                  There is not pending or, to the Company’s
best knowledge, threatened any claim, suit or action against the Company
contesting or challenging the rights of the Company in or to any Intellectual
Property or the validity of any of the Intellectual Property.

 

(f)                                    To the Company’s best knowledge, there is
no infringement upon or unauthorized use by any third party of any of the
Intellectual Property.

 

4.011                     Compliance.                           The Company is
in compliance in all material respects with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting its business. Except
as set forth in Section 4.011 of the Disclosure Schedule, the business,
activities and operations of the Company are in compliance in all material
respects with the Good Manufacturing Practice regulations issued by the United
States Food and Drug Administration.

 

4.012                     Transaction Documents.            The Company has not
distributed and will not distribute prior to the Closing Date any material in
connection with the sale of the Notes and Shares.  The Company has not in the
past nor will it hereafter take any action to sell, offer for sale or solicit
offers to buy any securities of the Company which cause the offer, issuance or
sale of the Notes or Shares, as contemplated by this Agreement and the
Transaction Documents to fail to qualify for the exemptions of Section 4 of the
Securities Act.

 

4.013                     Contributions.                The Company has not at
any time, directly or indirectly, (i) made any unlawful contribution to any
candidate for public office or made and/or failed to disclose any contribution
in violation of law or (ii) made any payment to any Federal or State
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or any foreign country.

 

4.014                     SEC Reports; Financial Statements.   The Company has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
“SEC Reports” and, together with the Disclosure Schedule the “Disclosure
Materials”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Reports to the
extent required.  The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing.  Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of

 

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the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.  Except as set forth on Disclosure Schedule or except as
specifically disclosed in the SEC Reports, since March 31, 2003 (a) there has
been no event, occurrence or development that has had or that could reasonably
be expected to have or result in a Material Adverse Effect, (b) the Company has
not incurred any liabilities (contingent or otherwise) other than (x)
liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock or stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.

 

4.015                     Legal Opinion.              The Company shall have
used its best efforts to deliver to the Purchasers a signed opinion of counsel
to the Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Lenders.

 

4.016                     Certificate.                                   At the
Closing, the Company will deliver to the Purchasers a certificate executed by
the Chairman of the Board or President and the chief financial or accounting
officer of the Company (solely in their respective capacities as such), dated
the Closing Date, in form and substance reasonably satisfactory to the
Purchasers, to the effect that the representations and warranties of the Company
set forth in this Section 4 were true and correct in all material respects
(other than representations and warranties that contain materiality or knowledge
standards or qualifications, which representations and warranties shall be true
and correct in all respects), as of the date of this Agreement and that the
Company has complied in all material respects with all the agreements and
satisfied all the conditions herein on its part to be performed or satisfied on
or prior to such Closing Date.

 

4.017                     Escrow
Agreement.                                        At the Closing, the Company
shall have executed and delivered the Escrow Agreement and made a copy thereof
available to the Purchaser.

 

4.018                     No Material, Non-public
Information.                                   At the time of the announcement
of the transaction contemplated by the Transaction Documents, as it may be
amended will include no material non-public information with respect to the
Company.

 

SECTION 5.    Representations, Warranties and Covenants of the Purchasers.

 

(a)                                  Each Purchaser represents and warrants to,
and covenants with, the Company that: (i) such Purchaser is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to investments representing an investment decision like that
involved in the purchase of the Notes and Shares and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Notes and Shares; (ii) such Purchaser is acquiring the
Notes and Shares as set forth in Section 2 above in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any Notes or Shares or any arrangement or
understanding

 

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with any other persons regarding the distribution of such Notes and Shares (this
representation and warranty not limiting each Purchaser’s right to resell
pursuant to the Registration Statement or, other than with respect to any claims
arising out of a breach of this representation and warranty, such Purchaser’s
right to indemnification under Section 7.02 hereof); (iii) each Purchaser will
not, directly or indirectly, offer, sell, pledge, sell short, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares or Contingent Shares, if
applicable, except in compliance with each of the Securities Act, the Exchange
Act, the Rules and Regulations and the provisions hereof and all other
applicable laws; (iv) each Purchaser has completed or caused to be completed the
Registration Statement Questionnaire attached hereto as part of Appendix I for
use in preparation of the Registration Statement, and the answers thereto are
true and correct as of the date hereof and will be true and correct as of the
effective date of the Registration Statement and the Purchasers will notify the
Company immediately of any material change in any such information provided in
the Registration Statement Questionnaire occurring prior to the sale by it of
all of the Shares and/or Contingent Shares, if any; and (v) each Purchaser has,
in connection with its decision to purchase the Notes and Shares as set forth in
Section 2 above, relied solely upon the representations and warranties of the
Company contained herein.

 

(b)                                 Each Purchaser understands that the Shares
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of the Securities Act, the Rules and Regulations and
state securities laws and that the Company is relying upon the truth and
accuracy of, and each Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and agreements of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares.

 

(c)                                  Until the Company publicly announces that
this Agreement and the Transaction Documents have been entered into, each
Purchaser agrees with the Company to keep strictly confidential all information
concerning this Agreement, the Transaction Documents and the transactions
contemplated hereby and thereby.  Each Purchaser understands that the
information contained in the Transaction Documents is strictly confidential and
proprietary to the Company and has been prepared, in large part, from the
Company’s publicly available documents and other information and is being
submitted to each Purchaser solely for such Purchaser’s confidential use.  Each
Purchaser hereby acknowledges that it is prohibited from reproducing and/or
distributing the Transaction Documents, or any other offering materials or other
information provided by the Company in connection with such Purchaser’s
consideration of its investment in the Company, in whole or in part, or
divulging or discussing any of their contents to third parties.  Further, each
Purchaser understands that the existence and nature of all conversations and
presentations, if any, regarding the Company and the Transaction Documents must
be kept strictly confidential.  Each Purchaser understands that Federal
securities laws impose restrictions on trading based on information regarding
the transactions contemplated by the Transaction Documents.  In particular, each
Purchaser hereby acknowledges that disclosure of information regarding the
transaction contemplated in the Transaction Documents may cause the Company to
violate Regulation FD and agrees not to engage in any such unauthorized
disclosure.  The restrictions in this subsection shall cease upon the Company’s
public announcement that the Transaction Documents have been entered into.

 

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(d)                                 Each Purchaser understands that its
investment in the Notes and Shares involves a significant degree of risk and
uncertainty and that the market price of the Common Stock has been and may
continue to be volatile and that no representation or warranty is being made as
to the future value or trading volume of the Common Stock.  In addition, each
Purchaser understands that there is no assurance that the Company will satisfy
the criteria for continued quotation of the Common Stock on The Nasdaq Stock
Market.  Each Purchaser has the knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Notes and Shares and has the ability to bear the full economic
risks of an investment in the Notes and Shares.  Each Purchaser is not relying
on the Company or any of its employees, representatives or agents with respect
to the legal, tax, economic and related considerations as to an investment in
the Notes and Shares, and each Purchaser has relied on the advice of, or has
consulted with, only its own advisors.

 

(e)                                  Each Purchaser understands that no United
States Federal or state agency or any other governmental agency has passed upon
or made any recommendation or endorsement of any of the Notes, Shares and/or
Contingent Shares, if any.

 

(f)                                    Each Purchaser understands that, until
such time as a Registration Statement (as defined in the Registration Rights
Agreement) has been declared effective or the Shares and/or Contingent Shares,
if any, may be sold pursuant to Rule 144(k) under the Securities Act without any
restriction as to the number of securities as of a particular date that can then
be immediately resold, the Shares and/or Contingent Shares, if any, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for the securities
comprising the Shares and/or Contingent Shares, if applicable):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.

 

The Purchasers also understand that, until such time as the shares of Common
Stock comprising the Shares and/or Contingent Shares, if any, may be sold in
accordance with Section 5(h) below, such shares of Common Stock also shall bear
an additional restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
shares of Common Stock comprising the Shares and/or Contingent Shares, if any):

 

THE TRANSFER OR SALE OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT
TO THE TERMS OF A PURCHASE AGREEMENT, INCLUDING SECTION 5(H) THEREOF, DATED AS
OF JUNE 23, 2003, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY.

 

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(g)                                 Each Purchaser’s principal executive office
or residence is in the jurisdiction set forth immediately below such Purchaser’s
name on the signature page hereto.

 

(h)                                 Each Purchaser hereby covenants with the
Company not to make any resale or other disposition of any of the Shares and/or
Contingent Shares, if any, without complying with the provisions of this
Agreement and the Transaction Documents and without effectively causing any
prospectus delivery requirement under the Securities Act to be satisfied, and
each Purchaser acknowledges and agrees that such Shares and/or Contingent
Shares, if any, are not transferable on the books of the Company unless the
certificate submitted to the transfer agent evidencing the Shares and or
Contingent Shares, if applicable, is accompanied by a separate Purchaser’s
Certificate of Subsequent Sale: (i) in the form of Appendix III hereto,
(ii) executed by each Purchaser (if a natural person) or, if not, by an officer
of, or other authorized person expressly designated by, such Purchaser and
(iii) to the effect that (A) the Shares and/or Contingent Shares, if any, have
been sold in accordance with the Registration Statement or a valid exemption
from registration under the Securities Act and any applicable State securities
or “blue sky” laws and (B), if applicable, the requirement of delivering a
current prospectus has been satisfied.

 

Subject, and in addition, to the preceding paragraph, each Purchaser hereby
covenants with the Company not to make any resale or other disposition of any
Shares and/or Contingent Shares, if any, prior to such time that a Registration
Statement may become effective under the Securities Act unless (i) such sale is
made pursuant to a valid exemption from registration under the Securities Act,
(ii) the transferee or assignee thereof shall agree in writing also to be bound
by all of the provisions of this Agreement, (iii) each Purchaser agrees in
writing with the transferee or assignee to assign its rights under this
Agreement and copies of such agreements are furnished to the Company after such
assignment, (iv) the Company is furnished with written notice of the name and
address of such transferee or assignee, (v) the certificate submitted to the
transfer agent evidencing the Shares and/or Contingent Shares, if any, is
accompanied by a separate Purchaser’s Certificate of Subsequent Sale: (a) in the
form of Appendix III hereto, (b) executed by such Purchaser (if a natural
person) or, if not, by an officer of, or other authorized person expressly
designated by, such Purchaser and (c) to the effect that the Shares and/or
Contingent Shares, if any, have been sold in accordance with a valid exemption
from registration under the Securities Act and any applicable State securities
or “blue sky” laws, (vi) each Purchaser shall have complied with all applicable
provisions of this Agreement and Transaction Documents relating to any resale of
any Shares and/or Contingent Shares, if any, (vii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws and (viii) if reasonably requested by the Company, each Purchaser shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of the
Shares and/or Contingent Shares, if applicable, under the Securities Act.

 

Each Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the prospectus forming a part of either of the
Registration Statement (a “Suspension”) until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act or appropriately
supplemented the prospectus forming a part of the Registration Statement. Each
Purchaser

 

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hereby covenants that it will not sell any Shares and/or Contingent Share, if
any, pursuant to said prospectus during the period commencing at the time at
which the Company gives each Purchaser written notice of the Suspension of the
use of said prospectus and ending at the time the Company gives the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to said
prospectus, except as permitted in Section 7.02(c) hereof; provided, however,
that the Purchaser shall be in compliance with the provisions contained in
Section 7.02(b) hereof, and provided further that the Company will use its
commercially reasonable efforts to cause the prospectus so suspended to be
promptly resumed.

 

(i)                                     Each Purchaser further represents and
warrants to, and covenants with, the Company that (i) each Purchaser has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and thereby and has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the Transaction Documents, and (ii) upon the execution and
delivery by each Purchaser of this Agreement, this Agreement shall constitute
legal, valid and binding obligations of each Purchaser, enforceable in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of such Purchaser contained in
Section 7.03 hereof may be held violative of public policy and legally
unenforceable.

 

(j) Each Purchaser: (i) if a natural person, represents that such Purchaser has
reached the age of 21 and has full power and authority to execute and deliver
this Agreement and all other related agreements or certificates and to carry out
the provisions hereof and thereof; (ii) if a corporation, partnership, limited
liability company or partnership, association, joint stock company, trust,
unincorporated organization or other entity, represents that such entity was not
formed for the specific purpose of acquiring the Notes and Shares, such entity
is duly organized, validly existing and in good standing under the laws of the
state of its organization, the consummation of the transactions contemplated
hereby is authorized by, and will not result in a violation of state law or its
charter or other organizational documents, such entity has full power and
authority to execute and deliver this Agreement and all other related agreements
or certificates and to carry out the provisions hereof and thereof and to
purchase and hold the securities constituting the Notes and Shares, the
execution and delivery of this Agreement has been duly authorized by all
necessary action, this Agreement has been duly executed and delivered on behalf
of such entity and is a legal, valid and binding obligation of such entity; or
(iii) if executing this Agreement in a representative or fiduciary capacity,
represents that it has full power and authority to execute and deliver this
Agreement in such capacity and on behalf of the subscribing individual, ward,
partnership, trust, estate, corporation, limited liability company or limited
liability partnership, or other entity for whom the Purchaser is executing this
Agreement, which execution shall not result in a violation of any document
creating Purchaser’s representative or fiduciary capacity, and such individual,
ward, partnership, trust, estate, corporation, limited liability company or
partnership, or other entity has full right and power to perform pursuant to
this Agreement and make an investment in the Company, and that this Agreement
constitutes a legal, valid and binding obligation of such entity. The execution,
delivery and performance of this Agreement will not violate or be in conflict
with any order,

 

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judgment, injunction, law, rule, regulation, agreement or controlling document
to which each Purchaser is a party or by which it is otherwise bound.

 

(j)                                     Such Purchaser is unaware of, is no way
relying on, and did not become aware of the investment contemplated by the Notes
or the Agreement through or as a result of, any form of general solicitation or
general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, in connection with the
investment contemplated by the notes or the Agreement and is not purchasing the
Notes, Shares or Contingency Shares, and did not become aware of the investment
contemplated by the notes or the Agreement, through or as a result of any
seminar or meeting to which the Purchaser was invited by, or any solicitation of
a subscription by, a person not previously known to the Purchaser in connection
with investments in securities generally.

 

(k)                                Such Purchaser is not an affiliate (as such
term is defined in Rule 12(b)(ii) under the Exchange Act) of any director or
officer of the Company for purposes of Rule 4350(i)(1)(A) of the NASD, Inc.
Marketplace Rules.

 

SECTION 6.                            Survival of Representations, Warranties
and Agreements. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein and in the certificates delivered pursuant
hereto shall survive the Closing, the delivery to the Purchaser of the Notes and
Shares being purchased and the payment therefor; provided, however, that the
representations and warranties of the Company contained in Section 4 hereof
(other than Section 4.012, which shall survive indefinitely) shall terminate on
June 23, 2004.

 

SECTION 7.                            Registration of the Shares and/or
Contingent Shares; Compliance with the Securities Act. The Purchasers are
entitled to certain “piggy-back” registration rights for the Shares and/or
Contingent Shares, if applicable, which are more fully set forth in that certain
registration rights agreement between the Company and the Purchasers of even
date herewith (the “Registration Rights Agreement”).

 

7.01                         Transfer of Shares and/or Contingent Shares Before
and After Effectiveness of a Registration Statement.

 

(a)                                  Each Purchaser agrees that it will not
effect any resale or other disposition of any Shares or Contingent Shares, if
applicable, or its right to purchase Shares and/or Contingent Shares, if any,
that would constitute a sale within the meaning of the Securities Act unless the
Purchaser effects such resale or other disposition in accordance with
Section 5(h) hereof.  If each Purchaser continues to hold any of the Shares
and/or Contingent Shares, if any, after a Registration Statement shall become
effective, such Purchaser will promptly notify the Company in writing of any
changes or additions to the information set forth in such Registration Statement
regarding such Purchaser or its plan of distribution or disposition.  The
foregoing obligation shall cease when for each Purchaser when such Purchaser
shall have disposed of all of its Shares and/or Contingent Shares, if any.

 

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(b)  Notwithstanding any other provisions of this Agreement, the Purchasers
shall not be prohibited from selling securities under the Registration Statement
as a result of Suspensions on more than two occasions of not more than 20 days
each in any 12-month period, unless, in the good faith judgment of the Company’s
Board of Directors, upon advice of counsel, the sale of Shares and/or Contingent
Shares, if any, under the Registration Statement in reliance on this paragraph
would be likely to cause a violation of the Securities Act or the Exchange Act
and result in liability to the Company.

 

7.02                           Indemnification. For the purpose of this
Section 7.02:

 

(i)                                   the term “Purchaser/Affiliate” shall mean
any affiliate of the Purchasers and any person who controls any Purchaser or any
affiliate of any Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act; and

 

(ii)                                the term “Registration Statement” shall
include any final prospectus, exhibit, supplement or amendment included in or
relating to, and any document incorporated by reference in, the Registration
Statement.

 

(a)                                  The Company agrees to indemnify and hold
harmless, and pay and/or reimburse, each of the Purchasers and each
Purchaser/Affiliate, against any losses, claims, damages, liabilities or
expenses, to which such Purchasers or such Purchaser/Affiliates may become
subject, under the Securities Act, the Exchange Act, or any other Federal or
state law or regulation, at common law or otherwise (including in settlement of
any claims or litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in either of the Registration Statement, as amended at the time
of effectiveness of the Registration Statement, including any information deemed
to be a part thereof as of the time of effectiveness pursuant to paragraph (b)
of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or the
prospectus, in the form first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations, or filed as part of either of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
“Prospectus”), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in the
Registration Statement or any amendment or supplement thereto not misleading or
in the Prospectus or any amendment or supplement thereto not misleading in the
light of the circumstances under which they were made, or arise out of or are
based in whole or in part on any material inaccuracy in the representations and
warranties of the Company contained in this Agreement or the Transaction
Documents, or any failure of the Company to perform in all material respects its
obligations hereunder or under law, and will reimburse each Purchaser and each
such Purchaser/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, the Prospectus or any amendment or supplement
thereto in reliance

 

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upon and in conformity with written information furnished to the Company by or
on behalf of the Purchaser expressly for use therein, (ii) the failure of such
Purchaser to comply with the covenants and agreements contained in this
Agreement (including, without limitation, Section 5(h) hereof and the
Registration Rights Agreement hereof in respect of the resale of Shares and/or
Contingent Shares, if any) or to perform its obligations under law, (iii) the
inaccuracy of any representations or warranties made by such Purchaser in this
Agreement or (iv) any statement or omission in any Prospectus or any amendment
or supplement thereto that is corrected in any subsequent Prospectus or any
amendment or supplement thereto that was delivered to the Purchaser reasonably
prior to the pertinent sale or sales by the Purchaser.

 

(b)                                 Each Purchaser will severally, but not
jointly, indemnify and hold harmless, and pay and/or reimburse, the Company,
each of its directors, each of its officers who signed a Registration Statement
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages, liabilities or expenses to which the Company, each of
its directors, each of its officers who signed a Registration Statement or
controlling person may become subject, under the Securities Act, the Exchange
Act, or any other Federal or state law or regulation, at common law or otherwise
(including in settlement of any claim or litigation, if such settlement is
effected with the written consent of such Purchaser), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure by the
Purchaser to comply with the covenants and agreements contained in this
Agreement (including Section 5(h) hereof in respect of the resale of Shares
and/or Contingent Shares, if any) or the Registration Rights Agreement or to
perform its obligations under law, (ii) the inaccuracy of any representations or
warranties made by such Purchaser herein or (iii) any untrue or alleged untrue
statement of any material fact contained in a Registration Statement, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements in a Registration
Statement or any amendment or supplement thereto not misleading or in the
Prospectus or any amendment or supplement thereto not misleading in the light of
the circumstances under which they were made, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in a Registration Statement, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed a Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. Notwithstanding any other provisions of this Section 7.02(b),
no Purchaser shall be required to indemnify any party in excess of the gross
proceeds paid by such Purchaser for Notes and Shares purchased pursuant to its
respective Agreement or if the Purchaser shall resell Shares and/or Contingent
Shares, if any, pursuant to a Registration Statement, if greater, the net
proceeds received by the Purchaser from those resales.

 

(c)  Promptly after receipt by an indemnified party under this Section 7.02 of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 7.02, promptly notify the

 

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indemnifying party in writing thereof; however, the failure to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for contribution or otherwise under this Section 7.02 to
the extent the indemnifying party is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party and, after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party shall not be liable to such Indemnified Party for any fees of
counsel or any other expenses, in each case subsequently incurred by such
Indemnified Party in connection with the defense thereof; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and, based upon the advice of such indemnified party’s
counsel, the indemnified party shall have reasonably concluded that there may be
a conflict of interest between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties.

 

If the indemnifying party elects to compromise or defend an asserted liability,
it shall promptly, but in any event within ten (10) days (or sooner, if the
nature of the asserted liability so requires), notify the indemnified party of
its intent to do so, and the indemnified party shall reasonably cooperate, at
the request and reasonable expense of the indemnifying party, in the compromise
of, or defense against, such asserted liability. The indemnifying party will not
be released from any obligation to indemnify the indemnified party hereunder
with respect to a claim without the prior written consent of the indemnified
party, unless the indemnifying party delivers to the indemnified party a duly
executed agreement settling or compromising such claim with no monetary
liability to or injunctive relief against the indemnified party and a complete
release of the indemnified party with respect thereto. The indemnifying party
shall have the right, except as provided below in this subsection, to conduct
and control the defense of any third-party claim made for which it has been
provided notice hereunder. Upon receipt of written notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and reasonable approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7.02 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, representing the
indemnified parties who are parties to such action, plus local counsel, if
appropriate) or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party.

 

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(d)                                 If the indemnification provided for in this
Section 7.02 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under subsections (a) or (b) of this Section 7.02 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative economic benefits received by the Company and the Purchaser
from the placement of the Notes and Shares contemplated by this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement or the
Transaction Documents that resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations.  The
relative benefits received by the Company, on the one hand, and each Purchaser,
on the other, shall be deemed to be in the same proportion as the amount paid by
such Purchaser to the Company pursuant to this Agreement for the Shares
purchased by such Purchasers that are resold pursuant to the Registration
Statement bears to the difference (the “Difference”), if any, between the amount
such Purchaser paid for the Shares, that are sold pursuant to a Registration
Statement and the amount received by such Purchaser from such resale.  The
relative fault of the Company, on the one hand, and each Purchaser, on the
other, shall be determined by reference to, among other things, whether the
untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or
by such Purchaser and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
and/or its distribution. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in subsection (c) of
this Section 7.02, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The provisions set forth in subsection (c) of this Section 7.02 with respect to
the notice of the threat or commencement of any action shall apply if a claim
for contribution is to be made under this subsection (d); provided, however,
that no additional notice shall be required with respect to any threat or action
for which notice has been given under subsection (c) for purposes of
indemnification. The Company and the Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7.02 were determined
solely by pro rata allocation (even if the Purchaser were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 7.02, no Purchaser shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers’ obligations to contribute pursuant to this
Section 7.02 are several and not joint.

 

7.03                           Termination of Conditions and Obligations.    The
restrictions imposed by Section 5(h) hereof and this Section 7 upon the
transferability of the Shares and/or Contingent

 

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Shares, if any, shall cease and terminate as to any particular number of the
Shares and/or Contingent Shares, if any, upon (i) the passage of two (2) years
from the date of their issuances, (ii) such time as they become eligible for
sale pursuant to Rule 144(k) under the Securities Act or another similar
exemption under the Securities Act or (iii) or at such time as an opinion of
counsel reasonably satisfactory in form and substance to the Company shall have
been rendered to the effect that such conditions are not necessary in order to
comply with the Securities Act.

 

7.04                           Information Available.                     So
long as a Registration Statement is effective covering the resale of Shares
and/or Contingent Shares, if any, owned by the Purchaser, the Company will
furnish or otherwise make available to the Purchasers:

 

(a)                                  as soon as practicable after available one
copy of (i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with U.S. generally accepted
accounting principles by a national firm of certified public accountants),
(ii) if not included in substance in the Annual Report to Stockholders, upon the
request of the Purchaser, its Annual Report on Form 10-K, (iii) upon the request
of the Purchaser, its Quarterly Reports on Form 10-Q, (iv) upon the request of
the Purchaser, its Current Reports on Form 8-K, (v) upon the request of the
Purchaser, its Notice of Annual Meeting of Shareholders and proxy statement for
the Company’s annual meeting and (vi) a full copy of the particular Registration
Statement covering the Shares and/or Contingent Shares, if any, (the foregoing,
in each case, excluding exhibits);

 

(b)                                 upon the request of the Purchaser, all
exhibits in the form filed with the Commission excluded by the parenthetical to
Section 7.04(a)(vi); and

 

(c)                                  upon the request of the Purchaser, a
reasonable number of copies of the prospectuses to supply to any other party
requiring such prospectuses;

 

and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company’s headquarters to
discuss information relevant for disclosure in such Registration Statement
covering the Shares and/or Contingent Shares, if any, and will otherwise
reasonably cooperate with any Purchaser conducting an investigation for the
purpose of reducing such Purchaser’s exposure to liability under the Securities
Act, including the reasonable production of information at the Company’s
headquarters during normal business hours, subject to appropriate
confidentiality limitations.

 

7.5                                 Compliance with the Sarbanes-Oxley Act of
2002.                  The Company shall comply with all applicable requirements
and prohibitions under the Sarbanes-Oxley Act of 2002.

 

SECTION 8.                                                           The Company
and the Purchasers appoint Computershare Trust Company, Inc. to act as the as
their escrow agent to hold and to release the Pre-Payment Penalty Shares on the
terms and conditions set forth in the Escrow Agreement.

 

SECTION 9.   Notices.      All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:

 

18

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if to the Company, to:

(a)

 

 

The Immune Response Corporation
5931 Darwin Court
Carlsbad, California 92008
Attention: President
Facsimile: (760) 431-8636

 

 

 

with a copy to:

 

 

 

Pillsbury Winthrop LLP
50 Fremont Street
San Francisco, CA 94105-2228
Attention: Thomas E. Sparks, Jr., Esq.
Facsimile: (415) 983-1200

 

or to such other person at such other place as the Company shall designate to
the Purchasers in writing; and

 

(b)                                 if to the Purchasers, at addresses as set
forth at the end of this Agreement, or at such other address or addresses as may
have been furnished to the Company in writing.

 

SECTION 10.                    
Changes.                                             This Agreement may not be
modified or amended except pursuant to an instrument in writing signed by the
Company and holders of a majority in interest of the outstanding Notes.

 

SECTION 11.                     Headings.                                       
The headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.

 

SECTION 12.                     Severability.                           In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.

 

SECTION 13.                     Governing Law.        This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.

 

SECTION 14.                     Counterparts.                    This Agreement
may be executed in two or more counterparts, each of which shall constitute an
original, and all of which, when taken together, shall constitute one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties. Facsimile
signatures shall be deemed original signatures.

 

SECTION 15.                     Entire
Agreement.                                           This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the

 

19

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Company nor the Purchaser makes any representation, warranty, covenant or
undertaking with respect to any such matters.

 

SECTION 16.                     Third Party
Beneficiaries.                                                 Subject to
Section 7.03 hereof, this Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.

 

SECTION 17.                     Interpretation.  The use herein of the
masculine, feminine or neuter forms shall also denote the other forms, as in
each case the context may require.

 

SECTION 18.                     Confidential Disclosure Agreement. 
Notwithstanding any provision of this Agreement to the contrary, any
confidential disclosure agreement previously executed by the Company and the
Purchaser in connection with the transactions contemplated by this Agreement
shall remain in full force and effect in accordance with its terms following the
execution of this Agreement and the consummation of the transactions
contemplated hereby.

 

SECTION 19.                     Assignment.                             This
Agreement and rights of the Purchaser hereunder may be assigned by the Purchaser
only with the prior written consent of the Company except such consent shall not
be required in cases of assignments (x) by operation of the law; (y) by the
Purchaser to a wholly-owned subsidiary; or (z) by an investment adviser to a
fund for which it is the adviser or by or among funds that are under common
control; provided, that, in any such case, such assignee agrees in writing to be
bound by the terms of this Agreement.

 

SECTION 20.                    
Publicity.                                           The Company will not issue
any public statement, press release or any other public disclosure, that
includes the Purchasers’ names, without the Purchasers’ prior written consent,
subject to the next sentence. If the Company is required by an applicable law,
resolution, or Exchange Act rule to disclose the Purchasers’ names, the Company
will give the Purchasers reasonable notice of the required disclosure.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

20

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

 

 

THE IMMUNE RESPONSE CORPORATION

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

Title:

 

21

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EXHIBIT A

 

LIST OF PURCHASERS AND NOTES AND SHARES PURCHASED

 

Name and Address
of Initial Purchasers

 

No. of Shares of
Common Stock

 

Principal Amount of
Notes

 

Aggregate
Purchase Price

 

Capital Growth Equity Fund I, LLC
225 NE Mizner Boulevard
Suite 750
Boca Raton, Florida 33432
Attn: Monique MacLaren

 

50,000

 

$

300,000

 

$

300,000

 

 

 

 

 

 

 

 

 

Edward A. Haymes
7108 Queenferry Circle
Boca Raton, Florida 33496

 

6,000

 

$

36,000

 

$

36,000

 

 

 

 

 

 

 

 

 

Gerald & Seena Sperling
17899 Aberdeen Way
Boca Raton, Florida 33496

 

8,333

 

$

50,000

 

$

50,000

 

 

 

 

 

 

 

 

 

Steve Oliveira
18 Fieldstone Court
New City, New York 10956

 

58,333

 

$

350,000

 

$

350,000

 

 

 

 

 

 

 

 

 

Lincoln Associates LLC
535 Madison Avenue
New York, New York 10022
Attn: William P. Dioguardi

 

9,500

 

$

57,000

 

$

57,000

 

 

 

 

 

 

 

 

 

Garfield Associates LLC
535 Madison Avenue
New York, New York 10022
Attn: William P. Dioguardi

 

9,500

 

$

57,000

 

$

57,000

 

 

 

 

 

 

 

 

 

Alex Tringas
29 Eigin Parkway
Ft. Walton Beach, Florida 32548

 

8,333

 

$

50,000

 

$

50,000

 

 

 

 

 

 

 

 

 

Ark Venture Capital, Inc.
6400 NW 6th Way
Suite 300 Ft. Lauderdale, Florida 33309
Attn: Robert D. Keyser, Jr.

 

16,666

 

$

100,000

 

$

100,000

 

Total

 

166,665

 

$

1,000,000

 

$

1,000,000

 

 

22

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EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees
to become a Purchaser, as defined in that certain Purchase Agreement (the
“Purchase Agreement”) by and among The Immune Response Corporation, a Delaware
corporation (the “Company”), and the Purchasers (as defined in the Purchase
Agreement), dated as of the Closing Date (as defined in the Purchase Agreement),
acknowledges having read the representations in the Purchase Agreement section
entitled “Representations of the Purchasers,” and hereby represents that the
statements contained therein are complete and accurate with respect to the
undersigned as a Purchaser.  The undersigned further hereby agrees to be bound
by the terms and conditions of (i) the Purchase Agreement as a “Purchaser”
thereunder and (ii) the Registration Rights Agreement (as defined in the
Purchase Agreement) as a “Purchaser” thereunder, and authorizes this signature
page to be attached to the Purchase Agreement and the Registration Rights
Agreement, or counterparts thereof.

 

Executed, in counterpart, as of the date set forth below.

 

 

PURCHASER:

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name of Purchaser

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

Date:

 

 

 

 

 

 

Contact Person:

 

 

 

 

 

 

Telephone No.:

 

 

 

 

 

 

Fax No.:

 

 

 

 

 

 

E-mail Address:

 

 

 

23

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APPENDIX I

 

THE IMMUNE RESPONSE CORPORATION

 

STOCK CERTIFICATE QUESTIONNAIRE

Pursuant to Section 3 of the Agreement, please provide us with the following
information:

 

1.

The exact name that your Notes, Shares and/or Contingent Shares, if applicable,
are to be registered in (this is the name that will appear on your stock
certificate(s)). You may use a nominee name if appropriate:

 

 

 

 

 

 

 

 

 

 

2.

The relationship between the Purchaser of the Notes, Shares and/or Contingent
Shares, if applicable and the Registered Holder listed in response to item 1
above:

 

 

 

 

 

 

 

 

 

 

3.

The mailing address of the Registered Holder listed in response to item 1 above:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:

 

 

 

 

 

 

 

 

24

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Appendix I-1

 

THE IMMUNE RESPONSE CORPORATION

 

REGISTRATION STATEMENT QUESTIONNAIRE

 

In connection with the preparation of the Registration Statement, please provide
us with the following information:

 

1.                                     In connection with the Registration
Statement, please state your or your organization’s name exactly as it should
appear in the Registration Statement:

 

 

 

2.                                     Please provide the number of Shares that
you or your organization will own immediately after Closing, including those
Shares purchased by you or your organization pursuant to this Purchase Agreement
and those shares purchased by you or your organization through other
transactions:

 

 

 

3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?

 

o Yes     o No

 

If yes, please indicate the nature of any such relationships below:

 

 

 

 

 

 

 

 

4.                                     Are you (i) an NASD Member (see
definition below), (ii) a Controlling (see definition below) shareholder of an
NASD Member, (iii) a Person Associated with a Member of the NASD (see definition
below), or (iv) an Underwriter or a Related Person (see definition below) with
respect to the proposed Offering; or (b) do you own any shares or other
securities of any NASD Member not purchased in the open market; or (c) have you
made any outstanding subordinated loans to any NASD Member?

 

o Yes     o No

 

If “yes,” please below:

 

 

 

 

 

 

 

 

 

 

25

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Appendix I-2

 

THE IMMUNE RESPONSE CORPORATION

 

GLOSSARY OF TERMS

NASD Member. The term “NASD member” means either any broker or dealer admitted
to membership in the National Association of Securities Dealers, Inc. (“NASD”).
(NASD Manual, By-laws Article I, Definitions)

Control. The term “control” (including the terms “controlling,” “controlled by”
and “under common control with”) means the possession, direct or indirect, of
the power, either individually or with others, to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise. (Rule 405 under the Securities Act
of 1933, as amended)

Person Associated with a member of the NASD. The term “person associated with a
member of the NASD” means every sole proprietor, partner, officer, director,
branch manager or executive representative of any NASD Member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by a NASD Member, whether or
not such person is registered or exempt from registration with the NASD pursuant
to its bylaws. (NASD Manual, By-laws Article I, Definitions)

Underwriter or a Related Person. The term “underwriter or a related person”
means, with respect to a proposed offering, underwriters, underwriters’ counsel,
financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons. (NASD Interpretation)

 

26

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APPENDIX II

 

Accredited Investor Certification
Initial the appropriate item(s)

The undersigned further represents and warrants as indicated below by the
undersigned’s initials:

 

A.    Individual investors:    (Please initial one or more of the following five
statements)

 

1.              I certify that I am an accredited investor because I have had
individual income (exclusive of any income earned by my spouse) in excess of
$200,000 in each of the most recent two years and I reasonably expect to have an
individual income in excess of $200,000 for the current year.

2.              I certify that I am an accredited investor because I have had
joint income with my spouse in excess of $300,000 in each of the most recent two
years and I reasonably expect to have joint income with my spouse in excess of
$300,000 for the current year.

3.              I certify that I am an accredited investor because I have an
individual net worth, or my spouse and I have a joint net worth, in excess of
$1,000,000.

4.              I am a director or executive officer of The Immune Response
Corporation

5.              I have individual net worth or my spouse and I have joint net
worth of over $5,000,000.

 

B.    Partnerships, corporations, trusts or other entities:    (Please initial
one of the following seven statements). The undersigned hereby certifies that it
is an accredited investor because it is:

 

1.              an employee benefit plan whose total assets exceed $5,000,000;

2.              an employee benefit plan whose investments decisions are made by
a plan fiduciary which is either a bank, savings and loan association or an
insurance company (as defined in Section 3(a) of the Securities Act) or an
investment adviser registered as such under the Investment Advisers Act of 1940;

3.              a self-directed employee benefit plan, including an Individual
Retirement Account, with investment decisions made solely by persons that are
accredited investors;

4.              an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, not formed for the specific purpose of
acquiring the Notes and Shares, whose total assets are in excess of $5,000,000;

5.              a corporation, partnership or Massachusetts or similar business
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Notes and Shares and whose purchase is directed by a
sophisticated person as described in Rule 506(b)(ii) of Regulation D and who has
such knowledge and experience in financial and business matters that he is
capable of evaluating the risks and merits of an investment in the Notes and
Shares;

6.              a trust, not formed for the specific purpose of acquiring the
Notes and Shares, with total assets in excess of $5,000,000, whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in the Notes and Shares; or

7.              an entity (including a revocable grantor trust but other than a
conventional trust) in which each of the above equity owners qualifies as an
accredited investor under items A(1), (2) or (3) or item B(1) above.

 

Appendix II-1

 

27

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APPENDIX III

Attention:

 

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

The undersigned, [an officer of, or other person duly authorized by]

 

 

 

 

hereby certifies

[fill in official name of individual or institution]

 

 

that he/she [said institution] is the Purchaser of the shares or warrants
evidenced by the attached certificate,

and as such, sold such shares on

 

 

in accordance with [Registration Statement

 

[date]

 

 

number 333-

 

 

] [a valid exemption (i.e.,

 

 

) from

registration under the Securities Act of 1933, as amended, and any applicable
State securities or “blue sky” laws] and any requirement of delivering a current
prospectus by the Company has been complied with in connection with such sale.

Print or Type:

 

 

Name of
Purchaser
(Individual or
Institution):

 

 

 

 

 

 

 

Name of
Individual
Representing
Purchaser (if
an Institution):

 

 

 

 

 

 

 

Title of
Individual
Representing
Purchaser (if
an Institution):

 

 

 

 

 

 

 

Signature by
Individual
Purchaser, or
Representative
of Purchaser:

 

 

 

 

28

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