EXHIBIT 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of April 29, 2004, among
The Immune Response Corporation, a Delaware corporation (the “Company”),
and the purchasers identified on the signature pages hereto (each a “Purchaser”
and collectively the “Purchasers”); and


 


WHEREAS, subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(2) of
the Securities Act (as defined below), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to the Purchasers, and the Purchasers,
severally and not jointly, desire to purchase from the Company in the
aggregate, up to 6,857,142 shares of Common Stock and Warrants to purchase up
to 2,057,142 shares of Common Stock.


 


NOW, THEREFORE, IN CONSIDERATION
of the mutual covenants contained in this Agreement, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agrees as follows:


 


ARTICLE I.


DEFINITIONS


 


1.1           Definitions.  In addition to the terms defined elsewhere
in this Agreement, for all purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.1:


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.


 


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


 


“Closing”
means a closing of the purchase and sale of the Common Stock and Warrants
pursuant to Section 2.1 (a).


 


“Closing
Date” means the date of a Closing.


 


“Closing
Price” means on any particular date (a) the last reported closing bid price
per share of Common Stock on such date on the Trading Market (as reported by
Bloomberg L.P. at 4:15 PM (New York time) as the last reported closing bid
price for regular session trading on such day), or (b) if there is no such
price on such date, then the closing bid price on the Trading Market on the
date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New
York time) as the closing bid price for regular session trading on such day),
or (c) if the Common Stock is not then listed or


 


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quoted on the Trading Market and
if prices for the Common Stock are then reported in the “pink sheets” published
by the National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) if the shares of Common
Stock are not then publicly traded the fair market value of a share of Common
Stock as determined by an appraiser selected in good faith by the Purchasers of
a majority in interest of the Shares then outstanding and reasonably acceptable
to the Company.


 


“Commission”
means the Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, $0.0025 par value per share,
and any securities into which such common stock may hereafter be reclassified.


 


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.


 


“Company
Counsel” means Heller Ehrman White & McAuliffe LLP.


 


“Disclosure
Schedules” means the Disclosure Schedules concurrently delivered herewith.


 


“Effective
Date” means the date that the Registration Statement is first declared
effective by the Commission.


 


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


 


“FW”
shall mean Feldman Weinstein LLP with offices located at 420 Lexington Avenue,
Suite 2620, New York, New York 10170-0002.


 


“Intellectual
Property Rights” shall have the meaning ascribed to such term in
Section 3.l(o).


 


“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal or
other restriction.


 


“Material
Adverse Effect” shall have the meaning ascribed to such term in
Section 3.l(b).


 


“Material
Permits” shall have the meaning ascribed to such term in
Section 3.1(m).


 


“Per
Share Purchase Price” equals $1.75,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that
occur after the date of this Agreement.


 


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“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.


 


“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the
date of this Agreement, among the Company and each Purchaser, in the form of Exhibit
B hereto.


 


“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.


 


“Rule
144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.


 


“SEC
Reports” shall have the meaning ascribed to such term in
Section 3.l(h).


 


“Securities”
means the Shares, the Warrants and the Warrant Shares.


 


“Securities
Act” means the Securities Act of 1933, as amended.


 


“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant
to this Agreement.


 


“Subscription
Amount” means, as to each Purchaser, the amounts set forth below such
Purchaser’s signature block on the signature page hereto, in United States
dollars and in immediately available funds.


 


“Subsidiary”
shall have the meaning ascribed to such term in Section 3.1(a).


 


“Trading
Day” means (i) a day on which the Common Stock is traded on a Trading
Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on
which the Common Stock is traded on the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.


 


“Trading
Market” means the following markets or exchanges on which the Common Stock
is listed or quoted for trading on the date in question: the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market.


 


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“Transaction
Documents” means this Agreement, the Registration Rights Agreement and the
Warrant executed in connection with the transactions contemplated hereunder.


 


“Warrants”
means the Common Stock Purchase Warrants, in the form of Exhibit C,
issuable to the Purchasers at Closing, which warrants shall be exercisable
beginning 6 months and a day after the Closing and have an exercise price equal
to $2.75 and a term of exercise of
5 years.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.


 


ARTICLE II.


PURCHASE
AND SALE


 


2.1           Closing.  At one or more Closings, the Purchasers
shall purchase, severally and not jointly, and the Company shall issue and
sell, in the aggregate, up to 6,857,142
shares of Common Stock and Warrants to purchase up to 2,057,142 shares of
Common Stock on the Closing Date.  Each
Purchaser shall purchase from the Company, and the Company shall issue and sell
to each Purchaser, a number of Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price.  Upon satisfaction of the conditions set forth in
Section 2.2, the Closings shall occur at the offices of FW, or such other
location as the parties shall mutually agree.


 


2.2           Closing
Conditions.


 


(a)           At
each Closing (unless otherwise specified below) the Company shall deliver or
cause to be delivered to each Purchaser the following:


 


(i)            this
Agreement duly executed by the Company;


 


(ii)           a copy
of the irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser’s Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such Purchaser;


 


(iii)          within
3 Business Days of the Closing Date, a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire up
to the number of shares of Common Stock equal to 30% of the Shares to be issued to such Purchaser at the
Closing;


 


(iv)          the
Registration Rights Agreement duly executed by the Company; and


 


(v)           a
legal opinion of Company Counsel, in the form of Exhibit A attached
hereto.


 


(b)           At a
Closing, each Purchaser shall deliver or cause to be delivered to the Company
the following:


 


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(i)            this
Agreement duly executed by such Purchaser;


 


(ii)           such
Purchaser’s Subscription Amount by wire transfer to the account of the Company
as provided to the Purchasers in writing prior to the Closing Date; and


 


(iii)          the
Registration Rights Agreement duly executed by such Purchaser.


 


(c)           All
representations and warranties of the other party contained herein shall remain
true and correct as of the Closing Date (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be correct as of such date).


 


(d)           As of
the Closing Date, there shall have been no Material Adverse Effect with respect
to the Company since the date hereof.


 


(e)           From
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or New York State authorities.


 


ARTICLE III.


REPRESENTATIONS
AND WARRANTIES


 


3.1           Representations
and Warranties of the Company. 
Except as set forth or incorporated by reference in (i) the SEC Reports,
which qualify the following representations and warranties in their entirety,
or (ii) the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:


 


(a)           Subsidiaries.  All subsidiaries of the Company are listed
on Exhibit 21.1 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2003 (each a “Subsidiary”).  The Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.


 


(b)           Organization
and Qualification.  Each of the
Company and the Subsidiaries is an entity duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the


 


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Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, would not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).


 


(c)           Authorization;
Enforcement.  The Company has
the requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company in connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, assuming the valid execution and delivery
thereof by the Purchasers, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ and
contracting parties rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies, and (iii) with respect to the indemnification provisions set forth in
this Agreement and the Registration Rights Agreement, as limited by public
policy, and in each case (i), (ii) or (iii) regardless of whether
enforceability is considered in a proceeding in equity or at law.


 


(d)           No
Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt) to which the Company
or any Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is
subject (including United States federal and state securities laws and
regulations), or by which any material property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as would not have or reasonably be expected to result in a Material
Adverse Effect.


 


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(e)           Filings,
Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than (a) the filing with the Commission of the Registration Statement, the
application(s) to the Nasdaq SmallCap Market for the listing of the Shares and
Warrant Shares for trading thereon, and applicable Blue Sky filings, (b) such as
have already been obtained or such exemptive filings as are required to be made
under applicable securities laws, and (c) such other filings as may be required
following the Closing Date under the Securities Act, the Exchange Act and
corporate law.


 


(f)            Issuance
of the Securities.  The Securities are
duly authorized and, the Shares and Warrant Shares, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.


 


(g)           Capitalization.  The capitalization of the Company as of the
date of the most recently filed periodic report under the Exchange Act is as
described in the Company’s most recent periodic report filed with the
Commission.  The Company has not issued
any capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, pursuant to the
conversion or exercise of Common Stock Equivalents outstanding on the date
hereof and issuances in the Company’s ordinary course of business. No Person
has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the
Transaction Documents, which right has not been complied with or waived prior
to the Closing, Except for (i) the purchase and sale of the Securities, (ii)
employee stock options under the Company’s stock option plans and (iii) grants
made in the ordinary course of the Company’s business, to the Company’s
knowledge there are no outstanding options, warrants, calls, relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire from the Company, any
shares of Common Stock, or contracts or commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. 
The issue and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.  All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board
of Directors of the Company or others is required for the issuance and sale of
the Shares.  Except as disclosed in the
SEC Reports, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to


 


7

















 


which the Company is a party or,
to the knowledge of the Company, between or among any of
the Company’s stockholders.


 


(h)           SEC
Reports; Financial Statements. 
The Company has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a)
or 15(d) of the Exchange Act, 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, including the exhibits thereto, being collectively
referred to herein as the “SEC Reports” and, together with the
Disclosure Schedules to this Agreement, 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, as applicable, 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. 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 except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of 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.


 


(i)            Material
Changes.  Since the date of
the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) 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, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.


 


(j)            Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties
before or by


 


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any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i)
materially and adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor, to the knowledge of the Company, any director or officer thereof, is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.


 


(k)           Labor
Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect.


 


(1)           Compliance.
Neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business, except in the case of clauses (i), (ii) and (iii) as would not have
or reasonably be expected to result in a Material Adverse Effect.


 


(m)          Regulatory
Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports, except where the failure to possess such
permits would not have or reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any Material Permit.


 


(n)           Title
to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries, taken as a whole, and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, taken as a whole, in each case
free and clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and
Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. To the knowledge of


 


9

















 


the Company, any real property
and facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in material compliance.


 


(o)           Patents
and Trademarks. To the knowledge of the Company and each Subsidiary, the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have or reasonably be expected
to result in a Material Adverse Effect, other than intellectual property
generally available on commercial terms from other sources (collectively, the “Intellectual
Property Rights”). There is not pending or, to the Company’s knowledge
threatened, any claim or action alleging that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes the rights of any
Person. The Company has taken all steps reasonably required in accordance with
sound business practice and business judgment to establish and preserve its
ownership of such Intellectual Property Rights.


 


(p)           Sarbanes-Oxley:
Internal Accounting Controls. The Company and each of its
Subsidiaries is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.
The Company and each of its subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its subsidiaries, is made known to the certifying officers
by others within those entities, particularly during the period in which the
Company’s Form 10-K or 10-Q, as the case may be, is being prepared. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed periodic report
under the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. 
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 307(b) of Regulation
S-K under the Exchange Act) or, to the Company’s knowledge, in other factors
that could significantly affect the Company’s internal controls.


 


(q)           Certain
Fees. Except as disclosed in Section 3(q) of the Disclosure
Schedule, no brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by


 


10

















 


this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated
by this Agreement.


 


(r)            Private
Placement. Assuming the accuracy of the Purchasers representations
and warranties set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.


 


(s)           Investment
Company. The Company is not an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.


 


(t)            Form
S-3 Eligibility. The Company is eligible to register the resale of its
Common Stock by the Purchasers under Form S-3 promulgated under the Securities
Act.


 


(u)           Registration
Rights. Except as set forth in the Registration Rights Agreement,
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company.


 


(v)           Listing
and Maintenance Requirements. The Company’s Common Stock is registered
pursuant to Section 12(g) of the Exchange Act, and the Company has taken
no action designed to, or which to its knowledge is likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act nor
has the Company received any notification that the Commission is contemplating
terminating such registration. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market.  The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.


 


(w)          Application
of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover
provision under the Company’s Certificate of Incorporation (or similar charter
documents) or the laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.


 


(x)            Disclosure. The
Company confirms that the Company has not provided any of the Purchasers or
counsel with any information that constitutes or might constitute material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting its
purchase of the Securities. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the


 


11

















 


Disclosure Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.


 


(y)           No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities
to fail to qualify for an exemption from registration under the United States
Federal securities laws.


 


(z)            Taxes.
Except for matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the Company and
each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.


 


(aa)         General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Shares by any form of general
solicitation or general advertising. The Company has offered the Shares for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.


 


Each Purchaser acknowledges and
agrees that the Company does not make or has not made any representations or
warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.1.


 


3.2           Representations
and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:


 


(a)           Organization;
Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement has been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it is
a party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.


 


12

















 


(b)           General
Solicitation.  Such Purchaser is
not purchasing the Securities as a result of any advertisement, article, notice
or other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.


 


(c)           No
Public Sale or Distribution. Such Purchaser is (i) acquiring the
Shares and (ii) upon exercise of the Warrants will acquire the Warrant Shares,
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof; provided, however,
that by making the representations herein, such Purchaser does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act
and the provisions of this Agreement including, but not limited to,
Section 4 hereof. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any of
the Securities.


 


(d)           Accredited
Investor Status.  Such Purchaser is
an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D. Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.


 


(e)           Reliance
on Exemptions.  Such Purchaser
understands that the Securities are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities.


 


(f)            Information. Such
Purchaser and its advisors, if any, have been furnished with all publicly
available materials relating to the business, finances and operations of the
Company and such other publicly available materials relating to the offer and
sale of the Shares and Warrants as have been requested by such Purchaser. Such
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Purchaser or its advisors, if any, or its
representatives shall modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained herein.  Such Purchaser understands that its
investment in the Shares and Warrants involves a high degree of risk.  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
Securities.  Such Purchaser has sought
Such accounting, legal and tax advice only from its own advisors as it has
considered necessary to make an informed investment decision with respect to
its acquisition of the Shares and Warrants.


 


(g)           No
Governmental Review. 
Such Purchaser understands that no United States federal or state agency
or any other government or governmental agency has


 


13

















 


passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.


 


(h)           Experience
of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters, including investing in biotechnology companies, so as to
be capable of evaluating the merits and risks of the prospective investment in
the Shares and Warrants, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment
in the Shares and Warrants and, at the present time, is able to afford a
complete loss of such investment.


 


(i)            Residency. Such
Purchaser is a resident of (or, if an entity, has its principal place of
business in) the jurisdiction set forth beside such Purchaser’s name on the
signature pages hereto.


 


(j)            Investment
Representations and Covenants. Each Purchaser has completed or
caused to be completed the Stock Certificate Questionnaire attached hereto as Exhibit
D and the Registration Statement Questionnaire attached hereto as Exhibit
E 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 the Warrant Shares, if any, or until the
Company is no longer required to keep the Registration Statement effective.


 


(k)           Confidentiality.
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 United States Federal and state 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


 


14

















 


disclosure.  The restrictions in this
subsection shall cease upon the Company’s public announcement that the
Transaction Documents have been entered into.


 


(l)            Continued
Listing. 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 Small Cap Market.


 


(m)          Requirements
of Foreign Jurisdictions. The Purchaser acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company or the Placement Agent
that would permit an offering of the Shares, or possession or distribution of
offering materials in connection with the issue of the Shares, in any
jurisdiction outside the United States where action for that purpose is required.
Each Purchaser outside the United States will comply with all applicable laws
and regulations in each foreign jurisdiction in which it purchases, offers,
sells or delivers Shares or has in its possession or distributes any offering
material, in all cases at its own expense. The Placement Agent is not
authorized to make any representation or use any information in connection with
the issue, placement, purchase and sale of the Shares.


 


(n)           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)(l)(A) of the NASD, Inc. Marketplace Rules.


 


The Company acknowledges and
agrees that each Purchaser does not make or has not made any representations or
warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2.


 


ARTICLE IV.


OTHER
AGREEMENTS OF THE PARTIES


 


4.1           Transfer
Restrictions.


 


(a)           The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement, to the Company, to an
Affiliate of a Purchaser, in connection with a pledge as contemplated in Section 4.l(b),
or in connection with a sale pursuant to Rule 144, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound
by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.


 


(b)           The
Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of a legend on any of the Securities in the following
form:


 


15

















 


THESE SECURITIES HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT.


 


The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or pledgor
shall be required in connection therewith; provided that the pledgee’s or
secured party’s further transfer of such Securities is registered by any
applicable securities laws. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.


 


(c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.l(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii)
following any sale of such Shares or Warrant Shares pursuant to Rule 144, or
(iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission), in which event the Company shall cause the
Company’s transfer agent to effect the removal of the legend hereunder. If all
or any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares shall be issued free of all legends. The Company agrees that following
the Effective Date or at such time as such legend is


 


16

















 


no longer required under this
Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a
certificate representing Shares or Warrant Shares, as the case may be, issued
with a restrictive legend (such date, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.


 


(d)           In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as liquidated damages and not as a penalty, for each
$1,000 of Shares or Warrant Shares (based on the Closing Price of the Common
Stock on the date such Securities are submitted to the Company’s transfer
agent) subject to Section 4.1(c), $10 per Trading Day (increasing to $20
per Trading Day five (5) Trading Days after such damages have begun to accrue)
for each Trading Day after the Legend Removal Date until such certificate is
delivered. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.


 


(e)           Each
Purchaser, severally and not jointly, agrees that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Securities pursuant to either (i) the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, which Purchaser hereby covenants to do whenever so
required, or (ii) an exemption therefrom, Purchaser further covenants and
agrees that it is familiar with the SEC’s Manual of Telephone Interpretation
item A.65 respecting the Purchaser’s inability to directly cover any short sale
made prior to the Effective Date with any Registrable Securities, and agrees to
comply with the same.


 


4.2           Furnishing
of Information.  As long as any
Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act.


 


4.3           Integration.  The Company shall not sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.


 


4.4           Deliver
of Securities After Closing. 
The Company shall deliver, or cause to be delivered, the respective
Shares and Warrants purchased by each Purchaser to such Purchaser within 3
Trading Days of the Closing Date.


 


17

















 


4.5           Securities
Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Business Day following the date hereof, file a press
release or Current Report on Form 8-K, disclosing the material terms of the
transactions contemplated hereby and make such other filings and notices in the
manner and time required by the Commission. 
Each Purchaser shall consult with the Company before issuing any press
releases with respect to the transactions contemplated hereby, and a Purchaser
shall not issue any such press release or otherwise make any such public
statement without the prior consent of the Company, except if such disclosure
is required by law, in which case the Purchaser shall promptly provide the
Company with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior
written consent of such Purchaser, except (i) as required by United States
federal and state securities laws in connection with the registration statement
contemplated by the Registration Rights Agreement and (ii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure
permitted under subclause (ii).


 


4.6           Shareholder
Rights Plan. No claim will be made or enforced by the Company or any
other Person that any Purchaser is an “Acquiring Person” under any shareholders
rights plan or similar plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.


 


4.7           Non-Public
Information.  The Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. 
The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in
securities of the Company.


 


4.8           Intentionally Omitted.


 


4.9           Intentionally Omitted.


 


4.10         Indemnification
of Purchasers.  The Company will
indemnify and hold the Purchasers and their directors, officers, shareholders,
partners, employees and agents (each, a “Purchaser Party”) harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation (collectively,
“Losses”) that any such Purchaser Party may suffer or incur as a result
of or relating to any material misrepresentation, breach or inaccuracy of any
of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the other Transaction Documents; provided, however,
that the Company will not be liable in any such case to the extent such Losses
arise out of or is based upon (a) the failure of the Purchaser to comply with
applicable securities laws or the covenants and agreements contained in this
Agreement (including, without limitation Section 4.1 hereof) (unless such
failure shall be a result of the Company breaching any of its obligations to
the Purchaser hereunder) or the Registration Rights


 


18

















 


Agreement or to perform its obligations
under law or (b) the inaccuracy of any representation or  warranty made by such Purchaser in this
Agreement in any material respect. The Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith.


 


4.11         Reservation
of Common Stock. The Company shall reserve and keep available at all times,
free of preemptive rights, a sufficient number of shares of Common Stock for
the purpose of enabling the Company to issue Shares pursuant to this Agreement
and Warrant Shares pursuant to the Warrants.


 


4.12         Listing
of Common Stock. The Company hereby agrees to use commercially reasonable
efforts to maintain the listing of the Common Stock on the Trading Market on
which the Shares are traded as of the date hereof, and as soon as reasonably
practicable following the Closing (but not later than the earlier of the
Effective Date and the first anniversary of the Closing Date) to list the
applicable Shares and Warrant Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application the Shares and the
Warrant Shares, and will take such other action as is necessary or desirable in
the opinion of the Purchasers to cause the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will
use reasonable efforts to comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market.


 


4.13         Future
Financings. From the date hereof until 15 Trading Days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary shall issue or sell any Common Stock or Common Stock
Equivalents. Notwithstanding anything herein to the contrary, the 15 Trading
Day period set forth in this Section 4.13 shall be extended for the number
of Trading Days during such period in which (y) trading in the Common Stock is
suspended by any Trading Market, or (z) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Shares and the Warrant Shares. Notwithstanding anything to the contrary herein,
this Section 4.13 shall not apply to the following (a) the granting of
options or stock to employees, officers, directors and consultants of the
Company pursuant to a grant approved by a majority of the Board of Directors or
pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such purpose,
or (b) the exercise of any security issued by the Company in connection with
the offer and sale of the Company’s securities pursuant to this Agreement, or
(c) the exercise of or conversion of any convertible securities, notes, options
or warrants issued and outstanding on the date hereof, provided such securities
have not been amended since the date hereof (unless, in the case of notes, the
sole purpose of such amendment is to extend the maturity date) or (d)
commercial transactions, collaborations, acquisitions or other strategic
transactions or investments, the primary purpose of which is not to raise
capital.


 


4.14         Equal
Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is


 


19

















 


intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.


 


ARTICLE V.


MISCELLANEOUS


 


5.1           Fees
and Expenses.  Each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement, except that the Company shall pay a document preparation fee of
$25,000 to FW, counsel for the placement agent, at closing. The Company shall
pay all stamp and other taxes and duties levied in connection with the sale of
the Securities.


 


5.2           Entire
Agreement.  The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.


 


5.3           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified on the signature pages attached hereto prior to
6:30 p.m. (New York City time) on a Trading Day and electronic confirmation of
successful transmission is received, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.


 


5.4           Amendments;
Waivers.  No provision of
this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by the Company and by each Purchaser with respect
to such Purchaser or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.


 


5.5           Construction.  The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.


 


5.6           Successors
and Assigns.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and permitted assigns, The Company may not assign


 


20

















 


this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser;
provided, however, no consent shall be required in connection with a merger,
consolidation or sale of substantially all of the Company’s assets. Any
Purchaser may assign any or all of its rights under this Agreement to any
Person, provided such transferee agrees in writing to be bound, with respect to
the transferred Securities, by the provisions hereof that apply to the
“Purchasers”. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided by this Agreement.


 


5.7           No
Third-Party Beneficiaries. 
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, except as
otherwise set forth in Section 4.10.


 


5.8           Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New
York.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by delivering a copy thereof via
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto (including its
affiliates, agents, officers, directors and employees) hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall commence
an action or proceeding to enforce any provisions of a Transaction Document,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.


 


5.9           Survival.  The representations, warranties, agreements
and covenants contained herein shall survive the Closing and delivery of the
Shares and exercise of the Warrants.


 


5.10         Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become


 


21

















 


effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.


 


5.11         Severability.  If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.


 


5.12         Replacement
of Securities.  If any certificate
or instrument evidencing any Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.


 


5.13         Remedies.  In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
each of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.


 


5.14         Intentionally Omitted.


 


5.15         Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document
are several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
the Transaction Document.  Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents.  For reasons of administrative convenience
only, Purchasers and their respective counsel have chosen to communicate with
the Company through FW. FW does not represent any of the Purchasers in this
transaction but only the placement agent, Rodman and Renshaw, Inc.  The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the


 


22

















 


convenience of the Company and not
because it was required or requested to do so by the Purchasers.


 


(Signature Page Follows)


 


23

















 


IN WITNESS WHEREOF, the parties
hereto have caused this Securities Purchase Agreement to be duly executed by
their respective authorized signatories as of the date first indicated above.


 


	
  THE IMMUNE RESPONSE
  CORPORATION

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attn:

  
	
  By:

  	
   

  	
   

  	
  Tel:

  
	
   

  	
  Name:

  	
  Fax:

  
	
   

  	
  Title:

  	
   

  
				



 


With copy to (which shall not
constitute notice):


 


Heller Ehrman White &
McAuliffe LLP


4350 La Jolla Village Drive


7th Floor


San Diego, CA 92122-1246


Attn: Hayden Trubitt


Fax: (858) 450-8499


 


[SIGNATURE
PAGE CONTINUES]


 


23

















 


[PURCHASER SIGNATURE PAGES TO IMNR
SECURITIES PURCHASE AGREEMENT]


 


[PURCHASER
SIGNATURE PAGES TO IMNR SECURITIES PURCHASE AGREEMENT]


 


IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.


 


Name of Investing Entity:


Signature of
Authorized Signatory of Investing Entity:___________________________________________________________


Name of Authorized Signatory::_____________________________________________________________________________


Title of Authorized Signatory::______________________________________________________________________________


Email Address of Authorized Entity::_________________________________________________________________________


 


Address for Notice of Investing Entity:


 


 


Address for Delivery of Securities for
Investing Entity (if not same as above):


 


 


Subscription Amount:


Shares:


Warrant Shares:


EIN Number: [WE SUGGEST YOU PROVIDE THIS UNDER SEPARATE COVER]


 


24

















 


EXHIBIT C


 


NEITHER THIS SECURITY NOR THE
SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES


 


COMMON STOCK PURCHASE WARRANT


 


To
Purchase
                
Shares of Common Stock of


 


The Immune Response Corporation


 


THIS COMMON STOCK PURCHASE
WARRANT CERTIFIES that, for value  received,
              
(the “Holder”), is entitled, upon the terms and subject to the limitations
on exercise and the conditions hereinafter set forth, at any time on or after
the sixth month anniversary of the date of issuance of this Warrant plus one
day (the “Initial Exercise Date”) and on or prior to the close of
business on the 5th year anniversary of the Initial Exercise Date
(the “Termination Date”) but not thereafter, to subscribe for and
purchase from The Immune Response Corporation, a corporation incorporated in
the State of Delaware (the “Company”), up to
                       
shares (the “Warrant Shares”) of Common Stock, of the Company
(the “Common Stock”). The purchase price of one share of Common Stock
(the “Exercise Price”) under this Warrant shall be $2.75, subject to adjustment hereunder. The
Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated April 29, 2004, between the Company and the purchasers signatory
thereto.


 


1

















 


1.     Title
to Warrant.  Prior to the
Termination Date and subject to compliance with applicable laws and
Section 7 of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part.


 


2.     Authorization
of Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant in accordance with the terms and conditions
hereof, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).


 


3.     Exercise
of Warrant.


 


(a)  Except as provided in Section 3(c)
herein, exercise of the purchase rights represented by this Warrant may be made
at any time or times on or after the Initial Exercise Date and on or before the
Termination Date by the surrender of this Warrant and the Notice of Exercise
Form annexed hereto duly executed, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of the
Company) and upon payment of the Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check of immediately available funds drawn on a
United States bank or by means of a cashless exercise pursuant to
Section 3(d), the Holder shall be entitled to receive a certificate for
the number of Warrant Shares so purchased. Certificates for shares purchased
hereunder shall be delivered to the Holder within five (5) Trading Days after
the date on which this Warrant shall have been exercised as aforesaid. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price and all
taxes required to be paid by the Holder, if any, pursuant to Section 5 prior
to the issuance of such shares, have been paid. If the Company fails to deliver
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to this Section 3(a) by the close of business on the fifth
Trading Day after the date of exercise, then the Holder will have the right to
rescind such exercise. In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the close of
business on the fifth Trading Day after the date of exercise, and if after such
fifth Trading Day the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall (1)
pay in cash to the Holder the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the


 


2

















 


price at which the sell order
giving rise to such purchase obligation was executed, and (2) at the option of
the Holder, either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.


 


(b)  If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.


 


(c)  The Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 3(a) or
otherwise, to the extent that after giving effect to such issuance after
exercise, the Holder (together with the Holder’s affiliates), as set forth on
the applicable Notice of Exercise, would beneficially own in excess of 4.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to such issuance. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its affiliates
shall include the number of shares of Common Stock issuable upon exercise of
this Warrant with respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates.
Except as set forth in the preceding sentence, for purposes of this
Section 3(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act, it being acknowledged by Holder that
the Company is not representing to Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and Holder is solely
responsible for any schedules required to be filed in accordance
therewith.  To the extent that the limitation
contained in this Section 3(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder)
and of which a portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and


 


3

















 


the submission of a Notice of
Exercise shall be deemed to be such Holder’s determination of whether this
Warrant is exercisable (in relation to other securities owned by such Holder)
and of which portion of this Warrant is exercisable, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation
to verify or confirm the accuracy of such determination. For purposes of this
Section 3(c), in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as
reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the
case may be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company’s Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of the Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.


 


(d)  If, but only if, at any time after one year
from the date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder, this
Warrant may also be exercised at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:


 


(A)  = 
the VWAP on the Trading Day immediately preceding the date of such
election;


 


(B)  = 
the Exercise Price of this Warrant, as adjusted; and


 


(X)  = 
the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by means of a cash exercise rather
than a cashless exercise.


 


As used herein, “VWAP” means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common
Stock is not then listed or quoted on a Trading Market and if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by the National Quotation Bureau Incorporated
(or a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported;
or (d) in all other cases, the fair market value of a share of Common


 


4

















 


Stock as determined by an independent
appraiser selected in good faith by the holders of a majority of the Shares
then outstanding and reasonably acceptable to the Company.


 


4.     No
Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price.


 


5.     Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company
may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.


 


6.     Closing
of Books.  The Company will
not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.


 


7.     Transfer,
Division and Combination.


 


(a)  Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 1 and 7(e) hereof and
to the provisions of Section 4.1 of the Purchase Agreement, this Warrant
and all rights hereunder are transferable, in whole or in part, upon surrender
of this Warrant, so long as the amount of Warrant Shares transferred is equal
to at least 25,000 shares (on an as exercised basis) at the principal office of
the Company, together with a written assignment of this Warrant substantially
in the form attached hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in
such instrument of assignment and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of Warrant Shares without having a new Warrant
issued.


 


(b)  This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.


 


5

















 


(c)  The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 7.


 


(d)  The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of transfer
of the Warrants.


 


(e)  If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such transfer (i)
that the Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an “accredited investor” as defined in Rule 501(a)
promulgated under the Securities Act.


 


8.     No
Rights as Shareholder until Exercise.  This Warrant does not entitle the Holder to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof. Upon
the surrender of this Warrant and the payment of the aggregate Exercise Price
(or by means of a cashless exercise), the Warrant Shares so purchased shall be
and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.


 


9.     Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and
dated as of such cancellation, in lieu of such Warrant or stock certificate.


 


10.   Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken
or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.


 


11.   Adjustments
of Exercise Price and Number of Warrant Shares.  The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its


 


6

















 


outstanding shares of Common Stock into
a smaller number of shares of Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an
Exercise Price per Warrant Share or other security obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment
and dividing by the number of Warrant Shares or other securities of the Company
that are purchasable pursuant hereto immediately after such adjustment. An
adjustment made pursuant to this paragraph shall become effective immediately
after the effective date of such event retroactive to the record date, if any,
for such event.


 


12. Reorganization,
Reclassification, Merger, Consolidation or Disposition of Assets. In case
the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another corporation (where the Company is not
the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation (including by way of a spin-off) and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation (“Other Property”), are to be received by or distributed to
the holders of Common Stock of the Company, then the Holder shall have the
right thereafter to receive upon exercise of this Warrant, the number of shares
of Common Stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of Warrant Shares for which this Warrant is exercisable which shall
be as nearly equivalent as practicable to the adjustments provided for in this
Section 12. For purposes of this Section 12, “common stock of the
successor or acquiring corporation” shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe


 


7

















 


for or purchase any such stock. The
foregoing provisions of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.


 


13.   Voluntary
Adjustment by the Company. 
The  Company may at any
time during the term of this Warrant reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.


 


14.   Notice
of Adjustment. Whenever the number of Warrant Shares or number or kind of
securities or other property purchasable upon the exercise of this Warrant or
the Exercise Price is adjusted, as herein provided, the Company shall give
notice thereof to the Holder, which notice shall state the number of Warrant
Shares (and other securities or property) purchasable upon the exercise of this
Warrant and the Exercise Price of such Warrant Shares (and other securities or
property) after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made.


 


15.   Notice
of Corporate Action. If at any time:


 


(a)           the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of stock
of any class or any other securities or property, or to receive any other
right, or


 


(b)           there
shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all
or substantially all the property, assets or business of the Company to,
another corporation or,


 


(c)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company;


 


then, in any one or more of such
cases, the Company shall give to Holder (i) at least 20 days’ prior written
notice of the date or expected date on which a record date shall be selected
for such dividend, distribution or right or for determining rights to vote in
respect of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, liquidation or winding up, and (ii) in the case of
any such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 20 days’ prior
written notice of the date when the same shall or is expected to take place.
Such notice in accordance with the foregoing clause also shall specify (A) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (B) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is expected to take place and the time,
if any such time is to be fixed, as of which the holders of Common Stock shall
be entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing


 


8

















 


on the books of the Company and
delivered in accordance with Section 17(d). Failure to provide such notice
shall not affect the validity of any action taken in connection with such
dividend, distribution, subscription or purchase rights, or proposed
reorganization, reclassification, recapitalization, merger, consolidation,
sale, transfer, disposition, conveyance, dissolution, liquidation or winding
up. Notwithstanding anything herein to the contrary, the Company shall be
deemed to have given notice of such action upon the filing of a current or
periodic report or the issuance of a press release that is made widely
available.


 


16.   Authorized
Shares.  The Company
covenants that during the period the Warrant is outstanding, it will reserve
from its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant.  The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.


 


Except
and to the extent as waived or consented to by the Holder, the Company shall
not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment, Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase
in par value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.


 


Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.


 


17.   Miscellaneous.


 


(a)  Jurisdiction. This Warrant shall
constitute a contract under the laws of New York, without regard to its
conflict of law, principles or rules.


 


9

















 


(b)  Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.


 


(c)  Nonwaiver and Expenses. No course of
dealing or any delay or failure to exercise any right hereunder on the part of
Holder shall operate as a waiver of such right or otherwise prejudice Holder’s
rights, powers or remedies, notwithstanding all rights hereunder terminate on
the Termination Date.  If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.


 


(d)  Notices. Any notice, request or other
document required or permitted to be given or delivered to the Holder by the
Company shall be delivered in accordance with the notice provisions of the
Purchase Agreement; provided upon any permitted assignment of this Warrant, the
assignee shall promptly provide the Company with its contact information.


 


(e)  Limitation of Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.


 


(f)  Remedies.  Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.


 


(g)  Successors and Assigns.  Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall
be enforceable by any such Holder or holder of Warrant Shares.


 


(h)  Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.


 


(i)  Severability. Wherever possible, each
provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant
shall be prohibited by or invalid under applicable law, such


 


10

















 


provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.


 


(j)  Headings. The headings used in this
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.


 


(k)  Entire Agreement. This Warrant, the
Purchase Agreement and the Registration Rights Agreement constitute the entire
agreement between the Company and the Holder with respect to this Warrant.


 


********************


 


11

















 


IN
WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.


 


 


Dated: April 29, 2004


 


	
   

  	
  THE IMMUNE RESPONSE
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 


12

















 


NOTICE OF EXERCISE


 


To:          The Immune Response Corporation


 


(1)   The
undersigned hereby elects to purchase
               
Warrant Shares of The Immune Response Corporation pursuant to the terms of  the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.


 


(2)   Payment
shall take the form of (check applicable box):


 


[  ]
in lawful money of the United States; or


 


[  ] the cancellation of such
number of Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 3(d), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(d).


 


(3)   Please
issue a certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified below:


 


 


 


The Warrant Shares shall be delivered
to the following:


 


 


 


(4)   Accredited
Investor.  The undersigned is
an “accredited investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.


 


	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
						



 

















 


ASSIGNMENT FORM


 


(To
assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)


 


FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to


 


                                                                                                                                 
whose
address is


                                                                                                                                                                       ,


 


 


 


	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  



 


 


	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


 


	
  Signature Guaranteed:

  	
   

  	
   

  



 


 


NOTE; The signature to this Assignment
Form must correspond with the name as it appears on the face of the Warrant,
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.