Document:

ACL SEMICONDUCTORS INC.
                             B24-B27,1/F., BLOCK B,
                          PROFICIENT INDUSTRIAL CENTRE
                                6 WANG KWUN ROAD
                               KOWLOON, HONG KONG

                                                     December 31, 2003

Professional Traders Fund, LLC
990 Stewart Avenue
Suite 420
Garden City, New York 11530

Gentlemen:

         In order to induce Professional Traders Fund, LLC, a New York limited
liability company with executive offices located at 990 Stewart Avenue, Suite
420, Garden City, New York 11530, Attn: Mark K. Swickle, Manager (the
"INVESTOR") to enter into, and perform its obligations under and pursuant to,
the Note Subscription, dated December 31, 2003 (the "SUBSCRIPTION"), to which
this letter is attached as Annex F, ACL Semiconductors Inc., a Delaware
corporation (the "COMPANY") hereby agrees as follows:

         i.       From the proceeds of the loan evidenced by the Note attached
as Annex A to the Subscription (the "Note"), the Investor shall be entitled to
retain, and immediately direct the payment of the following: (a) fees of counsel
to the Investor ("INVESTOR COUNSEL") and its out-of-pocked expenses in the
amount of the lesser of $5,000 or the actual fees theretofore billed to the
Investor in connection with the transactions contemplated by, and in connection
with, the Subscription and the documents annexed thereto; (b) fees and expenses
of the independent auditor to the Company in such amount as such auditor and the
Company shall agree; and (c) fees and expenses of Reitler Brown LLC, counsel to
the Company ("RB"), as evidenced by an invoice delivered by such counsel at or
prior to the closing of the funding of such Note;

         ii.      In the event that the fees and expenses of Investor Counsel
referenced in clause (i)(a) shall exceed $5,000, the Company shall pay such
additional fees and expenses up to a maximum of $2,000.

         iii.     As an alternative to clause (i)(c), the Investor may fund the
gross proceeds of the Note, less the amounts otherwise deducted therefrom
pursuant to clause (i)(a) and clause (i)(b) hereof, to an escrow account
maintained by RB.

         iv.      The Company hereby grants to the Investor a right of first
refusal to provide additional funding to the Company as set forth in EXHIBIT A
hereto.

<PAGE>

         v.       The Company  represents and warrants to the Investor as of the
closing date of the transactions  contemplated by the Subscription (the "CLOSING
DATE") that,  except as otherwise  provided in the  Disclosure  Letter  attached
hereto as Exhibit B or in the documents (the "SEC  DOCUMENTS")  heretofore filed
by the Company with the United States  Securities and Exchange  Commission  (the
"SEC"):

                  a.       RIGHTS OF OTHERS  AFFECTING THE  TRANSACTIONS.  There
are no preemptive rights of any stockholder of the Company,  as such, to acquire
the Note or the shares (the "CONVERSION  SHARES") of common stock of the Company
(the "COMMON  STOCK")  issuable upon the  conversion of the Note. No party has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Subscription.

                  b.       STATUS.  The Company is a corporation duly organized,
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so  qualify  would  not have or  result  in a  material  adverse  effect  on the
business,  prospects,  financial  condition,  or  results of  operations  of the
Company and its subsidiary taken as a whole (a "MATERIAL ADVERSE  EFFECT").  The
Company  has  registered  its  Common  Stock  pursuant  to Section 12 of, and is
obligated  to file  reports  pursuant  to Section  13 or  Section  15(d) of, the
Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"). The Common
Stock is listed and quoted on the over-the-counter Bulletin Board (the "OTCBB").
The Company has received no notice,  either oral or written, with respect to the
continued  eligibility of the Common Stock for such listing and quotation on the
OTCBB,  and the  Company has  maintained  all  requirements  on its part for the
continuation of such listing and quotation.

                  c.       AUTHORIZED  SHARES.  The authorized  capital stock of
the  Company  consists  of (i)  50,000,000  shares  of  Common  Stock,  of which
approximately  27,829,936  are  outstanding,   and  (ii)  20,000,000  shares  of
preferred stock, of which none are outstanding as of the date hereof. All issued
and  outstanding  shares of Common Stock have been duly  authorized  and validly
issued  and are  fully  paid and  non-assessable.  The  Company  has  sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the  Conversion  Shares.  As of the Closing Date,  the Notes and the
Conversion  Shares shall have been duly  authorized by all  necessary  corporate
action on the part of the Company, and the Conversion Shares, when issued on the
conversion of, or as interest on, the Note in accordance with its terms, will be
duly and validly issued,  fully paid and non-assessable and will not subject the
Investor to personal liability by reason thereof.

                  d.       TRANSACTION  AGREEMENTS AND STOCK. This Agreement and
the Subscription,  and the transactions  contemplated  hereby and thereby,  have
been duly and validly  authorized by the Company,  this  Agreement has been duly
executed and delivered

<PAGE>

by the Company and this  Agreement is, and the Note and the  Subscription,  when
executed and  delivered  by the  Company,  will be,  legal,  valid,  and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general  principles of equity and to bankruptcy,
insolvency,  moratorium,  and other similar laws  affecting the  enforcement  of
creditors' rights generally.

                  e.       NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Subscription by the Company,  the issuance of the Note and the
Conversion Shares in accordance with the terms of the Note, and the consummation
by the Company of the other  transactions  contemplated by this  Agreement,  the
Subscription,  and the Note do not and will not  conflict  with or  result  in a
breach by the  Company of any of the terms or  provisions  of, or  constitute  a
default under (i) the  certificate of  incorporation  or by-laws of the Company,
each as currently in effect,  (ii) any indenture,  mortgage,  deed of trust,  or
other  material  agreement or  instrument  to which the Company is a party or by
which it or any of its  properties  or assets are bound,  including  any listing
agreement  for the Common  Stock  except as herein  set  forth,  or (iii) to its
knowledge,  any existing  applicable  law, rule, or regulation or any applicable
decree,  judgment,  or  order  of any  court,  United  States  federal  or state
regulatory  body,  administrative  agency,  or other  governmental  body  having
jurisdiction  over the Company or any of its  properties or assets,  except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.

                  f.       FILINGS.   None  of  the   Company's   SEC  Documents
contained,  at the time they were filed, any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements  made therein in light of the  circumstances  under which
they were made, not misleading. Since the closing of the acquisition of Atlantic
Components  Ltd.  ("ATLANTIC") by the Company on September 30, 2003, the Company
has timely filed all requisite  forms,  reports and exhibits thereto required to
be filed by the Company with the SEC,  except for the  Quarterly  Report on Form
10-Q for the three months ended  September 30, 2003,  which the Company filed on
November  28,  2003,  the Form 8-K filed by the Company on October 16, 2003 (the
"FORM 8-K") and the amendment to the Form 8-K to contain the pro forma financial
statements relating to the Atlantic  Transaction which the Company  contemplates
filing prior to December 31, 2003.

                  g.       ABSENCE  OF  CERTAIN  CHANGES.  Since the date of the
last financial statements (the "LAST FINANCIAL STATEMENTS") of Atlantic included
in the SEC Documents,  there has been no material adverse change and no Material
Adverse  Effect,  except as disclosed in the Company's SEC Documents.  Since the
date of the Last Financial  Statements,  except as provided in the Company's SEC
Documents,  the Company has not (i)  incurred or become  subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices;  (ii) discharged or satisfied
any material lien or  encumbrance  or paid any material  obligation or liability
(absolute or contingent),  other than current  liabilities  paid in the ordinary
course of business  consistent with past  practices;  (iii) declared or made any
payment or distribution  of cash or other property to shareholders  with respect
to its capital stock, or

<PAGE>

purchased or redeemed,  or made any agreements to purchase or redeem, any shares
of its capital  stock;  (iv) sold,  assigned or  transferred  any other tangible
assets,  or canceled  any debts owed to the Company by any third party or claims
of the  Company  against  any  third  party,  except in the  ordinary  course of
business consistent with past practices;  (v) suffered any substantial losses or
waived any rights of material  value,  whether or not in the ordinary  course of
business, or suffered the loss of any material amount of existing business; (vi)
made any changes in  compensation  to senior  employees,  except in the ordinary
course of business  consistent  with past  practices;  or (vii)  experienced any
material  problems with labor or  management  in  connection  with the terms and
conditions of their employment.

                  h.       FULL  DISCLOSURE.   To  the  best  of  the  Company's
knowledge,  there is no fact known to the Company  (other than general  economic
conditions  known to the public  generally or as disclosed in the  Company's SEC
Documents)  that has not been  disclosed in writing to the  Investor  that would
reasonably be expected to have or result in a Material Adverse Effect.

                  i.       ABSENCE  OF  LITIGATION.  There is no  action,  suit,
proceeding,  inquiry or  investigation  before or by any court,  public board or
body  pending  or,  to the  knowledge  of the  Company,  threatened  against  or
affecting the Company before or by any governmental authority or nongovernmental
department,  commission,  board, bureau,  agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would  adversely  affect the validity or  enforceability
of, or the authority or ability of the Company to perform its obligations under,
this  Agreement or the  Subscription,  or any documents  contemplated  hereby or
thereby or in connection herewith or therewith.  The Company is not aware of any
valid basis for any such claim that  (either  individually  or in the  aggregate
with all other such events and  circumstances)  could  reasonably be expected to
have a  Material  Adverse  Effect.  There  are  no  outstanding  or  unsatisfied
judgments,  orders,  decrees,  writs,  injunctions or  stipulations to which the
Company  is a party or by  which  it or any of its  properties  is  bound,  that
involve the transaction  contemplated herein or that, alone or in the aggregate,
could reasonably be expect to have a Material Adverse Effect.

                  j.       ABSENCE OF EVENTS OF DEFAULT. Except as otherwise set
forth herein,  no event of default (or its equivalent  term),  as defined in the
respective  material  agreement  to which the  Company is a party,  and no event
which, with the giving of notice or the passage of time or both, would become an
event of default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse Effect.

                  k.       ABSENCE OF CERTAIN  COMPANY CONTROL PERSON ACTIONS OR
EVENTS.  Based on  information  provided to the Company by the affiliates of the
Company  at the  date  hereof  (the  "COMPANY  AFFILIATES"),  to the best of the
Company's knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Affiliate:

<PAGE>

         (1)  A  petition  under  the  federal  bankruptcy  laws  or  any  state
         insolvency law was filed by or against, or a receiver,  fiscal agent or
         similar  officer was  appointed by a court for the business or property
         of such Company Affiliate, or any partnership in which he was a general
         partner at or within two years before the time of such  filing,  or any
         corporation  or  business  association  of  which  he was an  executive
         officer at or within two years before the time of such filing;

         (2) Such Company Affiliate was convicted in a criminal proceeding or is
         a named subject of a pending  criminal  proceeding  (excluding  traffic
         violations and other minor offenses);

         (3) Such Company  Affiliate  was the subject of any order,  judgment or
         decree, not subsequently  reversed,  suspended or vacated, of any court
         of competent  jurisdiction,  permanently or  temporarily  enjoining him
         from, or otherwise limiting, the following activities:

                  (i) acting, as an investment  advisor,  underwriter,
                  broker or dealer in securities,  or as an affiliated
                  person,  director  or  employee  of  any  investment
                  company,  bank,  savings  and  loan  association  or
                  insurance company, as a futures commission merchant,
                  introducing   broker,   commodity  trading  advisor,
                  commodity  pool  operator,  floor broker,  any other
                  person  regulated by the Commodity  Futures  Trading
                  Commission ("CFTC") or engaging in or continuing any
                  conduct  or   practice  in   connection   with  such
                  activity;

                  (ii) engaging in any type of business practice; or

                  (iii)  engaging in any activity in  connection  with
                  the purchase or sale of any security or commodity or
                  in connection with any violation of federal or state
                  securities laws or federal commodities laws;

         (4) Such Company  Affiliate  was the subject of any order,  judgment or
         decree, not subsequently reversed, suspended or vacated, of any federal
         or state authority  barring,  suspending or otherwise limiting for more
         than 60 days the  right of such  Company  Affiliate  to  engage  in any
         activity  described in paragraph (3) above,  or to be  associated  with
         persons engaged in any such activity; or

         (5)  Such  Company   Affiliate  was  found  by  a  court  of  competent
         jurisdiction  in a civil action or by the CFTC or SEC to have  violated
         any federal or state  securities  law,  and the  judgment in such civil
         action  or  finding  by the  CFTC  or SEC  has  not  been  subsequently
         reversed, suspended, or vacated.

                  l.       NO UNDISCLOSED  LIABILITIES OR EVENTS. To the best of
the Company's  knowledge,  the Company has no liabilities  or obligations  other
than those

<PAGE>

disclosed in this  Agreement or the Company's SEC Documents or those incurred in
the  ordinary  course  of the  Company's  business  since  the  date of the Last
Financial Statements, or which individually or in the aggregate, do not or would
not have a Material Adverse Effect.  No event or  circumstances  has occurred or
exists with  respect to the  Company or its  properties,  business,  operations,
condition  (financial or  otherwise),  or results of  operations,  which,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
prior to the date  hereof by the  Company  but  which  has not been so  publicly
announced or disclosed. Except for proposals to amend the name of the Company to
"ACL Semiconductors  Inc.", there are no proposals currently under consideration
or currently  anticipated to be under consideration by the Board of Directors or
the  executive  officers  of the  Company  which  proposal  would (x) change the
certificate  of  incorporation  or other  charter  document  or  by-laws  of the
Company,  each as currently  in effect,  with or without  stockholder  approval,
which change would reduce or otherwise adversely affect the rights and powers of
the stockholders of the Common Stock or (y) materially or  substantially  change
the  business,  assets or capital of the  Company,  including  its  interests in
subsidiaries.

                  m.       NO  DEFAULT.  Neither  the  Company  nor  any  of its
subsidiaries  is in default in the  performance  or  observance  of any material
obligation,   agreement,   covenant  or  condition  contained  in  any  material
indenture,  mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.

                  n.       NO INTEGRATED  OFFERING.  Neither the Company nor any
Company Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since September 30, 2003, made any offer or sales of any
security or solicited any offers to buy any security  under  circumstances  that
would  eliminate the  availability  of the  exemption  from  registration  under
Regulation  D in  connection  with  the  offer  and  sale  of the  Note  and the
Conversion Shares as contemplated hereby.

                  o.       DILUTION. The number of shares issuable on conversion
of the Note may have a dilutive  effect on the ownership  interests of the other
stockholders  (and  persons  having  the  right to become  stockholders)  of the
Company.  The Company's  executive officers and directors have studied and fully
understand  the nature of the Note and recognize that they have such a potential
dilutive  effect.  The Board of Directors of the Company has  concluded,  in its
good faith business judgment that, such issuance is in the best interests of the
Company. The Company specifically  acknowledges that its obligation to issue the
Conversion  Shares upon  conversion  of the Note is binding upon the Company and
enforceable  regardless  of the dilution such issuance may have on the ownership
interests of other shareholders of the Company,  and the Company will honor such
obligations,  including  honoring every Notice of Conversion (as contemplated by
the Note) unless the Company is subject to an injunction  (which  injunction was
not sought by the Company) or other legal or regulatory restriction  prohibiting
the Company from doing so.

                  p.       FEES TO BROKERS,  FINDERS  AND OTHERS.  Except as set
forth in EXHIBIT B hereto,  there are no finder's or similar fees or commissions
payable in connection with

<PAGE>

the transactions contemplated hereby or by the Subscription. Investor shall have
no obligation with respect to such fees or with respect to any claims made by or
on behalf of other  persons for fees of a type  contemplated  in this  paragraph
that may be due in connection with the  transactions  contemplated  hereby or by
the  Subscription.  The Company  shall  indemnify  and hold harmless each of the
Investor, its employees,  officers,  directors,  agents, and partners, and their
respective  affiliates,  from and  against all claims,  losses,  damages,  costs
(including the costs of preparation and attorney's  fees) and expenses  suffered
in respect of any such claimed or existing fees, as and when incurred.

                  q.       CONFIRMATION.   The   Company   confirms   that   all
statements  of the Company  contained  herein shall  survive  acceptance of this
Agreement  by the  Investor.  The Company  agrees  that,  if any events occur or
circumstances  exist  prior to the  Closing  Date,  which  would make any of the
Company's representations, warranties, agreements or other information set forth
herein materially  untrue or materially  inaccurate as of such date, the Company
shall immediately notify the Investor (directly or through its counsel,  if any)
in writing  prior to such date of such fact,  specifying  which  representation,
warranty or covenant is affected and the reasons therefor.

         vi.      A registration  statement registering under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), the resale of such of the Conversion
Shares  as are  "restricted  securities"  (as  defined  in Rule  144  under  the
Securities  Act) shall be filed by the Company  within 60-days of the funding of
the Note. The Company  agrees to use  commercially  reasonable  efforts to cause
such  registration  statement to be declared  effective under the Securities Act
within 150 days of the  funding of the Note.  Should  the  Company  fail to meet
either of such  timelines,  a 1% penalty  per month on the funded  amount of the
Note (the  "PENALTY")  will be levied against the Company.  At the discretion of
the  Company,  payment may be issued to the Investor in either cash or in Common
Stock at a rate equal to the average  closing price of the previous five trading
days.

         vii.     The Company further agrees as follows:

                  a.       GOVERNING  LAW;   VENUE.   This  Agreement  shall  be
governed by, and  interpreted  in accordance  with, the laws of the State of New
York for  contracts  to be wholly  performed  in such state and  without  giving
effect to the  principles  thereof  regarding the conflict of laws.  Each of the
parties  consents to the  exclusive  jurisdiction  of the federal  courts  whose
districts  encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement,  the  Subscription,  or any of the other documents
contemplated  hereby or thereby or in  connection  herewith  or  therewith,  and
hereby waives, to the maximum extent permitted by law, any objection,  including
any  objection  based on  FORUM  NON  CONVENIENS,  to the  bringing  of any such
proceeding in such  jurisdictions.  To the extent  determined by such court, the
Company  shall  reimburse  the  Investor  for  any  reasonable  legal  fees  and
disbursements incurred by the Investor in enforcement of or protection of any of
its rights under any of the foregoing agreements or documents.

<PAGE>

                  b.       WAIVER. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.

                  c.       SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the  benefit of and be binding  upon the  successors  and assigns of each of the
parties hereto.

                  d.       PRONOUNS;  GENDER.  All pronouns  and any  variations
thereof refer to the masculine,  feminine or neuter,  singular or plural, as the
context may require.

                  e.       FACSIMILE  SIGNATURES.  A facsimile  transmission  of
this signed Agreement shall be legal and binding on all parties hereto.

                  f.       COUNTERPARTS.  This Agreement may be signed in one or
more counterparts, each of which shall be deemed an original.

                  g.       HEADINGS.  The  headings  of this  Agreement  are for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation of, this Agreement.

                  h.       SEVERABILITY.  If any  provision  of  this  Agreement
shall be  invalid or  unenforceable  in any  jurisdiction,  such  invalidity  or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder of this Agreement or the validity or  enforceability of this Agreement
in any other jurisdiction.

                  i.       AMENDMENT.  This  Agreement may be amended only by an
instrument  in  writing  signed  by the  party to be  charged  with  enforcement
thereof.

                  j.       PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements  and  understandings  among the parties  hereto  with  respect to the
subject matter hereof.

                  k.       NOTICE.  Any notice  required or permitted  hereunder
shall be given in  writing  (unless  otherwise  specified  herein)  and shall be
deemed effectively given on the earliest of

                  (1) the date delivered,  if delivered by personal  delivery as
                  against  written  receipt  therefor or by confirmed  facsimile
                  transmission,

                  (2) the seventh  business day after deposit,  postage prepaid,
                  in the United States Postal Service by registered or certified
                  mail, or

                  (3) the  third  business  day after  mailing  by  domestic  or
                  international  express  courier,  with delivery costs and fees
                  prepaid,

<PAGE>

in each case,  addressed to each of the other parties thereunto  entitled at the
addresses  set  forth  above  (or at such  other  addresses  as such  party  may
designate by ten (10) days' advance  written notice  similarly  given to each of
the other parties hereto).

                  l.       SURVIVAL.    The   Company's    representations   and
warranties herein shall survive the execution and delivery of this Agreement and
the delivery of the Note, and shall inure to the benefit of the Investor and the
Company and their respective successors and assigns.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

<PAGE>

         If the foregoing is acceptable, please indicate your agreement hereto
by executing this letter below.

                                        ACL SEMICONDUCTORS INC.

                                        BY: /S/ CHUNG-LUN YANG
                                           -------------------------------
                                            NAME: CHUNG - LUN YANG
                                            TITLE:   CHIEF EXECUTIVE OFFICER

ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE-WRITTEN:

PROFESSIONAL TRADERS FUND, LLC

BY: /S/ MARC K. SWICKLE
   -------------------------------
      NAME: MARC K. SWICKLE
      TITLE: MANAGER

<PAGE>

                                    EXHIBIT A

         (a)      Prior to entering into any agreement with any third party
relating to the financing of the Company (other than commercial financing
facilities, including term loan and revolving credit facilities and warehouse
facilities, and underwritten offerings of securities of the Company by member
firms of the NASD, Inc. and its affiliated bodies), the Company shall promptly
Deliver (as hereinafter defined) a copy of the proposed terms of such financing
(the "PROPOSED TERMS") and any available materials relating thereto ("FINANCING
DOCUMENTATION") to the Investor.

         (b)      Following the Delivery of the Financing Documentation to the
Investor, the Investor shall have five Business Days (as defined in the Note) to
Deliver to the Company a commitment, including proposed terms, to provide the
financing in question to the Company on terms equivalent to, or superior to the
Company than, the Proposed Terms (the "INVESTOR COMMITMENT"). In the event that
the Investor shall fail to Deliver the Investor Commitment to the Company within
the aforementioned five Business Days, the Investor shall be deemed to have
waived Investor's right of first refusal with respect to such financing.

         (c)      In the event that the Investor Delivers the Investor
Commitment to the Company within the aforementioned five days, the Company shall
and the Investor shall use best efforts to cause the consummation of such
financing within 60 days.

         (d)      In the event that the Investor shall fail to Deliver the
Investor Commitment to the Company within the aforementioned five Business Days,
the Company shall cause the financing on the Proposed Terms, or terms more
advantageous to the Company than the Proposed Terms to be consummated within 60
days thereafter. In the event that the Company shall fail to consummate such
financing within such 60 days, the Investor shall again have a right of first
refusal pursuant to this EXHIBIT A.

         (e)      A document or notice hereunder shall be deemed "DELIVERED",
and "DELIVER" shall be deemed, for the purposes hereof, to take place as
follows: (i) if delivered personally, on the date of delivery thereof, (ii) if
delivered by a national or international overnight delivery service (including,
without limitation, Federal Express, DHL Courier, TNT, and UPS), on the date
after the delivery to such service thereof by the Company, and (iii) if
delivered by any other means, on the seventh day following the date on which the
Company delivers such documents to such delivery service. Such definition shall
be deemed to include correlative terms, including, without limitation,
"DELIVERY".

         (f)      The right of first refusal set forth in this Exhibit A shall
terminate immediately upon the conversion in full or repayment in full of the
Note.<PAGE>

                                                                     EXHIBIT 4.1

                             UNIT PURCHASE AGREEMENT

         This UNIT PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 7,
2004, is made by and among EPIMMUNE INC., a Delaware corporation (the
"COMPANY"), and the Purchasers listed on EXHIBIT A, together with their
permitted transferees (each, a "PURCHASER" and collectively, the "PURCHASERS").

                                    RECITALS:

         A. The Company has retained the services of Jefferies & Company, Inc.
("JEFFERIES") pursuant to the terms of an engagement letter dated March 25, 2004
(the "ENGAGEMENT LETTER"), to assist the Company in connection with a private
placement of the Company's Securities (the "OFFERING").

         B. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.

         C. The Purchasers desire to purchase and the Company desires to sell,
upon the terms and conditions stated in this Agreement, up to a maximum of
$7,500,000 of Common Stock and warrants to purchase Common Stock of the Company.

         D. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article 8 hereof.

                                    AGREEMENT

         In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchasers (severally and not
jointly) hereby agree as follows:

                                   ARTICLE 1

                           PURCHASE AND SALE OF UNITS

         1.1 PURCHASE AND SALE OF UNITS. At the Closing the Company will issue
and sell to each Purchaser, and each Purchaser will, severally and not jointly,
purchase from the Company the number of shares of Common Stock of the Company
(the "SHARES") and the number of warrants (the "WARRANTS") to purchase shares of
Common Stock set forth opposite such Purchaser's name on EXHIBIT A (the Shares
and Warrants referred to collectively as the "UNITS"). The purchase price for
each Unit shall be $2.2125, which is the sum of (i) $2.15, the lower of (A) the
average of the closing bid price of the Common Stock as reported on the Nasdaq
National Market (symbol "EPMN"), as the 4:00 closing bid price, for the four
trading days preceding and the trading day including the date of execution of
this Agreement and (B) the 4:00 closing bid price on the date of execution of
this Agreement, and (ii) $0.0625 (the "PURCHASE PRICE"). For each two Shares
purchased by a Purchaser, such Purchaser shall receive a Warrant to purchase one
share of Common Stock of the Company at an exercise price equal to $2.655,

                                       1.
<PAGE>

which represents 120% of the Purchase Price, and the Warrants shall be
exercisable for three years from the Closing Date pursuant to the Warrant
substantially in the form attached as EXHIBIT B.

         1.2 PAYMENT. At the Closing, each Purchaser will pay the aggregate
Purchase Price set forth opposite its name on EXHIBIT A hereof by wire transfer
of immediately available funds in accordance with the Company's wire
instructions set forth on EXHIBIT C hereto. The Company will deliver stock
certificates to the Purchasers representing the Shares and Warrants representing
the Warrant Shares against delivery of the aggregate Purchase Price within three
business days of the Closing Date.

         1.3 CLOSING DATE. The execution of this Agreement and the closing of
the transaction contemplated by this Agreement will take place on April 14, 2004
(the "CLOSING DATE") and the closing (the "CLOSING") will be held at the offices
of the Company or at such other place as the parties agree.

                                   ARTICLE 2

                   PURCHASER'S REPRESENTATIONS AND WARRANTIES

         Each Purchaser represents and warrants to the Company and Jefferies,
severally and not jointly with respect to itself and its purchase hereunder,
that:

         2.1 INVESTMENT PURPOSE. The Purchaser is purchasing the Units for its
own account and not with a present view toward the public sale or distribution
thereof.

         2.2 ACCREDITED PURCHASER STATUS. The Purchaser is an "ACCREDITED
INVESTOR" as defined in Rule 501(a) of Regulation D. The Purchaser has delivered
the applicable Accredited Investor Questionnaire in the form of EXHIBIT D to the
Company. The Purchaser hereby represents that, either by reason of the
Purchaser's business or financial experience, the Purchaser has the capacity to
protect the Purchaser's own interests in connection with the purchase of the
Units. In addition, the Purchaser is capable of evaluating the merits and risks
of its investment in the Company and has the capacity to protect its own
interest.

         2.3 RELIANCE ON EXEMPTIONS. The Purchaser understands that the Units
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Units.

         2.4 INFORMATION. The Purchaser has been furnished with all relevant
materials relating to the business, finances and operations of the Company
necessary to make an investment decision, and materials relating to the offer
and sale of the Units, that have been requested by the Purchaser, including,
without limitation, the Company's SEC Documents (as defined in Section 3.6), and
the Purchaser has read the SEC Documents. The Purchaser has been afforded the
opportunity to ask questions of the Company. In connection with its decision to
purchase the number of Units set forth on Exhibit A, the Purchaser (i) has
relied only upon the

                                       2.
<PAGE>

SEC Documents and the representations and warranties of the Company contained
herein and the information in Section 2.2 herein and (ii) has not relied on any
information or advice furnished by Jefferies.

         2.5 ACKNOWLEDGEMENT OF RISK. The Purchaser acknowledges and understands
that its investment in the Units involves a significant degree of risk,
including, without limitation, (i) the Company remains a development stage
business with limited operating history and requires substantial funds in
addition to the proceeds from the sale of the Units; (ii) an investment in the
Company is speculative, and only Purchasers who can afford the loss of their
entire investment should consider investing in the Company and the Units; (iii)
the Purchaser may not be able to liquidate its investment; (iv) transferability
of the Units is extremely limited; (v) in the event of a disposition of the
Units, the Purchaser could sustain the loss of its entire investment; and (vi)
the Company has not paid any dividends on its Common Stock since inception and
does not anticipate the payment of dividends in the foreseeable future. Such
risks are more fully set forth in the SEC Documents.

         2.6 GOVERNMENTAL REVIEW. The Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Units or an
investment therein.

         2.7 TRANSFER OR RESALE. The Purchaser understands that:

                  (a) the Units have not been and are not being registered under
the Securities Act or any applicable state securities laws and, consequently,
the Purchaser may have to bear the risk of owning the Units for an indefinite
period of time because the Units may not be transferred unless (i) the resale of
the Units is registered pursuant to an effective registration statement under
the Securities Act, as contemplated in Article 6; (ii) the Purchaser has
delivered to the Company an opinion of counsel (in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Units to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; or (iii) the Units are sold or transferred
pursuant to Rule 144;

                  (b) any sale of the Units made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and, if Rule 144 is not
applicable, any resale of the Units under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and

                  (c) except as set forth in Article 6, neither the Company nor
any other person is under any obligation to register the resale of the Shares or
the Warrant Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.

         2.8 LEGENDS. The Purchaser understands the certificates representing
the Units will bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates
for such Units):

                                       3.
<PAGE>

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.

         2.9 AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Purchaser and
represents the valid and binding obligations of the Purchaser enforceable in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and the application of general principles of equity.

         2.10 RESIDENCY. The Purchaser is a resident of the jurisdiction set
forth immediately below such Purchaser's name on the signature pages hereto.

         2.11 ACKNOWLEDGEMENTS REGARDING PLACEMENT AGENT. The Purchaser
acknowledges that Jefferies (the "PLACEMENT AGENT") is acting as the exclusive
Placement Agent for the Units being offered hereby and will be compensated by
the Company for acting in such capacity. The Purchaser represents that (i) the
Purchaser was contacted regarding the sale of the Units by the Placement Agent
(or an authorized agent or representative thereof) with whom the Purchaser had a
prior substantial pre-existing relationship and (ii) no Units were offered or
sold to it by means of any form of general solicitation or general advertising,
and in connection therewith the Purchaser did not: (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.

                                   ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to the Purchasers and Jefferies,
that:

         3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware,
the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company is duly qualified to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.

                                       4.
<PAGE>

         3.2 AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement, to consummate the transactions contemplated hereby and to issue
the Units in accordance with the terms hereof; (ii) the execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby (including without limitation the issuance of
the Units) have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or its
stockholders is required, (iii) this Agreement has been duly executed by the
Company; and (iv) this Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.

         3.3 CAPITALIZATION. The capitalization of the Company is described in
the Company's SEC Documents. The Company has not issued any capital stock since
December 31, 2003 other than pursuant to employee benefit plans disclosed in the
Company's SEC Documents. All of such outstanding shares of capital stock have
been duly authorized, validly issued, fully paid and nonassessable. No shares of
capital stock of the Company, including the Units issuable pursuant to this
Agreement, are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any liens or encumbrances imposed through the
actions or failure to act of the Company. There are no (i) outstanding options,
warrants, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into,
exercisable for, or exchangeable for any shares of capital stock of the Company,
or arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company (excluding those rights that have been
waived); (ii) agreements or arrangements under which the Company is obligated to
register the sale of any of its securities under the Securities Act (except as
contemplated under Article 6) or the resale of its securities (except those
obligations that have been complied with) and (iii) anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Units other than (a) rights created in connection with the
transactions contemplated by this Agreement; (b) the conversion privileges of
the Series S and S-1 Preferred Stock; (c) the anti-dilution adjustment to the
shares of Series S Preferred Stock that will occur as a result of the issuance
of the Units; (d) up to 500,000 shares of Common Stock of the Company that may
be sold to Peter Allard under certain conditions; (e) 1,777,943 shares of Common
Stock issuable upon exercise of options granted under the Company's equity
incentive plan; (f) 1,218,785 shares reserved for future issuance under the
Company's equity incentive plan; (g) 158,755 shares reserved for issuance under
the Company's Employee Stock Purchase Plan; and (h) 797,198 shares reserved for
issuance upon the exercise of existing warrants. The Company has furnished to
the Purchasers true and correct copies of the Company's Amended and Restated
Certificate of Incorporation, as amended (the "CERTIFICATE OF INCORPORATION"),
as in effect on the date hereof, and the Company's Amended and Restated Bylaws
(the "BYLAWS") as in effect on the date hereof.

         3.4 ISSUANCE OF UNITS. The Shares and all of the shares of Common Stock
issuable upon exercise of the Warrants (the "WARRANT SHARES") are duly
authorized and, upon issuance in accordance with the terms of this Agreement
(and in case of the Warrant Shares, the Warrants)

                                       5.
<PAGE>

will be validly issued, fully paid and non-assessable, free from all taxes,
liens, claims, encumbrances and charges with respect to the issue thereof, will
not be subject to preemptive rights or other similar rights of stockholders of
the Company.

         3.5 NO CONFLICTS; NO VIOLATION.

                  (a) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby (including, without limitation, the issuance of the Units)
will not (i) conflict with or result in a violation of any provision of its
Certificate of Incorporation or Bylaws, (ii) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, or instrument to which the Company is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company, except for such conflicts,
breaches, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.

                  (b) The Company is not in violation of its Certificate of
Incorporation or Bylaws and the Company is not in default under any agreement,
indenture or instrument to which the Company is a party or by which any property
or assets of the Company is bound or affected, except for possible defaults as
would not, individually or in the aggregate, have a Material Adverse Effect.

                  (c) The Company is not conducting its business in violation of
any law, ordinance or regulation of any governmental entity, the failure to
comply with which would, individually or in the aggregate, have a Material
Adverse Effect.

                  (d) The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency in order for it
to execute, deliver or perform any of its obligations under this Agreement in
accordance with the terms hereof, or to issue and sell the Units in accordance
with the terms hereof other than such as have been made or obtained, and except
for any filings required to be made under federal or state securities laws. All
consents, authorizations, orders, filings and registrations that the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date.

         3.6 SEC DOCUMENTS, FINANCIAL STATEMENTS. The Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC during the twelve (12) months preceding the date of
this Agreement, pursuant to the reporting requirements of the Exchange Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Purchaser, or
each Purchaser has had access to, true and complete copies of the SEC Documents.
As of their respective dates, the SEC

                                       6.
<PAGE>

Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than liabilities incurred in the ordinary course of business subsequent to
December 31, 2003, and liabilities of the type not required under generally
accepted accounting principles to be reflected in such financial statements.
Such liabilities incurred subsequent to December 31, 2003, are not, in the
aggregate, material to the financial condition or operating results of the
Company.

         3.7 ABSENCE OF LITIGATION. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its officers or
directors acting as such that if determined adversely to the Company could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

         3.8 INTELLECTUAL PROPERTY RIGHTS. To the Company's knowledge, the
Company owns or possesses, or believes it can obtain on reasonable terms,
licenses or sufficient rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights necessary to enable it
to conduct its business as now operated and as proposed to be operated as
described in the SEC Documents, except where the failure to currently own or
possess such rights could not reasonably be expected to have a Material Adverse
Effect (the "INTELLECTUAL PROPERTY"). Except as set forth in the SEC Documents,
there are no material options, licenses or agreements relating to the
Intellectual Property, nor is the Company bound by or a party to any material
options, licenses or agreements relating to the patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names or copyrights of any
other person or entity. Except as disclosed in the SEC Documents, there is no
claim or action or proceeding pending or, to the Company's knowledge, threatened
that challenges the right of the Company with respect to any Intellectual
Property.

         3.9 TAX STATUS. The Company has timely made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it

                                       7.
<PAGE>

is subject (unless and only to the extent that the Company has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith, and has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the Company's knowledge, there are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.

         3.10 ENVIRONMENTAL LAWS. The Company (i) is in compliance in all
material respects with all applicable foreign federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval where, in each of the three foregoing clauses,
the failure to so comply would have, individually or in the aggregate, a
Material Adverse Effect.

         3.11 PLACEMENT AGENT. The Company has taken no action that would give
rise to any claim by any person for brokerage commissions, placement agent's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with the Placement Agent, whose
commissions and fees will be paid by the Company.

         3.12 EMPLOYMENT MATTERS. The Company is in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours
except where failure to be in compliance would not have a Material Adverse
Effect. The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the Company's knowledge, has sought to represent any of the
employees, representatives or agents of the Company. There is no strike or other
labor dispute involving the Company pending, or to the Company's knowledge,
threatened, that could have a Material Adverse Effect nor is the Company aware
of any labor organization activity involving its employees. The Company is not
aware that any officer or key employee intends to terminate his or her
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer or key employee.

         3.13 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association,
joint venture, partnership or other business entity and the Company is not a
direct or indirect participant in any joint venture or partnership.

         3.14 NO CONFLICT OF INTEREST. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount

                                       8.
<PAGE>

whatsoever other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or relocation expenses of employees.
None of the Company's officers, directors or employees, or any members of their
immediate families, are directly, or indirectly, indebted to the Company (other
than as described in the SEC Documents) or, to the Company's knowledge, have any
direct or indirect ownership interest in any entity with which the Company is
affiliated or with which the Company has a business relationship, or any entity
which competes with the Company, except that officers, directors, employees
and/or stockholders of the Company may own stock in any publicly traded company
that may compete with the Company. To the Company's knowledge, none of the
Company's officers, directors or employees or any members of their immediate
families are, directly or indirectly, interested in any material contract with
the Company. The Company is not a guarantor or indemnitor of any indebtedness of
any other person or entity.

         3.15 S-3 STATUS. The Company currently meets the "registrant
eligibility" requirements set forth in the general instructions to Form S-3 to
enable the registration of the resale of the Registrable Securities and, to the
Company's knowledge, there exist no facts or circumstances that could reasonably
be expected to prohibit or delay the filing or effectiveness of a registration
statement on Form S-3 covering the resale of the Registrable Securities;
provided, however, that the Company does not currently meet the requirements for
a primary offering.

         3.16 NO REGISTRATION. Assuming the accuracy of the representations and
warranties made by, and compliance with the covenants of, the Purchasers in
Article 2 hereof, no registration of the Units under the Securities Act is
required in connection with the offer and sale of the Units by the Company to
the Purchasers as contemplated by the Agreement.

         3.17 NASDAQ COMPLIANCE. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq
National Market (the "NASDAQ NATIONAL MARKET"), and the Company has taken no
action designated to, or which is reasonably likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from The Nasdaq National Market. Except for those
certain Letters dated August 21, 2003 and April 1, 2004, the Company has not, in
the 12 months preceding the date hereof, received notice from The Nasdaq
National Market to the effect that the Company is not in compliance with the
listing or maintenance requirements thereof, and the Company is, and has no
reason to believe that it will not in the foreseeable future continue to be in,
in compliance with all such listing and maintenance requirements (or in the case
of the minimum stockholder equity standard, regain compliance with such listing
requirement). The sale and issuance of the Units does not require stockholder
approval, including, without limitation, pursuant to the Nasdaq Marketplace
Rules.

         3.18 NO MANIPULATION OF STOCK. The Company has not taken and will not,
in violation of applicable law, take any action outside the ordinary course of
business designated to or that might reasonably be expected to cause or result
in unlawful manipulation of the price of the Common Stock to facilitate the sale
or resale of the Units.

         3.19 LISTING. The Company shall comply with all requirements of the
National Association of Securities Dealers, Inc. (the "NASD") with respect to
the issuance of the Shares and the listing of the Registrable Securities on the
Nasdaq Stock Market.

                                       9.
<PAGE>

                                    ARTICLE 4

                                    COVENANTS

         4.1 REPORTING STATUS. The Company's Common Stock is registered under
Section 12 of the Exchange Act. During the Registration Period (as defined in
Section 6.4(a)), the Company will timely file all documents with the SEC, and
the Company will not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.

         4.2 EXPENSES. The Company and each Purchaser is liable for, and will
pay, its own expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement, including, without limitation,
attorneys' and consultants' fees and expenses.

         4.3 FINANCIAL INFORMATION. The financial statements of the Company to
be included in any documents filed with the SEC will be prepared in accordance
with accounting principles generally accepted in the United States, consistently
applied, and will fairly present in all material respects the consolidated
financial position of the Company and results of its operations and cash flows
as of, and for the periods covered by, such financial statements (subject, in
the case of unaudited statements, to normal year-end audit adjustments).

         4.4 COMPLIANCE WITH LAW. As long as a Purchaser owns any of the Units,
the Company will conduct its business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is conducting business
(including, without limitation, all applicable local, state and federal
environmental laws and regulations), the failure to comply with which would have
a Material Adverse Effect.

         4.5 SALES BY PURCHASERS. Each Purchaser will sell any Units and Warrant
Shares held by it in compliance with applicable prospectus delivery
requirements, if any, or otherwise in compliance with the requirements for an
exemption from registration under the Securities Act and the rules and
regulations promulgated thereunder. No Purchaser will make any sale, transfer or
other disposition of the Units in violation of federal or state securities laws.

         4.6 NASDAQ. Based on the Company's pro forma (assuming completion of
the Offering) unaudited financials as of March 31, 2004, the Company shall be in
compliance with the listing and maintenance requirements of The Nasdaq National
Market including, but not limited to, the stockholders' equity requirement for
continued listing on The Nasdaq National Market set forth in NASD Rule
4450(a)(3).

                                   ARTICLE 5

                              CONDITIONS TO CLOSING

         5.1 PURCHASERS' OBLIGATIONS - LEGAL OPINION. The Purchasers'
obligations to purchase the Units at the Closing are subject to the Company's
counsel having delivered a legal opinion to each Purchaser in substantially the
form set forth as EXHIBIT E.

                                      10.
<PAGE>

                                   ARTICLE 6

                               REGISTRATION RIGHTS

         6.1 As used in this Agreement, the following terms shall have the
following meanings:

                  (a) "AFFILIATE" means, with respect to any Person (as defined
below), any other Person controlling, controlled by or under direct or indirect
common control with such Person (for the purposes of this definition "CONTROL,"
when used with respect to any specified Person, shall mean the power to direct
the management and policies of such person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" shall have meanings correlative to the
foregoing).

                  (b) "BUSINESS DAY" means a day Monday through Friday on which
banks are generally open for business in New York.

                  (c) "FILING DATE" has the meaning set forth in Section 6.2.

                  (d) "FINAL PROSPECTUS" has the meaning set forth in Section
6.6(a).

                  (e) "HOLDERS" means any person holding Registrable Securities
or any person to whom the rights under Article 6 have been transferred in
accordance with Section 6.9 hereof.

                  (f) "INDEMNIFIED PARTY" has the meaning set forth in Section
6.6(c).

                  (g) "INDEMNIFYING PARTY" has the meaning set forth in Section
6.6(c).

                  (h) "PERSON" means any person, individual, corporation,
limited liability company, partnership, trust or other nongovernmental entity or
any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).

                  (i) The terms "REGISTER," "REGISTERED" and "REGISTRATION"
refer to the registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.

                  (j) "REGISTRABLE SECURITIES" means (i) the Shares and (ii) the
Warrant Shares; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the SEC,
(B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale or (C) are held by a Holder or a permitted transferee
pursuant to Section 6.9.

                  (k) "REGISTRATION EXPENSES" means all expenses incurred by the
Company in complying with Section 6.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company,

                                      11.
<PAGE>

blue sky fees and expenses and the expense of any special audits incident to or
required by any such registration (but excluding the fees of legal counsel for
any Holder).

                  (l) "REGISTRATION STATEMENT" has the meaning set forth in
Section 6.2.

                  (m) "REGISTRATION PERIOD" has the meaning set forth in Section
6.5(a).

                  (n) "SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and expenses of legal counsel for any Holder.

         6.2 As soon as reasonably practicable, but in no event later than 30
days after the Closing Date (the "FILING DATE"), the Company shall file a
registration statement covering the resale of the Registrable Securities on a
Form S-3 Registration Statement (the "REGISTRATION STATEMENT") with the SEC and
effect the registration, qualifications or compliances (including, without
limitation, the execution of any required undertaking to file post-effective
amendments, appropriate qualifications or exemptions under applicable blue sky
or other state securities laws and appropriate compliance with applicable
securities laws, requirements or regulations) as promptly as possible after the
filing thereof, but in any event prior to the date which is 120 days after the
Closing Date. The Company shall not be obligated to enter into any underwriting
agreement for the sale of any of the Registrable Securities.

         6.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 6.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.

         6.4 The Company further agrees that, in the event that the Registration
Statement has not (i) been filed with the SEC within 30 days after the Closing
Date or (ii) been declared effective by the SEC within 120 days after the
Closing Date (each such event referred to in clauses (i) and (ii), (a
"REGISTRATION DEFAULT")), for all or part of any one week period (a "PENALTY
PERIOD") during which the Registration Default remains uncured, the Company
shall pay to each Purchaser 0.5% of such Purchaser's aggregate purchase price of
his or her Units for each Penalty Period during which the Registration Default
remains uncured. The Company shall deliver said cash payment to the Purchaser by
the fifth Business Day after the end of such Penalty Period.

         6.5 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:

                  (a) use its commercially reasonable efforts to keep such
registration, and any qualification, exemption or compliance under state
securities laws which the Company determines to obtain, continuously effective
until the earlier of the following: (i) the second anniversary of the Effective
Date or (ii) the date all Shares and Warrant Shares may be sold under Rule 144
during any 90 day period. The period of time during which the Company is

                                      12.
<PAGE>

required hereunder to keep the Registration Statement effective is referred to
herein as "the Registration Period."

                  (b) advise the Holders within five Business Days:

                           (i) when the Registration Statement or any amendment
thereto has been filed with the SEC and when the Registration Statement or any
post-effective amendment thereto has become effective;

                           (ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the prospectus included therein or
for additional information;

                           (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for such purpose;

                           (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and

                           (v) of the occurrence of any event that requires the
making of any changes in the Registration Statement or the prospectus so that,
as of such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading;

                  (c) use its commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time;

                  (d) promptly furnish to each Holder, without charge, at least
one copy of such Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits in the form filed with the SEC;

                  (e) during the Registration Period, promptly deliver to each
Holder, without charge, as many copies of the prospectus included in such
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use, consistent with the
provisions hereof, of the prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the prospectus or any
amendment or supplement thereto. In addition, upon the reasonable request of the
Holder and subject in all cases to confidentiality protections reasonably
acceptable to the Company, the Company will meet with a Holder or a
representative thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Registrable
Securities, and will otherwise cooperate with any Holder conducting an
investigation for the purpose of reducing or eliminating such Holder's exposure
to liability under the Securities Act, including the reasonable production of
information at the Company's headquarters;

                                      13.
<PAGE>

                  (f) during the Registration Period, promptly deliver to each
Holder, without charge, (i) as soon as practicable (but in the case of the
annual report of the Company to its stockholders, within 120 days after the end
of each fiscal year of the Company) one copy of the following documents, other
than those documents available via EDGAR: (A) its annual report to its
stockholders, if any (which annual report shall contain financial statements
audited in accordance with generally accepted accounting principles in the
United States of America by a firm of certified public accountants of recognized
standing); (B) if not included in substance in its annual report to
stockholders, its annual report on Form 10-K (or similar form); (C) each of its
quarterly reports to its stockholders, and, if not included in substance in its
quarterly reports to stockholders, its quarterly report on Form 10-Q (or similar
form), and (D) a copy of the full Registration Statement (the foregoing, in each
case, excluding exhibits); and (ii) upon reasonable request, all exhibits
excluded by the parenthetical to the immediately preceding clause (D), and all
other information that is generally available to the public;

                  (g) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, promptly take such actions as may be
necessary to register or qualify or obtain an exemption for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, and do any and all other
acts or things reasonably necessary or advisable to enable the offer and sale in
such jurisdictions of the Registrable Securities covered by such Registration
Statement;

                  (h) upon the occurrence of any event contemplated by Section
6.4(b)(v) above, the Company shall use its commercially reasonable efforts to
promptly prepare a post-effective amendment to the Registration Statement or a
supplement to the related prospectus, or file any other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the prospectus will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

                  (i) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC which could affect
the sale of the Registrable Securities;

                  (j) use its commercially reasonable efforts to cause all
Registrable Securities to be listed on each securities exchange or market, if
any, on which equity securities issued by the Company have been listed; and

                  (k) use its commercially reasonable efforts to take all other
steps necessary to effect the registration of the Registrable Securities
contemplated hereby and to enable the Holders to sell Registrable Securities
under Rule 144.

         6.6 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 6.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.

                                      14.
<PAGE>

         6.7      (a) To the extent permitted by law, the Company shall
indemnify each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which any registration that has been effected
pursuant to this Agreement, against all claims, losses, damages and liabilities
(or action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 6.6(c)
below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in the Registration Statement,
prospectus, any amendment or supplement thereof, or other document incident to
any such registration, qualification or compliance or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, or any violation by the Company of any
rule or regulation promulgated by the Securities Act applicable to the Company
and relating to any action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder, for reasonable legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred; provided that the Company will not be
liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder and stated
to be specifically for use in preparation of such Registration Statement,
prospectus; provided that the Company will not be liable in any such case where
the claim, loss, damage or liability arises out of or is related to the failure
of the Holder to comply with the covenants and agreements contained in this
Agreement respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement or alleged untrue statement or omission or
alleged omission made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the SEC at the time the Registration
Statement becomes effective or in the amended prospectus filed with the SEC
pursuant to Rule 424(b) or in the prospectus subject to completion under Rule
434 of the Securities Act, which together meet the requirements of Section 10(a)
of the Securities Act (the "FINAL PROSPECTUS"), such indemnity shall not inure
to the benefit of any such Holder, any such underwriter or any such controlling
person, if a copy of the Final Prospectus furnished by the Company to the Holder
for delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act and the Final Prospectus would have cured the defect
giving rise to such loss, liability, claim or damage.

                  (b) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such registration is
being effected, indemnify the Company, each of its directors and officers, each
underwriter of the Registrable Securities and each person who controls the
Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to Section 6.6(c) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in the Registration Statement, prospectus, or any amendment or
supplement thereof, incident to any such registration, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of
the circumstances in which they were

                                      15.
<PAGE>

made, and will reimburse the Company, such directors and officers, each
underwriter of the Registrable Securities and each person controlling the
Company for reasonable legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Holder and stated to be specifically for use in
preparation of the Registration Statement, prospectus; provided that the
indemnity shall not apply to the extent that such claim, loss, damage or
liability results from the fact that a current copy of the prospectus was not
made available to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities Act
and the Final Prospectus would have cured the defect giving rise to such loss,
claim, damage or liability. Notwithstanding the foregoing, (x) a Holder's
aggregate liability pursuant to this subsection (b) and subsection (d) shall be
limited to the net amount received by the Holder from the sale of the
Registrable Securities and (y) the Holder shall not be liable to the Company for
any consequential damages, including lost profits, solely with respect to
losses, claims, damages, liabilities or expenses to which the Company (or any
officer, director or controlling person as set forth above) may become subject
(under the Securities Act or otherwise), arising out of, or based upon, any
failure to comply with the covenants and agreements concerning its sale or other
disposition of the Registrable Securities.

                  (c) Each party entitled to indemnification under this Section
6.6 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, unless
such failure is materially prejudicial to the Indemnifying Party in defending
such claim or litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent (which
consent will not be unreasonably withheld). No Indemnifying Party, in its
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.

                  (d) If the indemnification provided for in this Section 6.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall

                                      16.
<PAGE>

be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

         6.8      (a) Each Holder agrees that, upon receipt of any notice from
the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to the Holders, such prospectus shall not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement and prospectus contemplated by
Section 6.2 until its receipt of copies of the supplemented or amended
prospectus from the Company and, if so directed by the Company, each Holder
shall deliver to the Company all copies, other than permanent file copies then
in such Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.

                  (b) Each Holder shall suspend, upon request of the Company,
any disposition of Registrable Securities pursuant to the Registration Statement
and prospectus contemplated by Section 6.2 during (i) any period not to exceed
two 90-day periods within any one 12-month period the Company requires in
connection with a primary underwritten offering of equity securities and (ii)
any period, not to exceed one 45-day period per circumstance or development,
when the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would be
required in such a prospectus is premature or would have an adverse effect on
the Company.

                  (c) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information regarding
such Holder and the distribution proposed by such Holder as the Company may
request in writing, including completing a Registration Statement Questionnaire
in the form provided by the Company, or as shall be required in connection with
any registration referred to in this Article 6.

                  (d) Each Holder hereby covenants with the Company (i) not to
make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied, and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on a national securities exchange, Nasdaq or in the
over-the-counter market, in privately negotiated transactions, or in a
combination of such methods, to notify the Company at least five business days
prior to the date on which the Holder first offers to sell any such Registrable
Securities.

                  (e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Registration Statement are not transferable on
the books of the Company unless the stock certificate submitted to the transfer
agent evidencing such Registrable Securities is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (i) the

                                      17.
<PAGE>

Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has been
satisfied.

                  (f) Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such Registration Statement which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.

                  (g) At the end of the Registration Period the Holders shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such Registration Statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.

         6.9 With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which at any time permit the sale of
the Registrable Securities to the public without registration, so long as the
Holders still own Registrable Securities, the Company shall use its reasonable
best efforts to:

                  (a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times;

                  (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act; and

                  (c) so long as a Holder owns any Registrable Securities,
furnish to such Holder, upon any reasonable request, a written statement by the
Company as to its compliance with Rule 144 under the Securities Act, and of the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.

         6.10 The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 6.1 may be assigned in full
by a Holder in connection with a transfer by such Holder of its Registrable
Securities, provided, however, that such transfer must be made at least ten days
prior to the Filing Date and that (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior written
notice to the Company at least ten days prior to the Filing Date; and (iii) such
transferee agrees to comply with the terms and provisions of this Agreement, and
such transfer is otherwise in compliance with this Agreement. Except as
specifically permitted by this Section 6.9, the rights of a Holder with respect
to Registrable Securities as set out herein shall not be transferable to any
other Person, and any attempted transfer shall cause all rights of such Holder
therein to be forfeited.

         6.11 With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding, any
provision of this Article 6 may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of

                                      18.
<PAGE>

each such waiver or amendment, the Company shall promptly give written notice
thereof to the Holders, if any, who have not previously received notice thereof
or consented thereto in writing.

                                    ARTICLE 7

                                 INDEMNIFICATION

         In consideration of each Purchaser's execution and delivery of this
Agreement and its acquisition of the Units hereunder, and in addition to all of
the Company's other obligations under this Agreement, the Company will indemnify
and hold harmless each Purchaser and each other holder of the Units and all of
their stockholders, officers, directors, employees and direct or indirect
Purchasers and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (regardless of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
an Indemnitee as a result of, or arising out of, or relating to (a) any breach
of any representation or warranty made by the Company in Section 3 of this
Agreement (b) any breach of any covenant, agreement or obligation of the Company
contained in Section 4 of this Agreement or (c) any cause of action, suit or
claim brought against such Indemnitee and arising out of or resulting from the
execution, delivery, performance, breach or enforcement of this Agreement by the
Company. To the extent that the foregoing undertaking by the Company is
unenforceable for any reason, the Company will make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law.

                                   ARTICLE 8

                                   DEFINITIONS

         8.1 "BYLAWS" has the meaning set forth in Section 3.3.

         8.2 "CERTIFICATE OF INCORPORATION" has the meaning set forth in Section
3.3.

         8.3 "CLOSING" has the meaning set forth in Section 1.3.

         8.4 "CLOSING DATE" has the meaning set forth in Section 1.3.

         8.5 "COMMON STOCK" means the common stock, par value $.01 per share, of
the Company.

         8.6 "COMPANY" means Epimmune Inc.

         8.7 "ENGAGEMENT LETTER" has the meaning set forth in Recital A.

         8.8 "ENVIRONMENTAL LAWS" has the meaning set forth in Section 3.10.

                                      19.
<PAGE>

         8.9  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         8.10 "INDEMNITEES" has the meaning set forth in Section 7.

         8.11 "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 7.

         8.12 "INTELLECTUAL PROPERTY" has the meaning set forth in Section 3.8.

         8.13 "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, assets or financial condition of the Company or (b)
the ability of the Company to perform its obligations pursuant to the
transactions contemplated by this Agreement.

         8.14 "NASD" has the meaning set forth in Section 3.2.

         8.15 "NASDAQ" means the Nasdaq National Market.

         8.16 "OFFERING" has the meaning set forth in Recital A.

         8.17 "PENALTY PERIOD" has the meaning set forth in Section 6.4.

         8.18 "PLACEMENT AGENT" has the meaning set forth in Section 2.11(a).

         8.19 "PURCHASERS" mean the Purchasers whose names are set forth on the
signature pages of this Agreement, and their permitted transferees.

         8.20 "PURCHASE PRICE" has the meaning set forth in Section 1.1.

         8.21 "REGISTRATION DEFAULT" has the meaning set forth in Section 6.4.

         8.22 "REGULATION D" means Regulation D as promulgated under by the SEC
under the Securities Act.

         8.23 "RULE 144" means Rule 144 promulgated under the Securities Act, or
any successor rule.

         8.24 "SEC" means the United States Securities and Exchange Commission.

         8.25 "SEC DOCUMENTS" has the meaning set forth in Section 3.6.

         8.26 "SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute.

         8.27 "SHARES" has the meaning set forth in Section 1.1.

         8.28 "TO THE COMPANY'S KNOWLEDGE" and variations thereon mean to the
actual knowledge of Dr. Emile Loria and Bob De Vaere.

         8.29 "UNITS" has the meaning set forth in Section 1.1.

                                      20.
<PAGE>

         8.30 "WARRANT SHARES" has the meaning set forth in Section 3.4.

         8.31 "WARRANTS" has the meaning set forth in Section 1.1.

                                    ARTICLE 9

                          GOVERNING LAW; MISCELLANEOUS

         9.1 GOVERNING LAW; JURISDICTION. This Agreement will be governed by and
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States federal and state courts
located in the County of San Diego, State of California with respect to any
dispute arising under this Agreement or the transactions contemplated hereby or
thereby.

         9.2 COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in two or more counterparts, all of which are considered one and the
same agreement and will become effective when counterparts have been signed by
each party and delivered to the other parties. This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.

         9.3 HEADINGS. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.

         9.4 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law will
not affect the validity or enforceability of any other provision hereof.

         9.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including all
schedules and exhibits hereto) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein or therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.

         9.6 NOTICES. Any notices required or permitted to be given under the
terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) and will be effective five days after being placed
in the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally, or by courier (including a recognized overnight delivery service),
in each case addressed to a party. The addresses for such communications are:

                                      21.
<PAGE>

         If to the Company:            Epimmune Inc.
                                       5820 Nancy Ridge Drive, Suite 100
                                       San Diego, CA 92121
                                       Attn:  Chief Financial Officer

         With a copy to:               Cooley Godward LLP
                                       4401 Eastgate Mall
                                       San Diego, CA 92121
                                       Attn:  L. Kay Chandler, Esq.

         If to a Purchaser: To the address set forth immediately below such
Purchaser's name on the signature pages hereto. Each party will provide written
notice to the other parties of any change in its address.

         9.7 SUCCESSORS AND ASSIGNS. This Agreement is binding upon and inures
to the benefit of the parties and their successors and assigns. The Company will
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Purchasers, and no Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company.

         9.8 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto, their respective permitted successors and assigns
and Jefferies, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

         9.9 FURTHER ASSURANCES. Each party will do and perform, or cause to be
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

         9.10 NO STRICT CONSTRUCTION. The language used in this Agreement is
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.

         9.11 EQUITABLE RELIEF. The Company recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement, any remedy at
law may prove to be inadequate relief to the Purchasers. The Company therefore
agrees that the Purchasers are entitled to seek temporary and permanent
injunctive relief in any such case. Each Purchaser also recognizes that, if it
fails to perform or discharge any of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Company. Each Purchaser
therefore agrees that the Company is entitled to seek temporary and permanent
injunctive relief in any such case.

                                      22.
<PAGE>

         IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.

                                    EPIMMUNE INC.

                                    By: /s/ Robert De Vaere
                                        ----------------------------------------

                                    Name: Robert De Vaere

                                    Title: Vice President, Finance & Admin., CFO

                                    Address:   5820 Nancy Ridge Drive, Suite 100
                                               San Diego, CA 92121
                                               Facsimile: (858) 860-2600

                            UNIT PURCHASE AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                    PURCHASER

                                    ____________________________________________
                                           (investor name)

                                    By: ________________________________________
                                           (signature)

                                    ____________________________________________
                                           (print name and title)

                                    Address: ___________________________________

                                             ___________________________________

                                             ___________________________________

                            UNIT PURCHASE AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                    EXHIBIT A

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
                                                                           AGGREGATE PURCHASE
          PURCHASER                            SHARES         WARRANTS           PRICE
---------------------------------------------------------------------------------------------
<S>                                          <C>              <C>          <C>
The Animi Master Fund, Ltd.                    677,966         338,983       $1,499,999.78
Bluegrass Growth Fund LP                       225,988         112,994       $  499,998.45
Winton Capital                                 158,192          79,096       $  349,999.80
DKR SoundShore Oasis Holding Fund Ltd.         112,994          56,497       $  249,999.23
Iroquois Capital L.P.                          112,994          56,497       $  249,999.23
Vertical Ventures, LLC                         112,994          56,497       $  249,999.23
Cranshire Capital, L.P.                        112,994          56,497       $  249,999.23
Cougar Trading, LLC                             45,197          22,598       $   99,998.36
AS Capital Partners, LLC                        11,299           5,649       $   24,999.04
Nathaniel S. Thayer                             22,598          11,299       $   49,998.08
Greene Family Trust                             45,197          22,598       $   99,998.36
Peter A. Allard                                150,000          75,000       $  331,875.00
                                             ---------         -------       -------------
                  TOTAL                      1,788,413         894,205       $3,956,863.79
                                             ---------         -------       -------------
</TABLE>

<PAGE>

                                    EXHIBIT B

                                     WARRANT

                         [Filed as Exhibit 4.3 herein]

<PAGE>

                                    EXHIBIT C

                           WIRE TRANSFER INSTRUCTIONS

                            [Intentionally Omitted]

<PAGE>

                                    EXHIBIT D

                 ACCREDITED INVESTOR QUALIFICATION QUESTIONNAIRE

                            [Intentionally Omitted]

<PAGE>

                                    EXHIBIT E

                              FORM OF LEGAL OPINION

                            [Intentionally Omitted]

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