S-3

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As filed with the Securities and Exchange Commission on December [13], 2002

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933

THE IMMUNE RESPONSE CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	33-0255679 (I.R.S. Employer Identification No.)
5931 Darwin Court, Carlsbad, California 92008 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Michael L. Jeub
Chief Financial Officer and
Vice President of Finance
The Immune Response Corporation
5931 Darwin Court
Carlsbad, California 92008
(760) 431-7080

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:
P. Joseph Campisi, Jr., Esq.
Thomas E. Sparks, Jr., Esq.
Pillsbury Winthrop LLP
50 Fremont Street
San Francisco, California 94105
(415) 983-1000

Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective as determined by the selling security holders.

        If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box:    o

        If any of the securities on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:    ý

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box:    o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Security (1)	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Fee (2)
Class A Warrants	10,974,490	N/A	N/A	N/A (2)
Class B Warrants	10,974,490	N/A	N/A	N/A (2)
Common Stock, $0.0025 par value	33,342,470 (3)(4)	$1.09	$36,343,292.30	$3,343.58

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) based upon the average of the high and low sales prices of our common stock, as reported on the Nasdaq SmallCap Market, on December 12, 2002

(2)

In accordance with Rule 457(g) under the Securities Act, no separate registration fee is payable in respect of the warrants.

(3)

Includes the resale of shares of common stock which are issuable upon the exercise of the Class A warrants (and the Class B warrants upon exercise of the Class A warrants).

(4)

In accordance with Rule 416 under the Securities Act, we are also registering an indeterminate number of additional shares of common stock and other securities which may be issued from time to time in accordance with the adjustment provisions of the warrants.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

PRELIMINARY PROSPECTUS            Subject to completion, December 13, 2002

The information in this prospectus is not complete and may be changed. The security holders identified in this prospectus may not sell these securities until this registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

THE IMMUNE RESPONSE CORPORATION

33,342,470 Shares of Common Stock
10,974,490 Class A Warrants
10,974,490 Class B Warrants

This prospectus relates to the public offer for resale by certain of our security holders of up to (i) 9,522,071 issued shares of our common stock, (ii) 9,522,071 Class A warrants, (iii) 9,522,071 Class B warrants, (iv) 9,522,071 shares of our common stock underlying the Class A warrants and (v) 9,522,071 shares of our common stock underlying the Class B warrants. This offer is not being underwritten. We will not receive any of the proceeds from sales by the selling security holders of common stock and warrants. These security holders acquired 9,522,071 shares of common stock and the Class A warrants directly from us in a private placement of units completed on December 10, 2002. Each Class A warrant may be exercised to purchase initially one share of our common stock and one Class B warrant, at an aggregate price of $1.33. Each Class B warrant may be exercised to purchase initially one share of our common stock at a price of $1.77. Unless exercised, the warrants will expire five years after their respective dates of issuance. The Class A and Class B warrants are described more fully under "Description of the Warrants and the Warrant Agreement" on page 28.

This prospectus also relates to the public offer for resale by our placement agent of (i) 1,452,419 shares of our common stock, (ii) 1,452,419 Class A warrants, (iii) 1,452,419 shares of our common stock underlying the Class A warrants, (iv) 1,452,419 Class B warrants and (v) 1,452,419 shares of our common stock underlying our Class B warrants. Such shares, Class A warrants and Class B warrants are being registered pursuant to an option issued to our placement agent in connection with our private placement of units.

Additionally, this prospectus relates to the public offer for resale by Trinity Medical Group USA, Inc. of 500,000 shares of our common stock issued in connection with an amendment to certain of our agreements with Trinity.

We will not receive any net proceeds from the resale of shares of our common stock, Class A warrants, or Class B warrants. If the warrants are exercised by either the selling security holders or subsequent purchasers of the warrants, we will receive the net proceeds from such exercises. If an investor purchases from a selling security holder a Class A or Class B warrant other than through a private transaction, the shares of common stock and the Class B warrants, as the case may be, to be issued by us upon the exercise of such warrants are to be registered pursuant to a registration statement on Form S-1 (File No. 333-[            ]), which was filed with the Securities and Exchange Commission on December [    ], 2002. Neither the Class A nor the Class B warrants may be exercised by a public investor until the Form S-1 becomes effective.

Subject to the following paragraph, the selling security holders of the offered shares of common stock, Class A warrants, Class B warrants and shares of common stock underlying the warrants may offer to resell any such securities at any time or from time to time after the date of this prospectus.

The selling security holders of the offered securities may not, directly or indirectly, offer, sell, transfer, assign or otherwise dispose of any shares of common stock acquired by them in our December 2002 private placement of units, other than shares of common stock acquired by them from us upon the exercise of any of the warrants, until the date which is the earlier of (i) two hundred ten (210) days following the closing date of the private placement of units and (ii) ninety (90) days following the date the registration statement on Form S-1 has been declared effective by the Securities and Exchange Commission. The placement agent in the December 2002 private placement of units, Spencer Trask Ventures, Inc., may, in its sole discretion and upon written notice to such purchasers, permit the sale or other disposition of such shares of common stock prior to the expiration of such period; however, any such decision may be made only in respect of all (but not less than all) of the shares of common stock to which the resale restrictions apply.

For a description of the plan of distribution of the resale of securities, see page 44 of this prospectus.

Our common stock is quoted on The Nasdaq SmallCap Market under the symbol "IMNR." On December 12, 2002, the closing price of our common stock was $1.05 per share. The Class A and Class B warrants have been authorized for quotation on the Nasdaq SmallCap Market.

Investing in our common stock and warrants involves very significant risks. You should carefully consider the risks set forth under "Risk Factors" beginning on page 4 before investing in our common stock or our warrants.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is a part of a registration statement we filed with the Securities and Exchange Commission, the SEC. You should rely only on the information contained in this prospectus or incorporated herein by reference. We have not authorized anyone else to provide you with any additional or different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front page of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the resale securities.

We file annual, quarterly and special reports, proxy and information statements and other information with the SEC. You may inspect and copy our registration statement on Form S-3 of which this prospectus is a part (File No. 333-[            ]), as well as reports, proxy and information statements and other information filed by us, at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You can call the SEC at 1-800-732-0330 for information regarding the operation of its Public Reference Room. The SEC also maintains a World Wide Web site at http:\\www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants, like us, that file electronically.

The SEC allows us to "incorporate by reference" information in this prospectus and other information that we file with the SEC, which means that we can disclose important information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update, amend and/or replace this information. We incorporate by reference the documents listed below and any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until all of the securities that we have registered have been resold:

1.

[Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000;]*



2.

[Our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2002 and September 30, 2002, respectively;]*



3.

Our Proxy Statement for our Special Meeting of Stockholders, dated October 7, 2002;



4.

Our Current Reports on Form 8-K filed with the SEC on February 21, 2002, June 19, 2002, July 3, 2002, August 7, 2002 and September 10, 2002, respectively;



5.

The description of our common stock set forth in the registration statement on Form 8-A filed with the SEC on March 30, 1990;



6.

The description of our Preferred Stock Purchase Rights for Series E Participating Preferred Stock, par value $0.001, set forth in the registration statement on Form 8-A filed with the SEC on March 4, 1992, together with Amendments Nos. 1 and 2 on Form 8-A/A filed with the SEC on December 26, 2001 and February 21, 2002, respectively; and



7.

Our registration statement on Form S-8, dated November 7, 2002.

* Our independent auditor, BDO Seidman, LLP, is currently re-auditing the financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and BDO Seidman, LLP is also re-performing a review for our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002. Once the re-audit of the Annual Report and re-performance of the review of the Quarterly Report is complete we will restate the financial statements as necessary and incorporate them by reference in this prospectus.

If you make a request for this information in writing or by telephone, we will provide you, without charge, a copy of any or all of the information incorporated by reference in this registration statement

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of which this prospectus is a part. Requests for this information should be submitted in writing to: The Immune Response Corporation, 5931 Darwin Court, Carlsbad, California 92008 Attention: Secretary; or by calling us at (760) 431-7080.

FORWARD-LOOKING STATEMENTS

Specific statements contained in this registration statement are forward-looking statements. Such forward-looking statements can be identified by use of forward-looking terminology such as "believes," "expects," "may," "projects," "predicts," "intends," "will," "seeks," "should" and "anticipates," or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Although we believe these statements are based upon reasonable assumptions, no assurance can be given that the future results covered by the forward-looking statements will be achieved. Forward-looking statements are subject to risks, uncertainties and other factors that may be outside of our control or that are not presently known to us and that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. The more significant risks, uncertainties and other factors are discussed under the heading "RISK FACTORS" in this prospectus, and prospective investors are urged to consider these factors carefully and in their entirety. Further, any forward-looking statement speaks only as of the date on which it was made, and, subject to applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

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RISK FACTORS

You should carefully consider the risks and uncertainties described below before making an investment decision. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business and condition. If any of the following risks actually occur, our business and condition could be adversely affected. In those cases, the trading price of our common stock could decline, and you may lose all or part of your investment.

Our Current Cash Position, Additional Financing Requirements and Limited Access to Financing Will Adversely Affect Our Ability to Develop Products and Continue Operations

In addition to the funds we received from our private placement of units in December 2002, we will need to raise additional funds to continue our operations and to conduct research and development, preclinical studies and clinical trials necessary to bring our potential products to market and to establish manufacturing and marketing capabilities. We anticipate beginning new clinical studies in North America and/or Europe in 2003. A failure to raise substantial additional funds would require us to scale back or eliminate some or all of our research and development programs or license to third parties products or technologies that we would otherwise seek to develop ourselves and would cause us to cease operations, at which time we will not be able to satisfy our obligations.

As of September 30, 2002, we had net accumulated operating losses of approximately $245.9 million, cash and cash equivalents of only $1.1 million and negative working capital of approximately $4.8 million. Our current liabilities as of September 30, 2002 included approximately $3.6 million of short-term promissory notes issued to entities affiliated with and/or related to one of our directors, which were subsequently converted into convertible promissory notes pursuant to the stockholder approval we received on October 28, 2002 at our Special Meeting of Stockholders. The aggregate amount of promissory notes and accrued interest converted into a convertible promissory note and warrant on November 12, 2002 was approximately $4.8 million. Since September 30, 2002, we have issued an additional $615,000 in convertible promissory notes to Cheshire Associates, LLC, an affiliate and/or related party of one of our directors and our principal stockholder. The gross cash proceeds of $6.4 million from the private placement of units will be sufficient to fund our planned operations, excluding capital improvements and new clinical trial costs, for approximately four to five months following the closing date of the private placement of units. Because we do not anticipate generating any revenue from our products until at least the first quarter of 2004, if at all, we will continue to have negative cash flow and will need to raise substantial additional capital to fund our operations beyond such time. We may receive up to $29.4 million in gross proceeds upon exercise in full of the Class A and Class B warrants, which we expect will be sufficient to fund our planned operations, excluding capital improvements and new clinical trial costs, for an additional [18 to 20] months. However, there can be no assurance that any of the warrants will be exercised or when such exercise might occur.

Although we anticipate that development of REMUNE® will continue to represent a significant portion of our overall expenditures, costs related to the development of REMUNE® decreased in 2001. We expect our costs related to the development of REMUNE® to either increase in 2003 and 2004 in the event we are able to raise additional capital enabling us to pursue additional research and development projects, or to remain relatively the same if our financing efforts prove unsuccessful. Other anticipated costs relating to the development of REMUNE® will depend on many factors — in particular, a potential decrease in such costs associated with our ability to establish a new collaborative, strategic or marketing partner to replace Pfizer Inc., or Pfizer. See "— Pfizer has Terminated Its Collaboration with Us and We Have Had to Delay or Abandon the Continued Development and Commercialization of REMUNE®," "We May Be Unable to Enter Into Additional Collaborations or Maintain Existing Ones" and "Our Failure to Develop and Commercialize Products Successfully May Cause Us to Cease Operations."

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On September 9, 2002, we commenced the implementation of a cost reduction strategy to focus our core competencies on efforts related to the research, development, commercialization and production of REMUNE®. We anticipate that the cost reductions will impact our cash expenditures related to research, administrative and operational costs. In the process of implementing these cost reductions, we will incur one-time expenses related to severance, relocation of certain facilities and consulting payments. Excluding these one-time payments and any expansion of our research or manufacturing efforts, if all of our cost reductions are realized, we expect that these cost reductions will decrease our expenses significantly. However, we intend to increase our production capabilities at our King of Prussia, Pennsylvania, facility and this may necessitate additional cash and capital requirements for these activities. In addition, there can be no assurances that we will be successful in implementing all or any portion of these cost reduction measures or that we will recognize all or any portion of the anticipated savings.

The timing and amount of our future capital requirements will depend on many factors, including:

•

the cost of manufacturing scale-up;



•

the time and costs involved in obtaining regulatory approvals;



•

continued scientific progress in our research and development programs;



•

the scope and results of preclinical studies and clinical trials;



•

the costs involved in filing, prosecuting and enforcing patent claims;



•

competing technological and market developments;



•

effective commercialization activities and arrangements;



•

the costs of defending against and settling lawsuits; and



•

other factors not within our control or known to us.

Our access to capital could be limited if we do not progress in:

•

scaling up manufacturing;



•

obtaining regulatory approvals;



•

our research and development programs; or



•

our preclinical and clinical trials.

Such access also could be limited by (i) overall financial market conditions, (ii) applicable National Association of Securities Dealers, or NASD, rules and federal and state securities laws, (iii) the collateralization by a perfected security interest in our intellectual property in respect of the aggregate [$13.7 million] in convertible notes issued in November 2001 and February, May, July and November 2002 to affiliates and/or related parties of Mr. Kevin Kimberlin, one of our directors and our principal stockholder, (iv) our obligations to Transamerica Technology Finance Corporation, successor in interest to Transamerica Business Credit Corporation, or Transamerica, of approximately $1.0 million, (v) the effect of the exercise of certain outstanding options and warrants exercisable into [10,646,346] shares of common stock, (vi) the effect of the conversion of the November 2001 and February, May, July and November 2002 convertible notes into [                    ] shares of common stock, (vii) the issuance of 9,522,071 shares of common stock and 9,522,071 Class A warrants to the selling security holders in our private placement of units, and (viii) the issuance of the placement agent option to Spencer Track Ventures, Inc. which is exercisable for 1,452,419 shares of common stock and 1,452,419 Class A warrants.

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In June 2002, we restructured our equipment loans with Transamerica. As a result of the restructuring, we cured our then existing default under those loans and limited the circumstances which could serve as the basis for any future default by us. Pursuant to the agreements signed with Transamerica, we paid to Transamerica $200,000 and are obligated to pay Transamerica the following milestone payments:

(i) $200,000 when the aggregate net proceeds of any exercises of the Class A warrants equals or is greater than $300,000; and

(ii) $200,000 when the aggregate net proceeds of any exercises of the Class B warrants equals or is greater than $300,000.

Although these payments would reduce our existing Transamerica debt, we also remain obligated to make our scheduled debt payments of $72,801 per month to Transamerica until the total aggregate amount of the debt and interest has been paid in full. Additionally, we granted to Transamerica a security interest in certain of our assets, including a subordinated interest in our intellectual property.

There can be no assurance, however, that we will not in the future be in default under our equipment loans with Transamerica and that Transamerica would not exercise its right to accelerate our debt and foreclose on some of our office and laboratory equipment and intellectual property. If this were to occur, it could result in a default under certain of our other debt instruments and would have a material adverse effect on us and would result in us having to cease operations and being unable to satisfy our obligations.

You Could Suffer Substantial Dilution of Your Investment as a Result of Proposed Subsequent Financings

Although we have completed the private placement of units, we currently are actively considering raising additional funds. We hope to raise gross proceeds of approximately $10.0 million through a subsequent offering. However, there can be no assurance that a subsequent offering will occur or, if it does occur, that it will occur in the near future or that it will result in raising additional funds. Any subsequent offering may require the creation or issuance of a class or series of stock that by its terms ranks senior to the common stock with respect to rights relating to dividends and/or liquidation. If we are unable to raise funds on terms favorable to our then existing shareholders, your ownership interest and the value of your investment may be significantly diluted.

We do not expect to receive proceeds from product revenues sooner than the first quarter of 2004, if at all. Notwithstanding our current financing efforts, we will continue to have negative cash flow and will need to raise substantial additional capital to fund our operations beyond such time. We may be able to secure financing only on terms substantially less favorable to our current investors and to us, if at all. If we raise funds through equity arrangements, further dilution to stockholders will result. If we are unable to obtain financing before we generate enough revenue from our products to become cash flow break-even, we will be unable to pay our debts and will be forced to cease operations and potentially enter into bankruptcy.

You Could Suffer Substantial Dilution of Your Investment as the Result of Adjustments to the Convertible Notes, Warrants and Other Securities Issued in November 2001, February 2002, May 2002, July 2002 and November 2002

In November 2001, we issued to Kevin Kimberlin Partners LLP, or KKP, a $2.0 million convertible note and a warrant, each of which were initially convertible and exercisable, respectively, for 433,426 shares of common stock. In February 2002, we issued to Oshkim Limited Partnership, or Oshkim, a $2.0 million convertible note and a warrant, each of which were initially convertible and exercisable, respectively, for 429,000 shares of common stock, pursuant to the note purchase agreement. In May 2002, we issued to Oshkim a $4.0 million convertible note and a warrant, each of which were initially convertible and exercisable, respectively, for 2,319,109 shares of common stock. Such notes

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were issued pursuant to a note purchase agreement, dated November 11, 2001. The numbers of shares, as well as the applicable conversion or exercise price, as the case may be, are subject to weighted average antidilution adjustment in the event that we issue certain securities (including certain securities issued to affiliates and/or related parties of Mr. Kimberlin) below the applicable conversion or exercise price and in certain other events. This would dilute your interest in us.

In June 2002, we issued to Oshkim a $1.0 million convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 523,451 shares of common stock. Additionally, on July 11, 2002, we issued to The Kimberlin Family 1998 Irrevocable Trust, or the Kimberlin Trust, a $566,638 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 354,858 shares of common stock. On July 30, 2002, we issued to the Kimberlin Trust a $637,189 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 430,068 shares of common stock. Each of the notes and warrants was subsequently contributed by the initial holder to Cheshire Associates LLC, or Cheshire Associates. On November 12, 2002, we issued to Cheshire Associates a $4,847,607.84 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 4,243,354 shares of common stock. On November 15, 2002, we issued to Cheshire Associates a $200,000 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 174,581 shares of common stock. On November 20, 2002, we issued to Cheshire Associates a $200,000 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 184,638 shares of common stock. On November 27, 2002, we issued to Cheshire Associates a $215,000 convertible note and a warrant, each of which is initially convertible and exercisable, respectively, for 264,518 shares of common stock.

In conjunction with our private placement of units, $2.0 million of principal and interest on the June and July notes and related warrants have been converted by Cheshire Associates into 20 units. The convertible note and warrant issued to the Kimberlin Trust on July 30, 2002 and contributed to Cheshire has been reduced to [$278,320] as a result of the $2.0 million conversion and this remaining balance will continue to accrue interest from and after December 10, 2002 until the date of repayment or conversion. Following the close of the unit offering, the number of shares and applicable conversion and exercise price of the convertible notes and warrants issued to Oshkim, KKP, the Kimberlin Trust and Cheshire, respectively, were adjusted pursuant to their weighted average anti-dilution provisions for the unit offering as well as for the conversion of the equity underlying the converted notes. Consequently, the number of shares of common stock issuable upon conversion of the outstanding convertible notes has decreased to 9,474,460 and the number of shares of common stock issuable upon the exercise of the respective warrants has been decreased to 11,518,343 shares. Such number of shares, as well as the applicable conversion or exercise price, as the case may be, are subject to adjustment in the event that we issue certain securities (including certain securities issued to affiliates or related parties of Mr. Kimberlin) below the applicable conversion or exercise price and in certain other events. This also may dilute your interest in us.

On June 26, 2002, we entered into an agreement with Trinity Medical Group USA, Inc. and its affiliate, Trinity Medical Group, Co. Ltd., a Thailand company, collectively Trinity, to amend certain of our existing agreements with Trinity. In consideration for entering into these amendments, Trinity has received 1.0 million shares of our common stock and also will receive as additional consideration, 250,000 shares of our common stock (750,000 shares in the aggregate) as of the date of the satisfaction by Trinity of each of the following obligations: (i) the purchase by Trinity from us of an aggregate of 300,000 doses of REMUNE®, (ii) the purchase by Trinity from us of an aggregate of 600,000 doses of REMUNE® and (iii) the purchase by Trinity from us of an aggregate of 1.0 million doses of REMUNE®. Under the current agreement, Trinity also is obligated to purchase 500,000 shares of common stock at a purchase price of $10 per share on the date that is 30 days after the date on which Trinity receives the required marketing approval from the Food and Drug Administration of the Ministry of the Public Health of Thailand. The issuance by us to Trinity of these 2,250,000 shares of common stock, and the

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granting by us to Trinity of certain registration rights relating to such shares, will dilute your interest in us. On August 13, 2002, we informed Trinity that it was our intent to register 500,000 restricted shares of common stock, held in the name of Trinity, through the filing of the registration statement of which this prospectus forms a part. We are contemplating a renegotiation of our Licence and Collaboration Agreement with Trinity. However, we have not yet entered into any significant discussions with Trinity regarding such renegotiation.

We may in the future issue additional convertible notes, warrants or other securities. We are anticipating a subsequent offering which we plan to commence in the near future if the Class A warrants are not exercised. The number of underlying shares of common stock and the terms of the securities are not determinable at this time, but would dilute your interest in us.

You Could Suffer Substantial Dilution of Your Investment if Certain Warrants and Options to Purchase Common Stock are Exercised or Our Convertible Notes are Converted into Common Stock

As of [December 10], 2002, we had reserved [520,579] shares of our common stock for potential issuance upon the exercise of stock options or purchases under the employee stock purchase plan. Issuance of any of these additional shares could substantially dilute your interest in us. Furthermore, we have warrants outstanding which, if exercised, will purchase approximately [4,502,412] shares of our common stock and [9,609,000] shares which are issuable upon conversion of our outstanding convertible notes. In addition, we may issue up to 750,000 shares of our common stock to Trinity pursuant to our License and Collaboration Agreement. See also "— You Could Suffer Substantial Dilution of Your Investment as the Result of Adjustments to the Convertible Notes, Warrants and Other Securities Issued in November 2001, February 2002, May 2002, June 2002, July 2002 and November 2002 or if We Issue Additional Securities in the Future."

Our History of Operating Losses and Our Expectation of Significant Continuing Losses May Hurt Our Ability to Continue Operations and as a Going Concern

As of September 30, 2002, we had a consolidated accumulated deficit of $245.9 million. We have not generated revenues from the commercialization of any product. We expect to continue to incur substantial net operating losses over the next several years, which would imperil our ability to continue operations. We may not be able to generate sufficient product revenue to become profitable on a sustained basis, or at all, and do not expect to generate product revenue before the first quarter of 2004, if at all. We have operating and liquidity concerns due to our significant net losses and negative cash flows from operations. As a result of these and other factors, our previous independent auditors, Arthur Andersen LLP, indicated that there is substantial doubt about our ability to continue as a going concern.

Our Stock May Become Delisted and Subject to Penny Stock Rules, Which May Make it More Difficult for You to Sell Your Shares

On March 12, 2002, our common stock commenced trading below $1.00 per share on The Nasdaq National Market. The National Association of Securities Dealers Automated Quotation System, or Nasdaq, listing rules provide that if the closing bid price of a company's stock is below $1.00 for more than 30 consecutive trading days, the company faces possible delisting from Nasdaq. Additionally, Nasdaq listing rules require that a company's stockholder equity be at least $4.0 million, and after October 2002, be at least $10.0 million. Due to our common stock trading below $1.00 per share for more than 30 consecutive days, as of April 23, 2002, we received notification from Nasdaq that our common stock would be delisted from The Nasdaq National Market if we could not demonstrate compliance with the NASD rule by July 24, 2002.

On September 4, 2002, the NASD approved our application to transfer our common stock to The Nasdaq SmallCap Market and consequently extended, until October 22, 2002, the period for us to

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comply with the minimum $1.00 bid per share requirement. Our common stock was moved to The Nasdaq SmallCap Market, effective September 9, 2002. On September 29, 2002, we submitted to Nasdaq a request to grant us an additional 180 calendar-day grace period to demonstrate compliance with Nasdaq continued listing requirements. On October 24, 2002, Nasdaq granted us the 180 day extension or until April 21, 2003. Subsequently, Nasdaq has informed us that we now meet the listing requirements. See "— We Recently Implemented a 1-for-4 Reverse Stock Split. The Effect of a Reverse Split on the Trading Price of Our Common Stock is Unpredictable."

The transfer of our common stock to The Nasdaq SmallCap Market may adversely affect the liquidity and trading volume of our common stock and reduce the number of market makers willing to trade in our common stock, making it more likely that wider fluctuations in the quoted price of our common stock will occur. As a result, there is a risk that holders of our common stock will not be able to obtain accurate price quotes or be able to correctly assess the market price of our common stock. Increases in volatility also could make it more difficult to pledge shares of our common stock as collateral, if holders sought to do so, because a lender also might be unable to accurately value our common stock.

If we are delisted from the Nasdaq for any reason, our common stock will be considered a penny stock under regulations of the SEC and therefore would be subject to rules that impose additional sales practice requirements on broker-dealers who buy and sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the common stock and warrants and your ability to sell our securities in the secondary market. We cannot assure you that we will be able to maintain our listing on the Nasdaq. This also would limit our ability to raise additional financing.

We Recently Implemented a 1-for-4 Reverse Stock Split. The Effect of a Reverse Split on the Trading Price of Our Common Stock is Unpredictable

At our Annual Meeting of Stockholders held on June 17, 2002, our stockholders granted to our Board of Directors the discretion to effect a 1-for-4 reverse stock split. On October 9, 2002, we announced that our Board of Directors had formally declared a 1-for-4 reverse stock split of issued and outstanding shares of our common stock effective as of the open of trading on October 9, 2002. Although the theoretical effect of a reverse stock split is to increase the per share price of common stock, the actual price effect of a reverse stock split is difficult to predict. There is historical evidence and academic research relating to reverse stock splits which indicates that shares of listed companies do not perform well subsequent to a reverse stock split. It is possible that the post-split trading price of our stock could fall below the level one would expect based on the proportional effect of the split alone. As of December 10, 2002, the price of our common stock has decreased approximately 3% from the reverse stock split adjusted closing price on October 8, 2002.

An Existing Stockholder Directly Owns Approximately [14.1%] of Our Common Stock and has the Rights to Acquire an Additional [26,266,056] Shares, of Our Common Stock Which Could Result in Ownership of up to Approximately [63.3%] of Our Outstanding Shares and Could Allow him to Influence Stockholder Votes

Kevin Kimberlin, a member of our Board of Directors, and his affiliates and/or related parties currently own of record approximately [14.1] of our outstanding shares of common stock and have the right to acquire through the conversion of notes and exercise of warrants beneficially owned by them [26,266,056] additional shares. If the notes and warrants were to be converted and exercised, Mr. Kimberlin and his affiliates and/or related parties would own approximately [63.3] of our outstanding shares of common stock on a post-conversion/exercised basis. As a result of his ownership of our common stock and the ability to acquire additional shares, Mr. Kimberlin and his affiliates and/or related persons could have the ability to control substantially all matters requiring approval by

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our stockholders, including the election of directors and the approval of mergers or other business combination transactions. If your interests as a stockholder are different from his interests, you may not agree with his decisions and you might be adversely affected thereby.

Mr. Kimberlin, in addition to being one of our directors and our principal stockholder, is the controlling stockholder of Spencer Trask & Co., which in turn is the parent company of Spencer Trask Ventures, Inc., which acted as exclusive placement agent for the private placement of units.

The Warrant Terms Were Arbitrarily Determined

The exercise and redemption prices and other terms of the Class A and Class B warrants sold as part of our private offering completed on December 10, 2002, were determined by negotiations between the company and our placement agent and do not necessarily bear any relationship to our assets, book value, revenues or financial condition, or to any other recognized criterion of value. Such prices and other terms of the warrants should not be construed to indicate or predict future trading prices of our warrants or common stock in the public markets.

Limits on Ability to Exercise the Warrants; Adverse Effects May Result from the Possible Redemption of the Warrants

Purchasers of the warrants will be able to exercise the warrants only if a current prospectus relating to the securities underlying the warrants is then in effect under the Securities Act and the warrants are qualified for sale or exempt from qualification under the applicable securities or "blue sky" laws of the states in which the various holders of the warrants then reside. Although we have agreed to make certain efforts to maintain the effectiveness of a current prospectus covering the securities underlying the warrants, there can be no assurance that we will be able to do so. The value of the warrants may be greatly reduced if a current prospectus covering the securities to be issued upon the exercise of the warrants is not kept effective under the Securities Act or if such securities are not qualified or exempt from qualification in the states in which the holders of the warrants then reside.

Subsequent purchasers of the Class A and Class B warrants may not exercise the warrants until the registration statement on Form S-1 is declared effective by the SEC. We cannot assure you when or if the SEC will declare the Form S-1 effective and, if it is not, the warrants may never be exercisable.

In addition, the warrants are subject to redemption by us, at a price of $0.01 per warrant, following the effectiveness of the Form S-1 and upon at least 30 days prior written notice to the holders of the warrants if the average of the closing bid prices of common stock for any 10 consecutive trading days ending within 30 days prior to the date of the notice of redemption is greater than or equal to $2.49, in the case of the redemption of the Class A warrants, and $3.32, in the case of the redemption of the Class B warrants. If the warrants are redeemed, holders of warrants will lose their right to exercise the warrants, except during such 30-day notice of redemption period. Upon the receipt of a notice of redemption of the warrants, the holders would be required to: exercise the warrants and pay the exercise price at a time when it may be disadvantageous or difficult for them to do so; sell the warrants at the then market price when they might otherwise wish to hold the warrants; or accept the redemption price, which is equal to $0.01 per warrant.

Legal Proceedings Could Require Us to Spend Substantial Amounts of Money and Impair Our Operations

Since July 2001, several complaints have been filed in the United States District Court for the Southern District of California seeking an unspecified amount of damages on behalf of an alleged class of persons, who purchased shares of our common stock at various times between May 17, 1999 and July 6, 2001. The various complaints name us, one of our directors, one of our officers, Agouron Pharmaceuticals, Inc., or Agouron, and one of its officers, as defendants. The complaints allege that

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we, Agouron and/or such officers violated federal securities laws by misrepresenting and failing to disclose certain information about the results of clinical trials of REMUNE®. The complaints have been consolidated into a single action under the name In re Immune Response Securities Litigation by order of the Court. We have not yet formally responded to the complaints. Although we intend to vigorously defend the actions, we can not now predict or determine the outcome or resolution of these proceedings, or to estimate the amounts of, or potential range of, loss with respect to these proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. The range of possible resolutions of these proceedings could include judgments against us or our officers or settlements that could require substantial payments by us, which could have a material adverse impact on our financial position, results of operations and cash flows. These proceedings also might require substantial attention of our management team and therefore divert their time and attention from our business and operations.

The Annual Use of Our Net Operating Losses Will Be Limited As a Result in a Change of Our Ownership

While the issue is not free from doubt, the issuance of notes and warrants in November 2001, February 2002, May 2002, July 2002 and November 2002 would not result in a change of ownership of us as defined by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code. The issuance of shares of common stock upon the respective conversion and exercise of such notes and warrants would, however, almost certainly cause a change in our ownership at the time of such issuance. Pursuant to Sections 382 and 383 of the Code, the annual use of our net operating losses, or NOLs would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g)of the Code) of greater than 50% in the past three years. If a Section 382 ownership change occurs, there would be a substantial limitation on our ability to utilize our NOLs to offset future taxable income. As reported in our Form 10-K for the year ended December 31, 2001, we had approximately $192.9 million of NOL carryforwards at such time. We cannot assure you, however, that we will generate taxable income in the future against which the NOLs could be applied.

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Pfizer has Terminated Its Collaboration with Us and We Have Had To Delay or Abandon the Continued Development and Commercialization of REMUNE®

We received in July, 2001, a letter from Pfizer which indicated that Pfizer had elected to immediately terminate, in their entirety, all of its rights and obligations under our agreement with them. Our agreement with Pfizer permitted this termination and the letter we received from Pfizer provided no explanation as to why Pfizer had elected to exercise its termination right. In addition, no explanation has been provided to us by Pfizer at any time after the July, 2001 termination letter. Although we retained all rights relating to REMUNE® upon Pfizer's termination, we lost a significant source of funding. Following the termination of our agreement with Pfizer, we decided not to proceed with one of our clinical trials of REMUNE® developed by Agouron (subsequently acquired by Pfizer). The termination of this agreement has had, and may continue to have, a material adverse effect on our stock price and, consequently, our ability to successfully raise additional capital has been adversely affected.

We May Be Unable to Enter Into Additional Collaborations or Maintain Existing Ones

We are seeking additional collaborative arrangements to develop and commercialize our products. We may not be able to negotiate collaborative arrangements on favorable terms, or at all, in the future and our current or future collaborative arrangements may not be successful or continue. We also are contemplating a renegotiation of our License and Collaboration Agreement with Trinity. However, we have not yet entered into any significant discussions with Trinity regarding such renegotiation.

Cheshire Associates (an affiliate and/or related person of Mr. Kimberlin) has a perfected security interest in our intellectual property as collateral for the November 2001, February 2002, May 2002, July 2002 and November 2002 convertible notes. Pursuant to an agreement with Cheshire Associates, we must comply with certain covenants with respect to our intellectual property. Additionally, Transamerica has a subordinated security interest in our intellectual property. The security interests and covenants could impair our ability to enter into collaborative and licensing arrangements. Without funding arrangements, we would have to abandon some of our products under development.

Our Failure to Develop and Commercialize Products Successfully May Cause Us to Cease Operations

We have not completed the development of any product. Our failure to develop and commercialize products successfully may cause us to cease operations. Our potential therapies under development will require significant additional research and development efforts and regulatory approvals prior to potential commercialization.

The discontinuation in May 1999 of a previous Phase III trial of REMUNE® due to an inability to meet certain primary clinical endpoints has had a material adverse effect on us. The most recent pivotal trial of REMUNE® conducted by our former collaborative partner, Pfizer, was discontinued by us. We cannot assure you that any future trials of REMUNE® will be conducted. Furthermore, we cannot guarantee that we, or our corporate collaborators, if any, will ever obtain any regulatory approvals of REMUNE®. We currently are focusing our core competencies on REMUNE® although there can be no assurance that we will be successful in doing so.

Our other therapies and technologies are at earlier stages of development than REMUNE® and may not be shown to be safe or effective and may never receive regulatory approval. Some of our technologies have not yet been tested in humans. Regulatory authorities may not permit human testing of potential products based on these technologies. Even if human testing is permitted, the products based on these technologies may not be successfully developed or shown to be safe and effective.

The results of our preclinical studies and clinical trials may not be indicative of future clinical trial results. A commitment of substantial resources to conduct time-consuming research, preclinical studies

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and clinical trials will be required if we are to develop any products. Delays in planned patient enrollment in our clinical trials may result in increased costs, program delays or both. None of our potential products may prove to be safe and effective in clinical trials. Approval of the Food and Drug Administration, the FDA, or other regulatory approvals, including export license permissions, may not be obtained and even if successfully developed and approved, our products may not achieve market acceptance. Any products resulting from our programs may not be successfully developed or commercially available for a number of years, if at all.

Moreover, unacceptable toxicity or side effects could occur at any time in the course of human clinical trials or, if any products are successfully developed and approved for marketing, during commercial use of our products. Although preliminary research and clinical evidence has shown REMUNE® to be safe, the appearance of any unacceptable toxicity or side effects could interrupt, limit, delay or abort the development of any of our products or, if previously approved, necessitate their withdrawal from the market.

Our Patents and Proprietary Technology May Not Be Enforceable and the Patents and Proprietary Technology of Others May Prevent Us from Commercializing Products

We have a portfolio of 173 patents worldwide. Although we believe these patents to be protected and enforceable, the failure to obtain meaningful patent protection for our potential products and processes would greatly diminish the value of our potential products and processes.

Cheshire Associates, an affiliate of Mr. Kimberlin, has a perfected security interest in our intellectual property as collateral for the November 2001, February 2002, May 2002, June 2002, July 2002 and November 2002 convertible notes. Furthermore, Transamerica has a perfected subordinated security interest in substantially all of our intellectual property as collateral for our equipment loans with Transamerica.

In addition, whether or not our patents are issued, or issued with limited coverage, others may receive patents, which contain claims applicable to our products. Patents we are not aware of may adversely affect our ability to develop and commercialize products. Also, our patents related to HIV therapy have expiration dates that range from 2010 to 2015 and our patents related to autoimmune diseases have expiration dates that range from 2010 to 2018. The limited duration of our patents could diminish the value of our potential products and processes.

The patent positions of biotechnology and pharmaceutical companies are often highly uncertain and involve complex legal and factual questions. Therefore, the breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. We also rely upon non-patented trade secrets and know how, and others may independently develop substantially equivalent trade secrets or know how. We also rely on protecting our proprietary technology in part through confidentiality agreements with our current and former corporate collaborators, employees, consultants and certain contractors. These agreements may be breached, and we may not have adequate remedies for any such breaches. In addition, our trade secrets may otherwise become known or independently discovered by our competitors. Litigation may be necessary to defend against claims of infringement, to enforce our patents or to protect trade secrets. Litigation could result in substantial costs and diversion of management efforts regardless of the results of the litigation. An adverse result in litigation could subject us to significant liabilities to third parties, require disputed rights to be licensed or require us to cease using certain technologies.

Our products and processes may infringe, or be found to infringe, on patents not owned or controlled by us. If relevant claims of third-party patents are upheld as valid and enforceable, we could be prevented from practicing the subject matter claimed in the patents, or would be required to obtain licenses or redesign our products or processes to avoid infringement.

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The Lengthy Product Approval Process and Uncertainty of Government Regulatory Requirements May Delay or Prevent Us From Commercializing Products

Clinical testing, manufacture, promotion, export and sale of our products are subject to extensive regulation by numerous governmental authorities in the United States, principally the FDA, and corresponding state and foreign regulatory agencies, including those in Thailand. This regulation may delay or prevent us from commercializing products. Non-compliance with applicable requirements can result in, among other things, fines, injunctions, seizure or recall of products, total or partial suspension of product manufacturing and marketing, failure of the government to grant premarket approval, withdrawal of marketing approvals and criminal prosecution.

The regulatory process for new therapeutic drug products, including the required preclinical studies and clinical testing, is lengthy and expensive. We may not receive necessary FDA clearances for any of our potential products in a timely manner, or at all. The length of the clinical trial process and the number of patients the FDA will require to be enrolled in the clinical trials in order to establish the safety and efficacy of our products is uncertain.

Even if additional clinical trials of REMUNE® are initiated and successfully completed, the FDA may not approve REMUNE® for commercial sale. We may encounter significant delays or excessive costs in our efforts to secure necessary approvals. Regulatory requirements are evolving and uncertain. Future United States or foreign legislative or administrative acts could also prevent or delay regulatory approval of our products. We may not be able to obtain the necessary approvals for clinical trials, manufacturing or marketing of any of our products under development. Even if commercial regulatory approvals are obtained, they may include significant limitations on the indicated uses for which a product may be marketed.

In addition, a marketed product is subject to continual FDA review. Later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market, as well as possible civil or criminal sanctions.

Among the other requirements for regulatory approval is the requirement that prospective manufacturers conform to the FDA's Good Manufacturing Practices, or GMP, requirements. In complying with the FDA's GMP requirements, manufacturers must continue to expend time, money and effort in production, record keeping and quality control to assure that products meet applicable specifications and other requirements. Failure to comply and maintain compliance with the FDA's GMP requirements subjects manufacturers to possible FDA regulatory action and as a result, may have a material adverse effect on us. We, or our contract manufacturers, if any, may not be able to maintain compliance with the FDA's GMP requirements on a continuing basis. Failure to maintain compliance could have a material adverse effect on us.

The FDA has not designated expanded access protocols for REMUNE® as "treatment" protocols. The FDA may not determine that REMUNE® meets all of the FDA's criteria for use of an investigational drug for treatment use. Even if REMUNE® is allowed for treatment use, third party payers may not provide reimbursement for the costs of treatment with REMUNE®. The FDA also may not consider REMUNE® or any other of our products under development to be appropriate candidates for accelerated approval, expedited review or fast track designation.

Marketing any drug products outside of the United States will subject us to numerous and varying foreign regulatory requirements governing the design and conduct of human clinical trials and marketing approval. Additionally, our ability to export drug candidates outside the United States on a commercial basis is subject to the receipt of export permission, which may not be available on a timely basis, if at all. Approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Foreign

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regulatory approval processes include all of the risks associated with obtaining FDA approval set forth above, and approval by the FDA does not ensure approval by the health authorities of any other country, including those in Thailand.

Specifically, in order for us to export REMUNE® to Thailand for clinical use in that country, we need to meet a number of regulatory requirements. One of those requirements is that we must ensure that we can manufacture REMUNE® at our United States manufacturing facility in a manner that is in "substantial compliance" with current United States GMP requirements. We must provide the FDA with "credible scientific evidence" that REMUNE® would be safe and effective under the conditions of proposed use in Thailand. Furthermore, the Food and Drug Administration of the Ministry of Public Health of Thailand must (i) formally request the FDA to approve export of REMUNE® to Thailand, (ii) certify to the FDA that it is aware that REMUNE® is not approved in the United States or in any of several other countries with comprehensive drug review and approval systems and (iii) concur that the scientific evidence presented to the FDA is "credible scientific evidence that REMUNE® will be reasonably safe and effective" for use in Thailand. There can be no assurance, however, that we will successfully meet any or all of these requirements for the export of REMUNE®, and if we are unable to successfully meet all regulatory requirements, we will not be permitted by the FDA to export REMUNE® to Thailand for clinical use, even if the Thai government were to approve REMUNE® for such use. There can be no assurance that Trinity will be successful in its capacity or efforts to obtain regulatory approval from the Food and Drug Administration of the Ministry of Public Health of Thailand.

Technological Change and Competition May Render Our Potential Products Obsolete

The pharmaceutical and biotechnology industries continue to undergo rapid change, and competition is intense and is expected to increase. Competitors may succeed in developing technologies and products that are more effective or affordable than any that we are developing or that would render our technology and products obsolete or noncompetitive. Many of our competitors have substantially greater experience, financial and technical resources and production, marketing and development capabilities than us. Accordingly, some of our competitors may succeed in obtaining regulatory approval for products more rapidly or effectively than us, or technologies and products that are more effective and affordable than any that we are developing.

Our Lack of Commercial Manufacturing and Marketing Experience May Prevent Us from Successfully Commercializing Products

We have not manufactured any of our products in commercial quantities. We may not successfully make the transition from manufacturing clinical trial quantities to commercial production quantities or be able to arrange for contract manufacturing and this could prevent us from commercializing products or limit our profitability from our products. Even if REMUNE® is successfully developed and receives FDA approval, we have not demonstrated the capability to manufacture REMUNE® in commercial quantities. Except for REMUNE®, we have not demonstrated the ability to manufacture in large-scale clinical quantities any of our treatments. We rely on a third party for the final inactivation step of the REMUNE® manufacturing process. If the existing manufacturing operations prove inadequate, there can be no assurance that any arrangement with a third party can be established on a timely basis or that we can establish other manufacturing capacity on a timely basis.

We have no experience in the sales, marketing and distribution of pharmaceutical or biotechnology products. Thus, our products may not be successfully commercialized even if they are developed and approved for commercialization.

The manufacturing process of our products involves a number of steps and requires compliance with stringent quality control specifications imposed by us and by the FDA. Moreover, our products can be manufactured only in a facility that has undergone a satisfactory inspection and certification by the

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FDA. For these reasons, we would not be able to quickly replace our manufacturing capacity if we were unable to use our manufacturing facilities as a result of a fire, natural disaster (including an earthquake), equipment failure or other difficulty, or if such facilities are deemed not in compliance with the GMP requirements, and the non-compliance could not be rapidly rectified. Our inability or reduced capacity to manufacture our products would prevent us from successfully commercializing our products.

We may enter into arrangements with contract manufacturing companies to expand our own production capacity in order to meet requirements for our products, or to attempt to improve manufacturing efficiency. If we choose to contract for manufacturing services, we may encounter costs, delays and/or other difficulties in producing, packaging and distributing our clinical trials and finished product. Further, contract manufacturers must also operate in compliance with the GMP requirements; failure to do so could result in, among other things, the disruption of our product supplies. Our potential dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our ability to develop and deliver products on a timely and competitive basis.

Our Other Therapies and Technologies Are at Earlier Stages of Development, Thus We are Dependent Upon the Success of REMUNE®

Our other therapies and technologies are at earlier stages of development than REMUNE® and may not be shown to be safe or effective. They might never be fully developed and if they are they might never receive regulatory approval. Thus, we are dependent upon the success of REMUNE®. We currently are focusing our core competencies on REMUNE® although there can be no assurance that we will be successful in doing so. Some of our technologies have not yet been tested on humans. Human testing of potential products based on these technologies may not be permitted by regulatory authorities. Even if human testing is permitted, the products based on these technologies may not be successfully developed or be shown to be safe and effective.

Adverse Determinations Concerning Product Pricing, Reimbursement and Related Matters Could Prevent Us from Successfully Commercializing Products

Our ability to earn sufficient revenue on our products will depend in part on the extent to which reimbursement for the costs of the products and related treatments will be available from government health administration authorities, private health coverage insurers, managed care organizations and other organizations. Failure to obtain appropriate reimbursement may prevent us from successfully commercializing products. Third party payers are increasingly challenging the prices of medical products and services. If purchasers or users of our products are not able to obtain adequate reimbursement for the cost of using the products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status of newly approved health care products and whether adequate third party coverage will be available.

Product Liability Exposure May Expose Us to Significant Liability

We face an inherent business risk of exposure to product liability and other claims and lawsuits in the event that the development or use of our technology or prospective products is alleged to have resulted in adverse effects. We may not be able to avoid significant liability exposure. We may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost. An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products. A product liability claim could hurt our financial performance. Even if we avoid liability exposure, significant costs could be incurred that could hurt our financial performance.

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Dr. Carlo has Resigned as Our Chief Executive Officer and We May be Unable to Find an Adequate Replacement

Dennis J. Carlo, Ph.D., recently resigned as our Chief Executive Officer, President and Chief Scientific Officer. We currently are undertaking a search for a new Chief Executive Officer. There can be no assurance that an experienced Chief Executive Officer will be found to adequately manage our operations. If we are unable to find a Chief Executive Officer, we may not be able to achieve our objectives and our business, financial condition, operating results and future prospects could be materially and adversely affected.

If We Lose Our Key Personnel or Are Unable to Attract and Retain Additional Personnel, We May be Unable to Successfully Develop Our Technology

On May 21, 2002, we announced that Howard Sampson stepped down as Vice President, Finance, Chief Financial Officer, Secretary and Treasurer of the company. Subsequently, on June 21, 2002, we announced the appointment of Michael L. Jeub as Vice President of Finance and Chief Financial Officer. There can be no assurances that we will not lose additional members of our executive management team or, if so, whether we would be able to hire adequate replacements for any such individuals.

In addition, recruiting and retaining qualified scientific personnel to assist in scaling up our manufacturing facilities and perform future research and development work will be critical to our success. It has been particularly difficult for us to retain personnel in light of the performance of our common stock and the incurrence of substantial net operating losses. We do not have sufficient personnel to fully execute our business plan, and there is currently a shortage of skilled executives and scientists, which is likely to continue. As a result, competition for experienced executives and scientists from numerous companies and academic and other research institutions may limit our ability to hire or retain a new Chief Executive Officer and other personnel on acceptable terms. If we fail to attract and retain sufficient personnel, we may not be able to develop or implement our technology.

Hazardous Materials and Environmental Matters Could Expose Us to Significant Costs

We may be required to incur significant costs to comply with current or future environmental laws and regulations. Although we do not currently manufacture commercial quantities of our product candidates, we produce limited quantities of these products for our clinical trials. Our research and development and manufacturing processes involve the controlled storage, use and disposal of hazardous materials, biological hazardous materials and radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and some waste products. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, the risk of contamination or injury from these materials cannot be completely eliminated. In the event of an incident, we could be held liable for any damages that result, and any liability could exceed our resources. Current or future environmental laws or regulations may materially and adversely affect our operations, business or assets.

Volatility Of Our Stock Price and Absence Of Dividends May Hurt Securityholders

The market price of our common stock has been and is likely to continue to be highly volatile. Factors such as the following could have a significant adverse impact on the market price of our common stock:

•

our ability to obtain additional financing and, if available, the terms and conditions of the financing;



•

our financial position and results of operations;

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•

the results of preclinical studies and clinical trials by us, our collaborators or our competitors;



•

concern as to, or other evidence of, the safety or efficacy of our products or our competitors' products;



•

announcements of technological innovations or new products by us or our competitors;



•

U.S. and foreign governmental regulatory actions;



•

actual or anticipated changes in drug reimbursement policies;



•

developments with our collaborators;



•

developments concerning patent or other proprietary rights of ours or our competitors (including litigation);



•

status of litigation;



•

period-to-period fluctuations in our operating results;



•

changes in estimates of our performance by any securities analysts;



•

new regulatory requirements and changes in the existing regulatory environment;



•

market conditions for biopharmaceutical stocks in general; and



•

other factors not within our control.

We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

Changes to Financial Accounting Standards May Affect Our Reported Results of Operations

We prepare our financial statements to conform with U.S. generally accepted accounting principles, or GAAP. GAAP are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in those policies can have a significant effect on our reported results and may even affect our reporting of transactions completed before a change is announced. Accounting policies affecting many other aspects of our business, including rules relating to purchase and pooling-of-interests accounting for business combinations, employee stock option grants and revenue recognition have recently been revised or are under review. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. In addition, our preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the recorded amounts of assets and liabilities, disclosure of those assets and liabilities at the date of the financial statements and the recorded amounts of expenses during the reporting period. A change in the facts and circumstances surrounding those estimates could result in a change to our estimates and could impact our future operating results.

Our Certificate of Incorporation and Bylaws Include Provisions that Could Make Attempts by Stockholders to Change Management More Difficult

The approval of 66²/3 percent of our voting stock is required to approve certain transactions and to take certain stockholder actions, including the calling of special meetings of stockholders and the amendment of any of the anti-takeover provisions, such as those providing for a classified board of directors, contained in our certificate of incorporation. Further, pursuant to the terms of our stockholder rights plan, we have distributed a dividend of one right for each outstanding share of common stock. These rights will cause substantial dilution to the ownership of a person or group that attempts to acquire us on terms not approved by our Board of Directors and may have the effect of

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deterring hostile takeover attempts. The substantial aggregate equity positions of Mr. Kimberlin and his affiliates and/or related parties would make such hostile takeover attempts very unlikely. The practical effect of these provisions is to require a party seeking control of us to negotiate with our Board of Directors, which could delay or prevent a change in control. These provisions could limit the price that investors might be willing to pay in the future for our securities and make attempts by stockholders to change management more difficult.

We are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person first becomes an "interested stockholder," unless the business combination is approved in a prescribed manner. The application of Section 203 also could have the effect of delaying or preventing a change of control.

There May Be Risks Related to Our Previous Use of Arthur Andersen LLP as Our Independent Auditors

On March 14, 2002, Arthur Andersen LLP, our independent public auditor, was indicted on federal obstruction of justice charges arising from the federal government's investigation of Enron Corp. On June 15, 2002, Arthur Andersen was convicted of these charges. Although we have engaged BDO Seidman, LLP, effective as of August 5, 2002, to replace Arthur Andersen as our independent public auditors, there are certain risks related to our consolidated financial statements for the fiscal years ended December 31, 2001, 2000 and 1999, which were audited by Arthur Andersen. The SEC has said that it will continue accepting financial statements audited by Arthur Andersen as long as a reasonable effort is made to have Arthur Andersen reissue its reports and to obtain a manually signed accountant's report from Arthur Andersen. Former representatives of Arthur Andersen have notified us that Arthur Andersen is no longer able to reissue its reports because the firm is no longer in existence.

Our current independent auditor, BDO Seidman, LLP, has informed us that it has discovered an error in the financial statements included in our Annual Report on Form 10-K, as amended by Amendment No. 1 to Form 10-K, for the fiscal year ended December 31, 2001. As a result of this error, BDO Seidman, LLP currently is re-auditing our financial statements and we will restate certain financial information contained in the Form 10-K for the fiscal year ended 2001. BDO is also re-performing a review of our Quarterly Report on Form 10-Q for the Quarterly period ended March 31, 2002 and we will restate certain financial information contained in the Quarterly Report. Certain amounts were incorrectly characterized as equity rather than debt.

Certain investors, including significant funds and institutional investors, may choose not to hold or invest in securities of a company that does not have current financial reports available. Our access to the capital markets and our ability to make timely filings with the SEC could be impaired if the SEC ceases accepting financial statements from a prior period audited by Arthur Andersen for which Arthur Andersen will not reissue an audit report. In that case, we would not be able to access the public capital markets unless another independent accounting firm is able to audit the financial statements originally audited by Arthur Andersen. Any delay or inability to access the public capital markets caused by these circumstances would be disruptive and adversely affect the price and liquidity of our securities and would have a material adverse effect on our business and financial condition.

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OUR BUSINESS

GENERAL

We are a biopharmaceutical company co-founded by Dr. Jonas Salk, a pioneer vaccinologist who discovered the first effective polio vaccine. We were created primarily to pursue Dr. Salk's concept of developing a therapeutic vaccine for the treatment of human immunodeficiency virus ("HIV") infection. We have developed REMUNE®, an immune-based therapy to induce specific immune responses for the treatment of HIV. Our lead product, REMUNE®, designed to treat individuals already infected by HIV, is intended to induce an HIV-specific immune response in order to boost the body's natural defense mechanisms and control the amount of HIV in the blood. Over the course of 18 clinical studies, REMUNE® has been administered to over 3,000 people and has been shown to be safe. In addition, the data from these studies suggest that REMUNE® may be effective in promoting the immune system's own ability to defend against HIV and reducing the amount of HIV in the blood when used alone or in conjunction with antiviral drugs.

We currently are focusing our core competencies on REMUNE® our most clinically advanced product. On September 9, 2002, we announced a restructuring program and management changes aimed at reducing costs and continuing our efforts to develop and commercialize REMUNE®. As part of our dedication of efforts on REMUNE®, we terminated 28 of the 42 employees then located at our headquarters in Carlsbad, California, affecting substantially all non-management employees who were not working specifically on REMUNE®. We also have added five employees to our current staff of 36 at our REMUNE® production facilities in King of Prussia, Pennsylvania.

CLINICAL TRIALS

On August 15, 2002, we announced the results from an ongoing study by the Canadian HIV Trials Network (CTN-140) which examined the effects of stopping HAART (Highly Active Antiretroviral Therapy) in adults with chronic HIV infection. The results suggested for the first time in a clinical trial that REMUNE® might give relief for HIV-infected patients from the adverse side effects of antiretroviral therapies. This may be significant because a growing number of studies indicate that HIV-infected patients are developing greater resistance and significant adverse side effects to currently available antiretroviral drugs. According to Dr. Emil Toma, principal investigator of the trial and a professor at University of Montreal and active staff at Hotel-Dieu du Centre Hospitalier de l'Universite de Montreal, the results from this study suggest that treatment strategies using REMUNE® might give their systems the break from drug therapies they need to recover.

The study, conducted over 116 weeks and still ongoing, involved ten adults with a median age of 41 and ranging from 36 to 51 years of age. All have chronic HIV infection and used HAART for a median of 2.7 years, with HIV RNA levels (VL) below detection limit (<50 HIV-1 RNA copies/ml) for a median of two years and median CD4+ T cell count of 385/ml prior to antiretroviral treatment interruption. After HAART intensification with ddI, GM-CSF, hydroxyurea, and initiation of therapeutic vaccination with REMUNE®, patients stopped antiretrovirals, but continued to receive REMUNE® every three months. To date, each participant in the study has received nine doses of REMUNE®. Evaluations taken during the study include: clinical, virologic (viral load, HIV genotype, sensitive cultures), immunologic (lymphocyte phenotyping, serum cytokines/chemokines, Interferon-alpha (IFN-alpha) Elispot, intracellular cytokine staining for IFN-alpha secretion from CD4+ and CD8+ T cells, lymphoproliferative responses, thymus CT-Scans), health-related quality-of-life and nutrition.

The REMUNE® study conducted in Spain (STIR-2102) was a three-year, double-blind, adjuvant-controlled Phase II clinical trial. The study involved 243 HIV-infected patients and was completed in May, 2001. This trial combined REMUNE® with antiviral drug therapy and was designed to assess the effect of REMUNE® on virologic failure.

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In May 2001, the data safety monitoring board (DSMB) for this trial, an independent panel of experts designed to evaluate immunologic and virologic endpoints, met and concluded that the trial did not meet its primary endpoint. The primary endpoint analysis revealed no significant difference between the control group and the REMUNE® group. The DSMB noted at that time, however, that the study included a subgroup analysis which seemed to indicate that REMUNE® may have had a positive effect on viral load in patients who are more immunocompetent. The DSMB recommended further studies with REMUNE® in such patients.

In August 2001, the DSMB reconvened to review the final analysis of the trial as defined by the statistical plan of the trial protocol. The DSMB advised that the analysis first reported by the DSMB was insufficient, as it included only the treatment time, but not the complete follow up time of all patients, and did not include the intent-to-treat analysis. In addition, the DSMB, among other things, reviewed the reports of three outside statisticians engaged by us with the DSMB's concurrence, to independently review the data and noted that these statisticians concurred that the most appropriate primary analysis was the Cox regression model stratified by baseline viral load in an intent-to-treat analysis.

After reviewing the data provided by the trial protocol and the reports and views of the protocol statistician and the three outside statisticians, the DSMB expressed its view that, using the intent-to-treat analysis, REMUNE® showed a positive impact on controlling virus and that the study had met its primary endpoint (p=0.034).

The results were analyzed by Dr. Fernandez-Cruz, the principal investigator of the trial, the protocol statistician, us and the three outside statisticians using the intent-to-treat principle. Statistical analyses included the information from patients in both the treatment phase (patients who remained on stable ART [AZT plus ddI] treatment) and the follow-up phase (patients who switched from ART treatment to a three-drug HAART regimen [3TC, D4T, and Indinavir]). Treatment plus follow-up observation times showed a protective effect of REMUNE® on time to virologic failure when compared to placebo (Hazard Ratio = 0.66, p= 0.054). Regression analysis (Cox Proportional Hazards Model) which stratified the primary endpoint on baseline viral load (above and below 10,000 copies/ml) and CD4 (above and below 400 cells per cubic mm) increased the differences, showing a significant effect of REMUNE® (Hazard Ratio = 0.63, p= 0.036) on time to virologic failure. The same analysis, stratified on baseline viral load without CD4, also showed a significant effect of Remune® on time to virologic failure (Hazard Ratio = 0.63; p = 0.034). The analysis of patients who remained on stable ART (AZT plus ddI) treatment showed no difference in time to virologic failure between treatment and placebo groups (Hazard Ratio = 0.80; p = 0.34). However, because this method of analysis did not include follow-up time of patients who remained in the study on stable HAART therapy, and in light of the aforementioned analyses, we believe this analysis is not appropriate.

The intent-to-treat principle dictates that data from every patient enrolled in the study, at all time points, be included in the analysis. Viral load is the amount of HIV detected in the blood. The hazard ratio is a ratio of the probability of developing an endpoint in the treatment group, compared to the probability of developing an endpoint in the placebo group. Therefore, a hazard ratio that lies between 1 and 0 demonstrates a protective effect of treatment. For example, a hazard ratio of 0.5 denotes the probability of developing an endpoint in the treatment group is one-half of the probability of developing an endpoint in the placebo group.

Further analysis of the data from this trial by Dr. Eduard Fernandez-Cruz suggests that treatment with REMUNE® stimulated HIV-specific immune responses correlated with control of virus. Dr. Fernandez-Cruz presented the data in August, 2002, at the XIV International AIDS Conference. Dr. Fernandez-Cruz reported that therapeutic vaccination induces a decrease of immune system activation, an increase of HIV-specific helper T-cell activity, an increase in killer cells and a positive impact on the control of virus.

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In the overall study, patients receiving a combination of REMUNE® and antiviral medication demonstrated a delay in the time to reach virologic failure compared to the control group (Cox stratification model, p<0.05). The potential efficacy of REMUNE®, administered in combination with ART or HAART, was assessed by comparing the time to increases in viral level and decreases in CD4+ T cell counts between patient groups that received antiretroviral therapy plus REMUNE® or either therapy plus placebo. Study results indicated that REMUNE® was shown to be safe and well tolerated.

In addition, in a pre-specified group of 54 subjects, a significant lymphocyte proliferative helper T-cell immune response was observed in the REMUNE® treated group compared to controls (P<0.05). Furthermore, higher levels of cytotoxic T cells (killer cells) were observed in the REMUNE® group compared to the control group (P<0.05). Cytotoxic T cells recognize and kill virus-infected cells. Helper T-cells and cytotoxic T cell activity correlated (r=0.44, P<0.05). Additionally, killer cell activity correlated with control of virus in the REMUNE® treated group (r=-0.58, P<0.05).

Also at the XIV International AIDS Conference, Dr. Bruce Walker, Director of the AIDS Research Center, Massachusetts General Hospital presented data from a double blind, adjuvant controlled study involving ten patients with chronic HIV infection. The data suggests that REMUNE® induced helper T-cell immune responses aimed specifically at HIV in chronically infected HIV-positive individuals taking HAART (Highly Active Antiretroviral Therapy), thereby providing a possible treatment regime for HIV-infected patients. Currently, helper T-cell responses (cell-mediated immunity) are thought to be important in controlling HIV-1 infection.

All ten participants in the study had previously achieved undetectable viral levels through the use of HAART drug therapy. Five patients were treated with intramuscular injections of REMUNE® once every three months for 52 weeks, while the remaining five patients received injections of a placebo. Five out of the five REMUNE® treated patients showed a significant increase (p = 0.008) in helper T-cell immune responses against HIV-1. None of the patients receiving placebo exhibited helper T-cell responses. The study and all of the Lymphocyte Proliferation Assays (LPAs, a measurement of helper T-cell response) were conducted at Massachusetts General Hospital.

In 2000, three additional studies were initiated, including a Phase III, 150 - patient international study, whose main sponsor is GlaxoSmithKline, called QUEST, which includes REMUNE®. The international study is designed to evaluate the effectiveness of an anti-HIV strategy that combines HAART and therapeutic vaccinations in keeping the virus suppressed after complete treatment cessation. A 28 - week, 45 - patient, Phase I study is being funded by and conducted at Cedars Sinai Medical Center in Los Angeles to examine the effects of REMUNE® plus HAART when administered during the earliest stage of HIV infection. Another similar research study in chronically infected patients is being conducted at the Naval Hospital in San Diego.

The Thailand clinical trial, which involved 297 HIV-infected patients, conducted by Trinity, was completed in 1999. The primary endpoint was an increase in CD4 cells. Trinity determined that the primary endpoint was successfully met in this 40-week clinical trial. Although patients received no antiviral drug therapy, REMUNE® augmented CD4 cell counts and enhanced HIV-specific immunity. Further follow-up has shown stable or decreased viral load in a majority of the patients that have been examined.

In July 2001, Agouron, a company acquired by Pfizer, notified us of their decision to terminate their 1998 collaboration with us to commercialize REMUNE®. In August 2001, we announced our decision not to proceed with the 550 patient, Phase III pivotal trial that was initiated in late 1999 to evaluate whether REMUNE® plus highly active antiretroviral therapy, or HAART, delays virologic failure in HIV-infected individuals. As a result of our decision not to proceed with this study, an additional pivotal trial or trials may be needed before we would be permitted to submit REMUNE® to the FDA for commercialization. We will be unable to do this until we identify a new collaborator or raise substantial new funds. We cannot assure that we will be able to obtain a new collaborator or raise sufficient funds.

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In 1999, we discontinued a 2,526 patient, Phase III clinical endpoint trial. The trial was discontinued because differences in clinical endpoints were not observed between treatment groups, and extending the trial would have been unlikely to provide sufficient, additional clinical endpoints to permit statistically significant differences between the treatment groups to be observed in the near term. The primary efficacy endpoint for the trial was disease progression to an AIDS defining condition, or death. At the time the study began, this was the only accepted endpoint for approval by the FDA for vaccines. In 1999, the FDA agreed to accept virologic endpoint trials for the basis of approval for REMUNE® for future clinical studies.

The results of a Phase I, ten-patient pediatric trial completed by the NIH in 1998, were published in the Journal of Infectious Disease, and presented at the meeting of the Infectious Disease Society of America, showing that REMUNE® was safe in children concurrently taking antiviral drug therapy and stimulates HIV-specific immune responses. Furthermore, the results showed that children receiving the adult dose of REMUNE® had a significant sustained decrease in viral load (the amount of circulating HIV) compared to children who received a lower dose. The study was then expanded to enroll an additional 22 children who were subsequently treated with open label REMUNE® at the adult dose.

Previous Phase I and II studies of approximately 350 adult subjects indicated that REMUNE® is well tolerated with the most common side effect being injection site reactions. These trials indicated that REMUNE® is safe, and that it may induce HIV-specific immune responses and showed positive trends on the virologic and immunologic markers.

If we obtain financing or a collaborator, we may need to conduct future clinical trials. We cannot assure that we will be able to obtain a new collaborator or raise sufficient funds. Currently, we have not identified any potential collaboration partners.

We also have created six distinct therapeutic vaccines in various stages of development for autoimmune diseases and cancer and have established an extensive patent portfolio in four different technologies with a total of 173 patents issued to us worldwide.

REMUNE®-Related Regulatory Activities

We currently are evaluating the processes to seek regulatory approval for the commercialization of REMUNE® in the United States, Europe and Thailand. We intend to meet with the European regulatory authorities and the United States FDA to discuss the application process and to determine what additional trials may be required in connection with the filing of applications for approval of REMUNE®. Currently, we are working with consultants and scientific advisors engaged by an affiliate and/or related party of one of our directors to evaluate the data collected from our previous clinical studies in an effort to determine what additional clinical trials and protocols will be necessary for us to obtain regulatory approval in the United States and Europe. We currently are evaluating plans to commence new clinical trials of REMUNE® in North America and/or Europe in 2003.

Trinity is pursuing commercial approval of REMUNE® in Thailand. Commercial sales of REMUNE® in Thailand, if any, will be subject to: approval by the Food and Drug Administration of the Ministry of Public Health of Thailand, operation of our manufacturing facility in King of Prussia, PA in substantial compliance with the FDA's GMP regulations and receipt of FDA export permission. We currently cannot estimate at what date, if at all, these certifications will be obtained. See "Our Business — Our Immune Based Therapies — Immune-Based Therapies for HIV — Commercialization Strategy" and "Risk Factors — The Lengthy Product Approval Process and Uncertainty of Government Regulatory Requirements May Delay or Prevent Us From Commercializing Products."

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THE IMMUNE SYSTEM

The immune system is the human body's natural defense mechanism to prevent and combat disease. There are two major arms of the immune system: T cell-based and B cell or antibody-based.

T cells are specialized white blood cells that kill other cells within the body that have become infected. A T cell-based immune response begins when the immune system recognizes foreign invaders such as viruses or bacteria within the body. T cells are then dispatched to seek and destroy cells, which have been infected by these foreign invaders. This response, however, is not always sufficient to eradicate the disease, and certain diseases are able to produce substances that suppress this immune response, thus making it important to provide assistance to the immune system.

We believe that our technology can regulate the body's immune system to recognize and combat illnesses such as HIV infection, autoimmune disease and cancer. We are developing products to potentially boost T cell responses against HIV and cancer and to regulate disease-inducing T cell responses in autoimmune diseases such as rheumatoid arthritis, psoriasis and multiple sclerosis.

OUR IMMUNE-BASED THERAPIES

IMMUNE-BASED THERAPIES FOR HIV

BACKGROUND.    HIV is the virus that causes acquired immunodeficiency syndrome, or AIDS, a condition that slowly destroys the body's immune system and makes the body vulnerable to infections. The global HIV pandemic represents a significant societal threat to both developed and developing nations since most HIV-infected individuals are expected ultimately to develop AIDS. This creates a significant burden on healthcare systems and economies around the world. Twenty years after the first clinical evidence of AIDS was reported, AIDS has become one of the most devastating diseases humankind has ever faced. The statistics listed below from the Joint United Nations Programme on HIV/AIDS and the World Health Organization illustrate the severity of this pandemic:

More than 60 million people have been infected with HIV since the pandemic began;

HIV/AIDS is now the leading cause of death in sub-Saharan Africa and the fourth leading cause of death worldwide; At the end of 2001, an estimated 40 million people globally were living with HIV;

5 million people, including 800,000 children, were newly infected with HIV in 2001;

Approximately 14,000 people were newly infected with HIV per day in 2001;

3 million deaths, including 580,000 children under 15 years of age, were attributed to HIV/AIDS in 2001;

In many parts of the developing world, the majority of new infections occurred in young adults, with young women especially vulnerable; and About one-third of those currently living with HIV/AIDS are aged 15-24 and, it is believed, most of them do not know they carry the virus.

HIV spreads throughout the body by invading host cells and using the host cells' protein synthesis capability to replicate. The immune system responds by producing antibody and cellular immune responses capable of attacking HIV. While these and other responses are usually sufficient to temporarily arrest progress of the infection and reduce levels of the virus, the virus continues to replicate and slowly destroys the immune system by infecting and killing critical T cells, known as CD4 cells. As the infection progresses, the immune system's control of HIV weakens; the level of virus in the blood rises, and the level of T cells declines to a fraction of its normal level..

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Existing Therapies for HIV.    Currently available antiviral products have been shown to be effective at reducing the levels of virus in the blood; however, certain limitations in the therapy have prevented the antiviral products from being as effective as originally predicted. The antiviral products may be associated with significant toxicity and eventual viral resistance. In addition, non-compliance with the strict dosage regimen of various combinations of reverse transcriptase and protease inhibitors, or cocktail therapies, may also reduce their effectiveness and can accelerate emergence of resistance. A number of individuals who begin cocktail therapies will discontinue treatment due to resistance, toxicity, lack of compliance or because the cocktail therapy was not effective in reducing the viral load. Not all HIV-infected individuals in the United States use cocktail therapies. Due to the limitations of chronic use of antiviral drug therapies, new guidelines issued by the National Institutes of Health (2/5/01) suggest starting these therapies later in the disease (for individuals with greater than 350 CD4 T cells/mm3, initiating drug therapy when the level of virus has reached 55,000 copies/ml). Thus, a need exists for therapies that would be useful early in the disease as well as those that complement existing antiviral drug therapies.

REMUNE®.    Remune® is designed to stimulate an HIV-infected individual's immune system to attack HIV. We believe that results of previous clinical trials demonstrate that REMUNE® significantly boosts HIV-specific immune responses and may induce a positive virologic effect in HIV-infected individuals. Furthermore, we believe REMUNE® stimulates the production of specific antiviral substances that naturally protect components of the immune system from HIV infection. Leading HIV clinical researchers have begun to recognize that, in order to effectively stop or slow the progression of HIV to AIDS, therapies must stimulate HIV-specific cell mediated immune responses in infected individuals in addition to reducing viral load through the use of antiviral drugs. By utilizing an immune-based therapy such as REMUNE®, in conjunction with existing antiviral drugs, it may be possible to boost the HIV infected individual's immune system against the virus, such that the virologic effect of antiviral drug therapy is prolonged and enhanced.

The data from clinical trials of REMUNE® suggests that REMUNE® may:

Induce an HIV-specific T cell response (unlike antiviral drugs), which numerous researchers now believe is important in controlling HIV replication;

Induce broad HIV immunity — the use of inactivated virus may stimulate broader immune responses that are capable of suppressing more diverse strains of HIV than vaccines based on subunits of the virus;

Induce chemokines (substances that interfere with the virus attaching to and infecting normal cells); and

Work with currently available antiviral drugs as a complementary treatment for HIV infection — we believe that while antiviral drugs (such as AZT, ddI, ddC, and protease inhibitors) interrupt the reproduction process of HIV within infected cells, REMUNE® stimulates the immune system to destroy HIV-infected cells.

Other benefits of REMUNE® include:

Excellent safety profile — administered to thousands of patients with none of the toxicity and far fewer side effects than one currently observes with existing antiviral HIV drug therapies;

Easy to administer by a healthcare professional via intramuscular injection in the deltoid muscle once every three months; and

Positive effects on weight gain.

The possibility that REMUNE® may reconstitute HIV-specific immunity provides a unique opportunity for REMUNE® to be utilized in combination with currently available drug therapies to provide long-term

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management of the disease. One goal of the combination REMUNE®/drug approach is to prolong the impact of antiviral drug therapies on the level of virus by increasing the immune response to HIV-infected cells. If successful, a delay in drug resistance and a prolonged duration of low levels of virus in the blood coupled with an increase in the immune response to HIV could translate into a significant clinical benefit.

RECENT MANAGEMENT CHANGES

As part of a recent restructuring program, we implemented certain management changes. Effective as of September 6, 2002, Dennis J. Carlo, Ph.D., resigned as our Chief Executive Officer, President and Chief Scientific Officer. Dr. Carlo remains a member of our Board of Directors and has assumed the position of Senior Strategist. He is to devote substantially all of his business time, skill and attention to assisting our Board of Directors and our new President in successfully closing the Offering and facilitating the exercise of all of the Warrants.

Effective as of September 6, 2002, Ron Moss, M.D., was appointed our President. Dr. Moss is responsible for leading our scientific operations, including, but not limited to, the advancement of clinical trials, as well as the interim daily operations, until a new Chief Executive Officer is hired. Dr. Moss is reporting to our Board of Directors during the search for the new Chief Executive Officer and will report to the new Chief Executive Officer once that position is filled. As a result of his appointment as President, Dr. Moss has stepped down as our Vice President of Medical and Scientific Affairs.

Michael L. Jeub, our Vice President of Finance and Chief Financial Officer, will assist Dr. Moss in the administration of the corporate offices and will continue to manage the day-to-day financial operations, initiate cost control efforts and seek to secure additional financing.

MANAGEMENT

Our executive management team consists of professionals from the biotechnology, medical and scientific industries. Ron Moss, M.D., our President, formerly served as our Vice President, Medical and Scientific Affairs. Dr. Moss, trained at the National Institute of Health, is Board Certified in pediatrics and adult and pediatric allergy and immunology and is Assistant Clinical Professor at University of California, San Diego School of Medicine. Dr. Moss is the author of more than 50 manuscripts and 80 abstracts on HIV and immunology and is the Editor in Chief of the Journal of Immune Based Therapies and Vaccines. Michael L. Jeub, our Vice President of Finance and Chief Financial Officer, was Senior Vice President and Chief Financial Officer at Jenny Craig International, as well as President and Chief Financial Officer at National Health Laboratories, prior to joining us in June 2002. Dennis J. Carlo, Ph.D., serves as our Senior Strategist and one of our directors. Dr. Carlo was a co-founder of the company and formerly served as our Chief Executive Officer, President and Chief Scientific Officer. Dr. Carlo previously held senior positions with Hybritech, Inc. (Eli Lilly) and Merck & Co. We currently are seeking a new Chief Executive Officer. Bjorn K. Lydersen, Ph.D., our Vice President, Manufacturing Operations, formerly served as Vice President, Research and Development at Irvine Scientific, as well as Director at In Vitro Antibody Production and Hybritech, Inc. (Eli Lilly).

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DESCRIPTION OF THE WARRANTS AND THE WARRANT AGREEMENT

THE UNITS

The units sold in the private placement consist of (a) 9,522,071 shares of our common stock and (b) 9,522,071 Class A warrants to purchase initially (i) one share of our common stock and (ii) one Class B warrant to purchase one share of our common stock. Approximately 84 units were sold. Additionally, our placement agent, Spencer Trask Ventures, Inc., has an option to purchase (a) 1,452,419 shares of our common stock and (b) 1,452,419 Class A warrants.

CLASS A WARRANTS

General Terms.    Each Class A warrant entitles the holder to purchase initially (a) one share of common stock and (b) one Class B warrant. The Class A warrant has an initial exercise price equal to $1.33. The exercise price and the number of securities issued upon exercise of a Class A warrant are subject to adjustments in certain cases described below under "Adjustment to Exercise Rate; Distribution Rights; Merger or Consolidation."

Exercise.    Class A warrants cannot be exercised by anyone other than an initial investor in the units until the Form S-1 covering the sale by us to subsequent public purchasers of the warrants becomes effective. Initial purchasers of the units may sell or exercise the Class A warrants prior to the effectiveness of a registration statement pursuant to an exemption from registration under the Securities Act of 1933. Upon the effectiveness of the Form S-1, each Class A warrant shall be exercisable at any time until December 10, 2007.

Redemption.    Upon thirty (30) days prior written notice to the holders of the Class A warrants, we shall have the right to redeem from such holders the Class A Warrants (including the underlying Class B warrants) at any time after the date of issuance, at a price of $0.01 per Class A warrant, if the average of the closing bid prices of common stock for any ten (10) consecutive trading days ending within thirty (30) days prior to the date of the notice of redemption is greater than or equal to $2.49, subject to any stock splits, combinations or similar adjustments. However, we will not redeem any Class A warrant from a subsequent purchaser at any time prior to the date the Form S-1 is declared effective by the SEC.

CLASS B WARRANTS

General Terms.    Class B warrants will be issued to the holders of the Class A warrants upon the exercise of the Class A warrant. Each Class B warrant will entitle the holder to purchase initially one share of common stock. The Class B warrant has an initial exercise price equal to $1.77. Both the exercise price and the number of securities issued upon exercise of a Class B warrant are subject to adjustments in certain cases described below under "Adjustment to Exercise Rate; Distribution Rights; Merger or Consolidation."

Exercise.    Class B warrants may not be exercised by anyone other than an initial investor in the units until the Form S-1 becomes effective. Initial purchasers of the units may sell or exercise the Class B warrants prior to the effectiveness of a registration statement pursuant to an exemption from registration under the Securities Act of 1933. The Class B warrants will have a term of five years from the respective dates of issuance of such warrants.

Redemption.    Upon thirty (30) days prior written notice to the holders of the Class B warrants, we shall have the right to redeem from such holders the Class B warrants at any time after the date of issuance, at a price of $0.01 per Class B warrant, if the average of the closing bid prices of common stock for any ten (10) consecutive trading days ending within thirty (30) days prior to the date of the notice of redemption is greater than or equal to $3.32, subject to any stock splits, combinations or

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other adjustments. However, we will not redeem any Class B warrant from a subsequent purchaser at any time prior to the date the Form S-1 is declared effective by the SEC.

CLASS A AND CLASS B WARRANTS

The following descriptions of terms are applicable to both the Class A warrants and the Class B warrants.

Exercise.    Holders may exercise warrants on any business day on or before the applicable expiration date. Any warrant not exercised before 5:00 P.M., Mountain Standard time, on the applicable expiration date will become void, and all rights of the holder will cease. Holders may exercise the warrants by surrendering the warrant certificate evidencing their warrants after duly completing and executing the form of exercise to purchase shares of common stock and, in the case of the Class A warrants, the Class B warrants, and paying the exercise price for the warrants at the office or agency designated for that purpose, which initially is the corporate office of the warrant agent in Denver, Colorado. A holder may exercise a warrant only in whole. The exercise price must be paid in full, at the option of the holder, either in cash or by certified, official bank check or by wire transfer of funds to an account we have designated for such purposes.

We will make no payment on account of any dividends on our common stock which may be issued upon exercise of a warrant.

Holders of warrant certificates may surrender them for exchange, and register the transfer of warrant certificates, at our office or agency maintained for this purpose, which initially is the corporate office of the warrant agent in Denver, Colorado. We will issue the warrant certificates initially in definitive, fully registered form. We will impose no service charge for any exercise, exchange or registration of transfer of warrant certificates, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer.

We are not required to issue fractional shares of common stock upon exercise of warrants. We will pay a cash adjustment instead of fractional shares, except in limited circumstances.

Registration Rights.    We are obligated to maintain the effectiveness of this registration statement until the earlier of the date (i) as of which all common stock, Class A warrants and Class B warrants contained in the units and purchased or granted in the private placement have been resold and (ii) on which the common stock, Class A warrants and Class B warrants may be resold by our non-affiliates without registration by reason of Rule 144(k) under the Securities Act or any other rule of similar effect.

Additionally, pursuant to the terms of the private placement of units, we have filed a registration statement on Form S-1 under the Securities Act of 1933 covering the issuance by us to holders (other than the selling stockholders) of (i) that number of Class B warrants which may be issued upon exercise of Class A warrants, (ii) that number of shares of common stock which may be issued upon exercise of Class A warrants and (iii) that number of shares of common stock which may be issued upon the exercise of Class B warrants. We will be obligated to maintain the effectiveness of the Form S-1 for a period ending on the earlier of (i) December 10, 2012 and (ii) the date on which the last of the outstanding warrants is exercised.

Listing.    We received authorization for quotation on the Nasdaq Stock Market System for the shares of common stock included in the units, as well as the shares of common stock underlying the warrants. Our common stock currently is quoted on the Nasdaq SmallCap Market. There currently is no established trading market for the warrants. Additionally, we received authorization for the quotation of the warrants on the Nasdaq Stock Market System. There can be no assurance that the criteria for authorization for the warrants or our common stock will be satisfied by us on an ongoing basis. See "Risk Factors — Our Stock May Become Subject to Penny Stock Rules, Which may make it More

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Difficult for You to Sell Your Shares due to the Notification from Nasdaq Regarding Noncompliance with Nasdaq Listing Qualifications."

No Rights as Stockholders.    Except as expressly described in the warrants and the related warrant agreement, the holders of warrants are not entitled, in this capacity, to receive dividends or other distributions, receive notice of any meeting of stockholders, consent to any action of stockholders or receive notice of any other stockholder proceedings, or to any other rights exercised by our stockholders.

Adjustment to Exercise Rate; Distribution Rights; Merger or Consolidation.    The exercise price and/or the number of shares of common stock to be issued upon exercise of a warrant, or the exercise rate, will be adjusted from time to time when specific events occur, including:

1.

payment of dividends or distributions on shares of our common stock payable in shares of common stock or some of our other capital stock;



2.

subdivisions, combinations or some reclassifications of shares of our common stock;



3.

the distribution to all holders of our common stock of any of our assets (including cash), debt securities, preferred stock or any rights or warrants to purchase any of these securities, other than ordinary cash dividends at a rate not exceeding the rate specified in the warrant agreement; or



4.

the issuance of shares of our common stock or of securities convertible into or exchangeable or exercisable for shares of our common stock at a price below $0.885, other than issuances:



a.

upon the vesting or exercise of the warrants,



b.

upon the exercise, conversion or exchange of any right, option, warrant or other security, the issuance of which has previously required an adjustment as provided in the Warrant Agreement, or



c.

upon the exercise, conversion or exchange of any right, option, warrant or other security outstanding on the date of issuance (to the extent as provided under the terms of those securities as in effect on December 10, 2002).

Notwithstanding the above, no adjustment in the exercise rate will be required upon the issuance, conversion, exchange or exercise of options to acquire shares of common stock by our officers, directors or employees.

If, in a single transaction or through a series of related transactions, we consolidate with or merge with or into any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our properties and assets to another person or group of affiliated persons or are a party to a merger or binding share exchange which reclassifies or changes our outstanding common stock, a fundamental transaction, then, as a condition to consummating any of these transactions, the person formed by or surviving the consolidation or merger (if other than us) or the person to whom the transfer has been made, or the surviving person, will enter into a supplemental warrant agreement. The supplemental warrant agreement will provide:

1.

that the holder of a warrant then outstanding is entitled to exercise it for the kind and amount of securities, cash or other assets which the holder could have received immediately after the completion of a fundamental transaction if the holder had exercised the warrant immediately before the effective date of the transaction (regardless of whether the warrants are then exercisable), assuming that the holder:



a.

was not a constituent person or an affiliate of a constituent person to the transaction;



b.

made no election with respect to the transaction; and

29

c.

was treated alike with the plurality of non-electing holders; and




2.

that the surviving person will succeed to and be substituted for all of our rights and obligations under the warrant agreement and the warrants.

Notwithstanding the above, if we enter into a fundamental transaction with another person (other than one of our subsidiaries) and consideration is payable to holders of the shares of capital stock (or other securities or property) issuable or deliverable upon exercise of the warrants that are exercisable in exchange for their shares in connection with the fundamental transaction which consists solely of cash, or in the event of a dissolution, liquidation or winding-up of the company, then the holders of warrants shall be entitled to receive distributions on the date of the event on an equal basis with holders of those shares (or other securities issuable upon exercise of the warrants) as if the warrants had been exercised immediately before the event, less the exercise price for the warrants. Upon receipt of this payment, the rights of a holder of a warrant shall terminate and cease and the holder's warrants shall expire.

In the event of a taxable distribution to holders of our common stock which results in an adjustment to the number of shares of common stock or other consideration for which a warrant may be exercised, the holders of the warrants may, in some circumstances, be deemed under applicable law to have received a distribution subject to United States federal income tax as a dividend. See "U.S. Federal Income Tax Considerations."

Amendment or Modification of Warrant Agreement.    We may amend and modify some of the provisions of the warrant agreement without the prior approval of the holders. In addition, we and the warrant agent may amend and modify most provisions of the warrant agreement with the consent of the holders of the warrants representing a majority in number of warrants then outstanding.

Certain Covenants.    We have agreed to file all reports that we are required to file under the Securities Exchange Act of 1934 and the rules, regulations and policies adopted by the SEC in a timely manner.

We also have agreed to comply with all applicable laws, including the Securities Act of 1933 and any applicable state securities laws, in connection with the offer and sale of common stock (and other securities and property deliverable) upon exercise of the warrants.

Delivery and Form.    We will issue the warrant certificates initially in definitive, fully registered form. The warrants subsequently may be issued in book entry form with the warrant agent as custodian for The Depository Trust Company, or the depository, and deposited with the depository.

Global Warrants.    Upon issuance of a global warrant, the depository credits, on its internal system, the respective amounts of the individual beneficial interests in the global warrant to persons who have participant accounts with the depository, or participants. Ownership of beneficial interests in a global warrant will be shown on, and the transfer of these beneficial interests will be effected only through, records maintained by the depository or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Investors may hold their interests in a global warrant directly through the depository if they are participants, or indirectly through organizations which are participants.

So long as the depository, or its nominee, is the registered owner or holder of a global warrant, the depository or the nominee, as the case may be, will be considered the sole owner and holder of the warrants represented by the global warrant for all purposes under the warrant agreement and the warrants, including payment and notice provisions. No beneficial owner of an interest in a global warrant will be able to transfer its interest except in accordance with the depository's procedures, in addition to those provided for under the warrant agreement.

We will make payments and distributions and provide requisite notice in respect of the global warrants, if any, to the depository or its nominee, as the case may be. We and the warrant agent have no

30

responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global warrants or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.

We expect that the depository or its nominee, upon receipt of any payment of any dividends or other distributions in respect of a global warrant, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the global warrant or the number of warrants represented by the global warrant, as the case may be, as shown on the records of the depository or its nominee.

We also expect that any payments by participants to owners of beneficial interests in the global warrant held through those participants will be governed by standing instructions and customary practice as is now the case with securities held for the accounts of customers registered in the names of nominees for the customers. Those payments will be the responsibility of the participants.

Transfers between participants in the depository will be effected in the ordinary way through the depository's same-day funds system in accordance with the depository's rules and will be settled in immediately available funds. If a holder requires physical delivery of a certificated warrant for any reason, including to sell warrants to persons in states which require physical delivery of the warrants or to pledge the warrants, the holder must transfer its interest in the global warrant in accordance with the normal procedures of the depository and with the procedures set forth in the warrant agreement.

The depository has advised us of the following information and we take no responsibility for its accuracy: The depository is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. The depository was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the depository system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.

Although the depository and its participants have agreed to the foregoing procedures in order to facilitate transfers of interests in the global warrants among participants, they are under no obligation to perform these procedures, and these procedures may be discontinued at any time. We and the warrant agent will have no responsibility or liability for the performance by the depository or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Certificated Warrants.    Owners of beneficial interests in the global warrants will be entitled to receive certificated warrants if the depository is at any time unwilling or unable to continue as, or ceases to be, a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934, and we fail to appoint a successor to the depository registered as a "clearing agency" under Section 17A of the Securities Exchange Act of 1934 within 90 days.

Any certificated Warrants issued in exchange for beneficial interests in the global warrants will be registered in the name or names that the depository shall instruct the warrant agent. It is expected that these instructions will be based upon directions received by the depository from participants with respect to ownership of beneficial interests in the global warrants.

Replacement, Exchange and Transfers.    If any warrant at any time is mutilated, defaced, destroyed, stolen or lost, the warrant may be replaced at the cost of the applicant (including our legal fees and

31

those of the warrant agent) at the office of the warrant agent, upon provision of evidence satisfactory to the warrant agent that the warrant was destroyed, stolen or lost, together with any indemnity that we and the warrant agent may require. Mutilated or defaced warrants must be surrendered before replacements will be issued.

Any beneficial interest in one of the global warrants that is transferred to a person who takes delivery in the form of an interest in another global warrant will, upon transfer, cease to be an interest in the first global warrant and, accordingly, will after that time be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in the other global warrant for as long as it remains an interest in that global warrant.

Certificated warrants may be exchanged or transferred in whole or in part by surrendering the certificated warrants at the office of the warrant agent with a written instrument of transfer as provided in the warrant agreement. In addition, if the certificated warrants being exchanged or transferred contain a restrictive legend, additional certifications to the effect that the exchange or transfer is in compliance with the restrictions contained in the legend may be required.

32

USE OF PROCEEDS

We will not receive any of the proceeds from the resale of shares of our common stock, Class A warrants and/or the Class B warrants and/or shares of common stock underlying the warrants by the security holders. All proceeds from the sale of such resale securities will be solely for the accounts of the security holders. If the warrants are exercised by either the selling security holders or any subsequent purchaser of the warrants, we will receive the net proceeds from such exercises.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes certain United States federal income tax consequences relating to the purchase, ownership and disposition of the warrants or shares of common stock that may be relevant to holders of the warrants or common stock who are United States Persons. The discussion is intended only as a summary and does not purport to be a complete analysis or listing of all potential tax considerations that may be relevant to holders of warrants or common stock. The discussion does not include special rules that may apply to some holders (including insurance companies, tax-exempt organizations, financial institutions or broker-dealers whose functional currency is not the United States dollar, persons holding the warrants as part of a 'straddle,' 'hedge,' 'constructive sale' or 'conversion transaction' and investors who are not United States Persons) and does not address the tax consequences of the alternative minimum tax or the United States federal estate or gift tax laws or the law of any state, locality or foreign jurisdiction. This summary assumes that holders will hold the warrants and common stock as "capital assets." This discussion is based upon the Code, applicable Treasury Regulations thereunder and administrative rulings and judicial authority as of the date hereof. All of the foregoing are subject to change, possibly with retroactive effect, and any such changes could affect the continuing validity of this discussion.

As used in this registration statement, a "United States Person' is a beneficial owner of the warrants or common stock who (1) is a citizen or resident of the United States, (2) is a corporation, partnership or other entity created or organized in or under the laws of the United States or political subdivision of the United States, (3) is an estate, the income of which is subject to U.S. federal income taxation regardless of its source, (4) is a trust if (A) a U.S. court is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. fiduciaries have authority to control all substantial decisions of the trust or (5) any other person or entity whose ownership of warrants or common stock is effectively connected with the conduct of a trade or business by such person or entity within the United States. Holders who are not United States Persons should consult their own tax advisers as to the specific consequences of the purchase of a unit and the ownership and disposition of the common stock and warrants.

THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. THE TAX TREATMENT MAY VARY DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF PURCHASING, HOLDING AND DISPOSING OF THE WARRANTS OR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

Tax Basis of Warrants and Common Stock.    A holder's initial tax basis in a share of common stock or in a Class A warrant purchased in connection with the private placement will be equal to its purchase price. Furthermore, a holder's tax basis in the common stock and Class B warrant received upon the exercise of a Class A warrant will be equal to the portion of the exercise price of the Class A warrant plus the holder's tax basis in the warrant before its exercise allocable to each. Such allocation between the common stock and Class B warrants will be made in proportion to their respective fair market values. A holder's tax basis in the common stock received upon the exercise of a Class B warrant will equal the exercise price of the Class B warrant plus the holder's tax basis in the warrant before its

33

exercise. The holding period of common stock and Class B warrant received upon a warrant's exercise will begin with and include the day the warrant was exercised.

The Warrants.    A holder generally will not recognize gain or loss upon exercise of a warrant. If a warrant is not exercised and is allowed to expire, the holder of the warrant will recognize a loss equal to the holder's tax basis in the warrant. The loss will be a capital loss and will be long-term or short-term depending on the holder's holding period for the warrant.

Holders of warrants will recognize capital gain or loss upon the sale or taxable exchange of the warrants in an amount equal to the difference between the amount realized on such disposition and the holder's adjusted tax basis in such warrants. Any such gain or loss will be long-term capital gain or loss if the holder has held the warrants for longer than one year. Capital gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Net capital gains of holders who or which are individuals, estates and trusts are subject to tax at lower rates than items of ordinary income. Deductions for net capital losses are subject to significant limitations. For holders who or which are individuals, estates and trusts, a capital loss is deductible in the year incurred to the extent of capital gains recognized during such year plus $3,000 (or, if less, the excess of the total amount of loss recognized over the total amount of gain recognized in such year). Any unused portion of such net capital loss may generally be carried over and allowed to the extent of capital gains in such year plus $3,000 until such net capital loss is exhausted. For holders that are corporations, any unused portion of such net capital loss may be carried back three years and then carried forward five years from the year in which the loss arose, to offset net capital gains during such period.

The number of shares of common stock receivable upon the exercise of a warrant is subject to adjustment under some circumstances. Under Section 305 of the Code and the Treasury Regulations thereunder, holders of the warrants will be treated as having received a constructive distribution, resulting in ordinary income (subject to a possible dividends-received deduction in the case of corporate holders) to the extent of our current or accumulated earnings and profits, if, and to the extent that, specific adjustments in the number of shares of our common stock receivable upon the exercise of a warrant increase the proportionate interest of a holder of a warrant in our fully diluted common stock, whether or not the holders ever exercises the warrant. Generally, a holder's tax basis in a warrant will be increased by the amount of any such taxable constructive distribution.

Backup withholding.    Under some circumstances, the failure of a holder of warrants or common stock to provide sufficient information to establish that the holder is exempt from the backup withholding provisions of the Internal Revenue Code will subject the holder to backup withholding for payments of dividends on the common stock or from the proceeds from a disposition of the common stock or warrants at a rate of (i) 30% for payments made in 2002 and 2003, (ii) 29% for payments made in 2004 and 2005 and (iii) 28% for payments made in 2006 and thereafter. In general, backup withholding applies if a noncorporate holder fails to furnish a correct taxpayer identification number, fails to report dividend and interest income in full, or fails to certify that the holder has provided a correct taxpayer identification number and that the holder is not subject to withholding. An individual's taxpayer identification number is the individual's Social Security number. Any amount withheld from a payment to a holder under the backup withholding rules will be allowed as a credit against the holder's U.S. federal income tax liability and may entitle the holder to a refund, provided the required information is furnished to the Internal Revenue Service.

Distributions with respect to Common Stock.    Distributions with respect to common stock purchased in connection with this private placement or acquired upon the exercise of a warrant will constitute dividends, taxable to holders as ordinary income, to the extent of the company's current or accumulated earnings and profits. To the extent that a holder receives distributions with respect to shares of common stock that exceed such current and accumulated earnings and profits, such distributions first

34

will be treated as a non-taxable return of capital, to the extent of the holder's adjusted tax basis in the shares of common stock. Any such distributions in excess of the holder's adjusted tax basis in the shares of common stock generally will be treated as capital gain. Subject to applicable limitations, dividends paid to holders that are corporations may qualify for the dividends-received deduction.

Dispositions of the Common Stock.    A holder will recognize capital gain or loss upon the sale or taxable exchange of shares of common stock in an amount equal to the difference between the amount realized on such disposition and the holder's adjusted tax basis in such Common Stock. Any such gain or loss will be long-term capital gain or loss if the holder has held the shares of Common Stock for longer than one year. Capital gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Net capital gains of holders who or which are individuals, estates and trusts are subject to tax at lower rates than items of ordinary income. Deductions for net capital losses are subject to significant limitations. For holders who or which are individuals, estates and trusts, a capital loss is deductible in the year incurred to the extent of capital gains recognized during such year $3,000 (or, if less, the excess of the total amount of loss recognized over the total amount of fain recognized in that year). Any unused portion of such net capital loss may generally be carried over and allowed to the extent of capital gains in such year plus $3,000 until such net capital loss is exhausted. For holders that are corporations, any unused portion of such net capital loss may be carried back three years and then carried forward five years from the year in which the loss arose, to offset net capital gains during such period.

The above summary does not discuss all aspects of federal income taxation that may be relevant to a particular holder of warrants or common stock in light of such holder's particular circumstances and income tax situation. Each holder of warrants or common stock should consult such holder's tax advisor as to the specific tax consequences to the holder of the ownership and disposition of the warrants or common stock including the application and effect of state, local, foreign and other tax laws, or subsequent revisions of these tax laws.

35

SELLING SECURITY HOLDERS

We are registering for resale the securities held by the selling security holders identified below and by Trinity as well as securities which may be acquired by our placement agent, Spencer Trask Ventures, Inc. The selling security holders identified below acquired the shares of common stock and Class A warrants from us in the private placement of units completed on December 10, 2002. Trinity acquired the shares of our common stock in connection with the amendment the License and Collaboration Agreement entered into between us and Trinity. Spencer Trask Ventures, Inc. may acquire shares of our common stock and Class A warrant upon exercise of its placement agent option. The selling security holders identified below may acquire additional shares of common stock and Class B warrants upon the private exercise of the Class A warrants purchased in the private placement. We are registering these securities under the Securities Act of 1933 to permit the selling security holders, Spencer Trask Ventures, Inc. and Trinity and their respective pledgees, donees, transferees and other successors-in-interest that may receive securities from a selling security holder, Spencer Trask Ventures, Inc. or Trinity as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to publicly resell the securities when and as they deem appropriate. The following table sets forth:

•

the names of the selling security holders;



•

the numbers of and percentages of shares of our common stock and Class A warrants that the selling security holders beneficially owned as of the date of registration for resale of the securities under this prospectus;



•

the numbers of shares of our common stock and Class A warrants that may be offered for resale for the account of the selling security holders under this prospectus; and



•

the numbers and percentages of shares of our common stock and Class A warrants to be beneficially owned by the selling security holders after the resale of all such securities (assuming all of the offered resale shares of common stock and warrants are sold by the selling security holders).

The numbers of securities in the columns "Shares of Common Stock Being Offered," and "Class A Warrants Being Offered" represents all of the shares of common stock and Class A warrants that each selling security holder may offer for resale under this prospectus. We do not know how long the selling security holders will hold the securities before selling them or how many shares and/or warrants they will sell and, except for the resale restrictions which prohibit the selling security holders from selling any of the shares of common stock initially included in the units purchased by them until the date which is the earlier of (i) two hundred ten (210) days following the closing date of the private placement of units and (ii) ninety (90) days following the effectiveness of the registration statement on Form S-1, we do not currently have any agreements, arrangements or understandings with any of the selling security holders regarding the sale of any of the resale shares of common stock or warrants. The shares of common stock and warrants offered by this prospectus may be offered from time to time by the selling security holders listed below. This table does not indicate any Class B warrants or common stock issuable upon any exercise of the warrants. If there are any exercises of the Class A warrants, we will supplement this prospectus to the extent legally required or as otherwise determined to be appropriate.

Pursuant to a letter agreement dated August 13, 2002, Trinity has agreed not to sell, contract to sell or dispose of its shares of common stock until May 13, 2003.

This table is prepared solely based on information supplied to us by the listed selling security holders, any Schedule 13D or 13G, and other public documents filed with the SEC, and assumes the sale of all of the resale shares and warrants. The applicable percentages of beneficial ownership are based on an

36

aggregate of [                        ] shares of our common stock and 10,974,490 Class A warrants issued and outstanding on December 10, 2002, adjusted as required by rules promulgated by the SEC.

	Shares of Common Stock Beneficially Owned at December 10, 2002					Class A Warrants Beneficially Owned at December 10, 2002		Class A Warrants Beneficially Owned After Resale of Class A Warrants
				Shares Beneficially Owned After Sale of Common Stock
			Shares of Common Stock Being Offered				Class A Warrants Being Offered
Selling Securityholder
	Number	Percent		Number	Percent			Number	Percent
Cheshire Associates(1)	34,010,119	62.4%		34,010,119	62.4%
Spencer Trask Private Equity Fund I	508,475	2.6%	508,475	508,475	2.6%	508,475	508,475	0	0
Spencer Trask Private Equity Fund II	259,888	1.3%	259,888	259,888	1.3%	259,888	259,888	0	0
Spencer Trask Private Equity Accredited Fund III, LLC	225,989	1.1%	225,989	225,989	1.1%	225,989	225,989	0	0
George Karfunkel	169,492	*	169,492	169,492	*	169,492	169,492	0	0
Michael Karfunkel	169,492	*	169,492	169,492	*	169,492	169,492	0	0
Parfina Inv. Inc.	112,972	*	112,972	112,972	*	112,972	112,972	0	0
Lincoln Adair & Sally Adair TIC	14,125	*	14,125	14,125	*	14,125	14,125	0	0
David M. Gilson	33,899	*	33,899	33,899	*	33,899	33,899	0	0
Harold A. Havekotte	11,300	*	11,300	11,300	*	11,300	11,300	0	0
John Kokales	14,125	*	14,125	14,125	*	14,125	14,125	0	0
THE PAUL F PETRUS REV TRUST OF 1988 UAD 4-15-88	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Barry Shemaria	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Sweetland L.L.C.	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Statler Family Trust	14,125	*	14,125	14,125	*	14,125	14,125	0	0
William C Wetzel TTEE for the Livingston, Barger, Brandt & Schroeder Self Employment Ret Plan DTD 9/30/94 FBO Richard Stites	11,300	*	11,300	11,300	*	11,300	11,300	0	0
DCG&T c/f Ross Graham Walker III IRA R/O	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Clarence A. Abramson	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Glen Basinger	13,560	*	13,560	13,560	*	13,560	13,560	0	0
Joe N. & Jamie Behrendt Revocable Trust 10/20/96	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Lon Bell	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Fred B. Bialek	56,498	*	56,498	56,498	*	56,498	56,498	0	0
William J. Callahan & Joan M. Callahan JTWROS	225,989	1.1%	225,989	225,989	1.1%	225,989	225,989	0	0
Delaware Charter G&T C/F Elizabeth A. Eller IRA	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Jacob M. Engel	112,995	*	112,995	112,995	*	112,995	112,995	0	0
George Fink	18,080	*	18,080	18,080	*	18,080	18,080	0	0

37

Jonathan Fleisig	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Robert & Marie Frankel JTWROS	28,249	*	28,249	28,249	*	28,249	28,249	0	0
John P. Funkey Revocable Trust 2/26/90	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Headwaters Holdings LLC	225,989	1.1%	225,989	225,989	1.1%	225,989	225,989	0	0
Maurice & Stacy Gozlan TIE	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Byron C. & Julie L. Hughey Tenants By the Entirety	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Michael A. Kolber & Terri L. Meinking JT/WROS	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Ezra P. Mager	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Mouton Family Living Trust	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Gus & Karen Nicoloopoulos	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Edward J. O'Connell	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Reed S. Oslan	16,950	*	16,950	16,950	*	16,950	16,950	0	0
K.V. Rajagopalan	15,820	*	15,820	15,820	*	15,820	15,820	0	0
Elisha Rothman	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Richard Sakakeeny	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Wayne Saker	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Jason A. Sango	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Arthur Silverman	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Adam K. Stern	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Robert Streett	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Clayton Struve	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Matthew A. Sutton	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Jack Swartz	22,599	*	22,599	22,599	*	22,599	22,599	0	0
Ralph C. Wintrode Trust dtd May 9, 2001	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Michael Zimmerman	22,599	*	22,599	22,599	*	22,599	22,599	0	0
Dr. Jan Arnett	84,746	*	84,746	84,746	*	84,746	84,746	0	0
DCG&T C/F Jack T. Badgett IRA R/O	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Nicholas & Barbara DeLuca JTWROS	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Theresa M. Fabiani	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Alfred A. Gilbert	28,249	*	28,249	28,249	*	28,249	28,249	0	0
The Brice T. Hall Family Trust	28,249	*	28,249	28,249	*	28,249	28,249	0	0
John J. Kealy Trust	14,125	*	14,125	14,125	*	14,125	14,125	0	0
The Shirley Keys Family Trust UAD 4/22/99 — Shirely Keys TTEE	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Everett P. Kirch & Linda R. Kirch JTWROS	14,125	*	14,125	14,125	*	14,125	14,125	0	0

38

Kenneth J. Kostal	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Richard Mandell & Audrey R. Lee Mandell JTWROS	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Richard J. Mish	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Bernard Oleyar	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Dr. Peter Oppenheimer & Sandi Oppenheimer JTWROS	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Dr. V.J. L.K. Raju & Dr. Govind S. Raju JTWROS	14,125	*	14,125	14,125	*	14,125	14,125	0	0
J. Edward Shrawder	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Paul J. Weir	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Wells Yachts Inc. Pen/Plan DTD 1/1/83, Clinton Wells TTEE	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Joseph Thomas Alvarez III Trust	25,424	*	25,424	25,424	*	25,424	25,424	0	0
David R. Baker	11,300	*	11,300	11,300	*	11,300	11,300	0	0
James & Catherine Benedict, TIC	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Robert Berger T/A Retail Advisory Group	33,899	*	33,899	33,899	*	33,899	33,899	0	0
Tore Bjark	11,269	*	11,269	11,269	*	11,269	11,269	0	0
Paul Chacon	22,599	*	22,599	22,599	*	22,599	22,599	0	0
J.M.O Colton	39,549	*	39,549	39,549	*	39,549	39,549	0	0
William E. Dalton	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Bruce A. Davis MD	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Donald R. DePriest	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Gerard Fragetti	19,775	*	19,775	19,775	*	19,775	19,775	0	0
David Gans	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Glafam Trust	56,498	*	56,498	56,498	*	56,498	56,498	0	0
A. John Goddard III Estate Trust dated July 10, 1982	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Delaware Charter Guarantee & Trust Co FBO Jon Goodykoontz IRA	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Delaware Charter Guarantee & Trust Co. C/F Peter Grassl IRA	11,300	*	11,300	11,300	*	11,300	11,300	0	0
T.C.R., L.P.	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Fritas AS	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Joi Dell & Harry Hurd Trust	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Mark H. Hurd	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Jerry Jordan & Julianna Jordan JTWROS	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Intertel & Co.	112,995	*	112,995	112,995	*	112,995	112,995	0	0

39

Joseph P. Kazickas	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Ronald Knox	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Joe Massey	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Gary Mittleman	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Robert Nance	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Charles Nash	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Gerald Padwe	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Wayne Pambianchi	56,498	*	56,498	56,498	*	56,498	56,498	0	0
William F. Sanders	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Fredrik C. Schreuder	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Medical Venture Management A/S	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Delaware Charter Guarantee & Trust Co. FBO Susan Spongberg IRA	2,825	*	2,825	2,825	*	2,825	2,825	0	0
Nancy Sullins	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Premier Custom Leasing LLC	22,599	*	22,599	22,599	*	22,599	22,599	0	0
SSS Enterprises, A Partnership	22,599	*	22,599	22,599	*	22,599	22,599	0	0
Daniel Tripodi & Sharon Tripodi JTWROS	45,198	*	45,198	45,198	*	45,198	45,198	0	0
Larry Wasserman	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Delaware Charter G&T Co FBO Ronald Hutchison IRA	11,300	*	11,300	11,300	*	11,300	11,300	0	0
DCG&T c/f Scott Leishman IRA Rollover	11,300	*	11,300	11,300	*	11,300	11,300	0	0
PEAK Private Equity AG	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Jack Cardwell	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Daniel Chestler	56,498	*	56,498	56,498	*	56,498	56,498	0	0
DCG&T C/F Dennis Deloach IRA RO	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Dennis R. Deloach, Jr.	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Dr. Richard Dold	22,599	*	22,599	22,599	*	22,599	22,599	0	0
James B. Gallinatti Jr. & Ellen T. Gallinatti JTWROS	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Walter G. Gans	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Robert Hammer	22,599	*	22,599	22,599	*	22,599	22,599	0	0
Clariden Bank	225,989	1.1%	225,989	225,989	1.1%	225,989	225,989	0	0
W. Kentley Jones	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Christian Kolster	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Brooke Larsen	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Carlos Lezcano	124,294	*	124,294	124,294	*	124,294	124,294	0	0
Larry Pallini	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Joel Barth	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Paul Dembinski	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Roland Isaacson	112,995	*	112,995	112,995	*	112,995	112,995	0	0

40

Allen Sessoms	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Delaware Charter G&T Co FBO Elizabeth H. Bone SEP IRA	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Adrian Catalano	14,125	*	14,125	14,125	*	14,125	14,125	0	0
DCG&T c/f Robert G. Heidenreich IRA	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Jeffrey Blomstedt & Susan Lascala JTWROS	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Arthur G. Cooper	28,249	*	28,249	28,249	*	28,249	28,249	0	0
John Leisenring	16,950	*	16,950	16,950	*	16,950	16,950	0	0
Kevin P. Conroy	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Reiner Fenske	11,300	*	11,300	11,300	*	11,300	11,300	0	0
James J. Ferrari	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Meadowbrook Capital Corp. Profit Sharing Plan	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Louis P. Ferrari	56,498	*	56,498	56,498	*	56,498	56,498	0	0
William L. Ferrari	5,650	*	5,650	5,650	*	5,650	5,650	0	0
Harold S. Gault	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Arun Kapur & Meera Kapur TIC	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Steven L. Keenan	56,498	*	56,498	56,498	*	56,498	56,498	0	0
K&R Negotiation Associates LLC	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Stephen H. Lulla	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Kings Surgical Specialists: A Medical Corp Profit Sharing Plan & Pension Plan	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Howard Nathel	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Mel Okeon	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Mel Okeon M.D. Med. Corp Profit Sharing Trust	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Shuman Investment Trust	11,300	*	11,300	11,300	*	11,300	11,300	0	0
James & Deborah Soyak JTWROS	112,995	*	112,995	112,995	*	112,995	112,995	0	0
Eric William Swanson	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Don-Wheeler Enterprises, Inc. A Medical Corp.	28,249	*	28,249	28,249	*	28,249	28,249	0	0
OTAPE Investments LLC	282,486	1.4%	282,486	282,486	1.4%	282,486	282,486	0	0
William D. Barnes	11,300	*	11,300	11,300	*	11,300	11,300	0	0
John P. Smith	11,300	*	11,300	11,300	*	11,300	11,300	0	0
Robert J. Smith	11,300	*	11,300	11,300	*	11,300	11,300	0	0

41

Jane Wexler Feil	28,249	*	28,249	28,249	*	28,249	28,249	0	0
Andrew M. Dyer	56,498	*	56,498	56,498	*	56,498	56,498	0	0
Charles Murray	14,125	*	14,125	14,125	*	14,125	14,125	0	0
Trinity Medical Group USA, Inc.	1,000,000	5.1%	500,000	500,000	2.6%	n/a	n/a	n/a	n/a

*

Less than 1%

Beneficial Ownership for Cheshire Associates includes the beneficial ownership of Kevin Kimberlin and his affiliates and Spencer Trask Ventures, Inc.

Except for Cheshire Associates and Spencer Trask Ventures, Inc. and any affiliates and/or related persons thereof, there has been no material relationship between any of the selling security holders and us in the past three years except for obligations which arose out of the agreements dated as of October and December 2002 by and among us and the selling security holders in connection with our private placement of units completed on December 10, 2002. On June 26, 2002, we entered into amendments with Trinity to amend our Licence and Collaboration Agreement and Stock Purchase Agreement with Trinity. In consideration for entering into these amendments, Trinity has received 500,000 shares of our common stock and also will receive as additional consideration, 250,000 shares of our common stock (750,000 shares in the aggregate) as of the date of the satisfaction by Trinity of each of the following obligations: (i) the purchase by Trinity from us of an aggregate of 300,000 doses of REMUNE®, (ii) the purchase by Trinity from us of an aggregate of 600,000 doses of REMUNE® and (iii) the purchase by Trinity from us of an aggregate of 1.0 million doses of REMUNE®. Under the current agreement, Trinity also is obligated to purchase 500,000 shares of common stock at a purchase price of $10 per share on the date that is 30 days after the date on which Trinity receives the required marketing approval from the Food and Drug Administration of the Ministry of the Public Health of Thailand. We are contemplating renegotiating the Licence and Collaboration Agreement but have not yet entered into any significant discussions with Trinity regarding such renegotiation.

42

PLAN OF DISTRIBUTION

The selling security holders may sell the common stock, the Class A warrants and/or the Class B warrants and/or the shares of common stock underlying the warrants from time to time after the date hereof, subject to the resale restrictions discussed herein. Neither the Class A nor the Class B warrants may be exercised by subsequent public purchasers, each a new investor, until the registration statement on Form S-1 (File No. 333-[            ]), filed by us with the SEC on December [    ], 2002, becomes effective. Upon any private exercise of either the Class A or the Class B warrants by the selling security holders, the selling security holders will hold restricted shares of common stock and, in the case of the exercise of the Class A warrants, Class B warrants, but may resell those securities from time to time under this prospectus.

If a new investor purchases Class A warrants from a selling security holder, the shares of common stock and Class B warrants to be issued upon the exercise of such Class A warrants will be registered under the Form S-1. Additionally, if a new investor purchases Class B warrants from a selling security holder, the shares of common stock to be issued upon the exercise of such warrants will be registered under the Form S-1. A new investor may resell the Class A warrants and the Class B warrants at any time and from time to time after such investor purchases the warrants. However, a new investor may not exercise either the Class A warrants or the Class B warrants and, therefore, may not purchase or resell any shares of common stock underlying those warrants or, in the case of the Class A warrants, the Class B warrants to be issued upon exercise thereof, until the effectiveness of the Form S-1. See "Description of the Warrants and the Warrant Agreement — Registration Rights."

Subject to the resale restrictions described under the heading "Selling Security Holders," the selling security holders may sell shares of common stock, Class A warrants and/or the Class B warrants from time to time in one or more transactions at:

•

fixed prices;



•

market prices at the time of sale;



•

varying prices and term to be determined at the time of sale; or



•

negotiated prices.

The selling security holders will act independently of us in making decisions regarding the timing, manner and size of any resale or exercise. The sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and on terms then prevailing or at prices related to then current market prices or in negotiated transactions. The selling security holders may effect these transactions by selling the securities to or through broker-dealers. Broker-deals engaged by the selling security holders may arrange for other broker-dealers to participate in the resales. The resale securities may be sold by one or more of, or a combination of, the following:

•

block trades in which the broker-dealer attempts to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction;



•

purchases by a broker-dealer as principal and resales by a broker-dealer for its account under this prospectus;



•

an exchange distribution in accordance with the rules of an exchange;



•

ordinary brokerage transactions and transactions in which the broker solicits purchasers; and



•

in privately-negotiated transactions between the selling security holders and purchasers, without a broker-dealer.

To the extent legally required, this prospectus or the registration statement containing this prospectus will be amended or supplemented from time to time to describe a specific additional or different plan

43

of distribution. If the plan of distribution involves an arrangement with a broker-dealer for the sale of securities through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, the amendment or supplement will disclose:

•

the name of each selling security holder and of any participating broker-dealer(s);



•

the number(s) and type(s) of securities involved;



•

the price at which the securities were sold;



•

the commissions paid or discounts or concessions allowed to the broker-dealer(s), where applicable;



•

that a broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and



•

any other facts material to the transaction.

The selling security holders may enter into hedging transactions with broker-dealers in connection with distributions of the securities or otherwise. In these transactions, broker-dealers may engage in short sales of the securities in the course of hedging the positions they assume with selling security holders. The selling security holders may enter into option or other transactions with broker-dealers which require the delivery of securities to the broker-dealer. The broker-dealer may then resell or otherwise transfer the securities under this prospectus. The selling security holders also may loan or pledge the securities to a broker-dealer. The broker-dealer may sell the loaned securities, or upon a default, sell the pledged securities under this prospectus.

Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from selling security holders. Broker-dealers or agents also may receive compensation from the purchasers of the securities for whom they act as agents or to whom they sell as principals, or both. Compensation as to a particular broker-dealer might be in excess of customary commissions and will be in amounts to be negotiated in connection with the sale. Broker-dealers or agents and any other participating broker-dealers or the selling security holders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, in connection with sales of the securities. Accordingly, any commission, discount or concession received by them and any profit on the resale of the securities purchased by them may be deemed to be underwriting discounts or commissions under the Securities Act of 1933.

Because selling security holders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, the selling security holders are subject to the prospectus delivery requirements of the Securities Act of 1933. It is intended that the prospectus delivery requirements will not be satisfied by the electronic delivery of the prospectus.

Securities covered by this prospectus and held by selling security holders, other than affiliates of our company, for at least two years, as such holding period is determined in accordance with Rule 144(d), will be exempt from the registration requirements of the Securities Act of 1933 and freely transferable pursuant to Rule 144(k). Also, any securities covered by this prospectus which qualify for sale under an available exemption from the registration requirements of the Securities Act of 1933 may be sold upon the satisfaction of certain conditions.

The selling security holders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities. To our knowledge, there is no underwriter or coordinating broker acting in connection with the proposed sale of securities by the selling security holders.

To our knowledge, the resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in some states the securities may

44

not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirements is available and is complied with. We will make copies of this prospectus available to the selling security holders and have informed them of the need to deliver copies of this prospectus to purchasers at or prior to the time of any sale of the securities.

Under applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the securities may not simultaneously engage in market-making activities with respect to our securities for a period beginning on the later of five business days prior to the determination of the offering price or the time that person becomes engaged in the distribution of our securities. In addition, each selling security holder will be subject to applicable provisions of the Securities Exchange Act of 1934 and the associated rules and regulations under the Securities Exchange Act of 1934, including Regulation M, which provisions may limit the timing of purchases and sales of securities by the selling security holders.

We will bear all costs, expenses and fees in connection with the registration of the resale securities covered by this prospectus. The selling security holders will bear all commissions and discounts, if any, attributable to the resale of the securities. The selling security holders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the securities against specific liabilities, including liabilities arising under the Securities Act of 1933. The selling security holders have agreed to indemnify us against certain liabilities.

45

LEGAL MATTERS

Pillsbury Winthrop LLP, San Francisco, California, will pass on the validity of our securities being offered hereby. A member of Pillsbury Winthrop LLP owns 1,106 shares of our common stock and an option to acquire 5,000 shares of our common stock.

EXPERTS

[Arthur Andersen LLP, our former independent auditors, have audited our consolidated financial statements included in our amended Annual Report on Form 10-K for the year ended December 31, 2000, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement of which this prospectus forms a part. Our financial statements are incorporated by reference in reliance on Arthur Andersen, LLP's report, given on their authority as experts in giving said reports.]*

46

You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with information different from that contained in this prospectus. This prospectus may be used only where it is legal to sell the common stock and/or warrants of The Immune Response Corporation. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock or warrants of The Immune Response Corporation.

TABLE OF CONTENTS

	Page
WHERE YOU CAN FIND MORE INFORMATION	2
FORWARD-LOOKING STATEMENTS	3
RISK FACTORS	4
OUR BUSINESS	20
DESCRIPTION OF THE WARRANTS AND THE WARRANT AGREEMENT	27
USE OF PROCEEDS	33
U.S. FEDERAL INCOME TAX CONSIDERATIONS	33
SELLING SECURITY HOLDERS	36
PLAN OF DISTRIBUTION	43
LEGAL MATTERS	46
EXPERTS	46

THE IMMUNE RESPONSE CORPORATION

33,342,470 Shares of Common Stock
10,974,490 Class A Warrants
10,974,490 Class B Warrants

PROSPECTUS
December [    ], 2002

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the estimated fees and expenses expected to be incurred in connection with the issuance and distribution of the securities being registered:

Registration fee — SEC		$
Printing, duplicating and engraving expenses
Legal fees and expenses, other than Blue Sky
Transfer Agent and Registrar fees
Accounting fees and expenses
Blue sky fees and expenses
Nasdaq listing fees and expenses
Miscellaneous
	Total

We will bear the expenses shown above. All amounts, other than the SEC registration fee, are estimated solely for the purpose of this registration statement.

Item 15. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors, and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended. Our Amended and Restated Certificate of Incorporation and Bylaws provide for indemnification of our directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. The Delaware General Corporation Law provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under a by-law, agreement, vote of security holders or disinterested directors, or otherwise.

Article VII of our Restated Certificate of Incorporation, as amended, and Article V of our Bylaws provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by law. In addition, we have entered into separate indemnification agreements with our directors and officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent not prohibited by law.

Item 16. Exhibits.

See the Exhibit Index attached to this Registration Statement and incorporated herein by reference.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Act, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for

II-1

indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of ours in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

We hereby undertake:

        (1)  To file during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by us pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended that are incorporated by reference in this registration statement.

        (2)  That, for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (4)  For purposes of determining any liability under the Act, each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 which is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, we certify that we have reasonable grounds to believe that we meet all of the requirements for filing on Form S-3 and have duly caused this registration statement to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Carlsbad, State of California, on December 13, 2002.

THE IMMUNE RESPONSE CORPORATION
By:	/s/  MICHAEL L. JEUB Michael L. Jeub Chief Financial Officer and Vice President of Finance

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ronald B. Moss and Michael L. Jeub as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including any post-effective amendments) to this Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Dated: December 13, 2002	/s/  RONALD B. MOSS Ronald B. Moss President and Principal Executive Officer
Dated: December 13, 2002	/s/  JAMES B. GLAVIN James B. Glavin Chairman of the Board of Directors
Dated: December 13, 2002	/s/  DENNIS J. CARLO Dennis J. Carlo Director

II-3

Dated: December 13, 2002	/s/  MICHAEL L. JEUB Michael L. Jeub Vice President, Finance, Chief Financial Officer and Principal Accounting Officer
Dated: December 13, 2002	/s/  KEVIN B. KIMBERLIN Kevin B. Kimberlin Director
Dated: December 13, 2002	/s/  WILLIAM S. SULLIVAN William S. Sullivan Director

II-4

EXHIBITS

Exhibit Number	Description
4.2	Warrant Agreement
4.3	Form of Class A warrant (included in Exhibit 4.2)
4.4	Form of Class B warrant (included in Exhibit 4.2)
5.1*	Opinion of Pillsbury Winthrop LLP
10.1	Purchase Agreement
23.1*	Consent of BDO Seidman, LLP
23.2*	Consent of Pillsbury Winthrop LLP (included in Exhibit 5.1)
24.1	Power of Attorney (see page II-3)

*

Exhibits to be filed by amendment.

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WHERE YOU CAN FIND MORE INFORMATION
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RISK FACTORS
OUR BUSINESS
OUR IMMUNE-BASED THERAPIES
DESCRIPTION OF THE WARRANTS AND THE WARRANT AGREEMENT
USE OF PROCEEDS
U.S. FEDERAL INCOME TAX CONSIDERATIONS
SELLING SECURITY HOLDERS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Item 15. Indemnification of Directors and Officers.
Item 16. Exhibits.
Item 17. Undertakings.

SIGNATURES
POWER OF ATTORNEY

EXHIBITS

EX-4.2

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EXHIBIT 4.2

WARRANT AGREEMENT

by and between

THE IMMUNE RESPONSE CORPORATION

and

COMPUTERSHARE TRUST COMPANY, INC.

as Warrant Agent

Dated as of December 10, 2002

TABLE OF CONTENTS

Article I CERTAIN DEFINITIONS			1
	Section 1.01	Definitions	1
Article II ORIGINAL ISSUE OF WARRANTS			5
	Section 2.01	Form of Warrant Certificates	5
	Section 2.02	Restrictive Legends	5
	Section 2.03	Execution and Delivery of Warrant Certificates	5
	Section 2.04	Loss or Mutilation	6
	Section 2.05	CUSIP Numbers	6
	Section 2.06	Certificated Warrants	6
Article III EXERCISE OF WARRANTS; REDEMPTION			7
	Section 3.01	Exercise of Class A Warrants	7
	Section 3.02	Exercise of Class B Warrants	7
	Section 3.03	Redemption	7
	Section 3.04	Exercise; Restrictions on Exercise	8
	Section 3.05	Method of Exercise	8
	Section 3.06	Issuance of Warrant Shares	9
	Section 3.07	Fractional Warrant Shares	9
	Section 3.08	Reservation of Warrant Shares	9
	Section 3.09	Compliance with Law	10
Article IV ANTIDILUTION PROVISIONS			10
	Section 4.01	Changes in Common Stock	10
	Section 4.02	Cash Dividends and Other Distributions	11
	Section 4.03	Issuance of Common Stock or Rights or Options	11
	Section 4.04	Fundamental Transaction; Liquidation	12
	Section 4.05	Other Dilutive Events	13
	Section 4.06	Superseding Adjustment	13
	Section 4.07	Minimum Adjustment	13
	Section 4.08	Notice of Adjustment	14
	Section 4.09	Notice of Certain Transactions	14
	Section 4.10	Adjustment to Warrant Certificate	15
Article V WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER			15
	Section 5.01	Transfer and Exchange	15
	Section 5.02	Registration; Registration of Transfer and Exchange	15
	Section 5.03	Initial Certificated Warrants; Book-Entry Provisions for the Global Warrants	16
	Section 5.04	Surrender of Warrant Certificates	17
Article VI THE WARRANT AGENT			17
	Section 6.01	Duties and Liabilities	17
	Section 6.02	Right To Consult Counsel	19
	Section 6.03	Compensation; Indemnification	19
	Section 6.04	No Restrictions on Actions	19
	Section 6.05	Discharge or Removal; Replacement Warrant Agent	20
	Section 6.06	Successor Warrant Agent	20

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Article VII WARRANT HOLDERS			21
	Section 7.01	Warrant Holder Not Deemed a Holder of Common Stock	21
	Section 7.02	Right of Action	21
Article VIII MISCELLANEOUS			21
	Section 8.01	Payment of Taxes	21
	Section 8.02	Reports to Holders	21
	Section 8.03	Notices	21
	Section 8.04	Severability	22
	Section 8.05	Binding Effect	22
	Section 8.06	Third-Party Beneficiaries	22
	Section 8.07	Amendments	22
	Section 8.08	Headings	22
	Section 8.09	GOVERNING LAW	22
	Section 8.10	Counterparts	22
EXHIBIT A-1		Form of Class A Warrant Certificate
EXHIBIT A-2		Form of Class B Warrant Certificate
EXHIBIT B		Form of Legend for Global Warrants
EXHIBIT C		Form of Legend for Warrant Certificates
EXHIBIT D		Form of Accredited Investor Certificate Transferee Letter of Representation

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WARRANT AGREEMENT

        WARRANT AGREEMENT (this "Agreement"), dated as of December 10, 2002, by and between THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the "Company"), and COMPUTERSHARE TRUST COMPANY, INC., a Colorado corporation, as Warrant Agent (the "Warrant Agent").

W I T N E S S E T H:

        WHEREAS, the Company proposes to issue two classes of warrants (collectively, the "Warrants") to purchase upon the exercise of such warrants up to an aggregate 21,948,980 shares of common stock, par value $0.0025 per share, of the Company (the "Common Stock");

        WHEREAS, the Warrants are being issued in connection with the offering by the Company of up to eighty (80) units (plus up to an additional twenty four (24) units to cover any over subscriptions) (each a "Unit" and collectively, the "Units"), each Unit consisting of (a) shares of Common Stock and (b) Class A Warrants (the "Class A Warrants") to purchase initially (i) one share of Common Stock and (ii) one Class B Warrant (the "Class B Warrants") to purchase initially one (1) share of Common Stock (the "Offering"); and

        WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act in connection with the issuance of Warrant Certificates (as herein defined) and other matters as set forth in this Agreement;

        NOW, THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and the Warrant Agent, the Company and the Warrant Agent each hereby agree for the benefit of the other party and for the equal and ratable benefit of the holders of Warrants (the "Holders") as follows:

ARTICLE I

CERTAIN DEFINITIONS

        Section 1.01    Definitions.    (a) As used in this Agreement, the following terms shall have the following meanings:

        "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (2) any other Person that owns, directly or indirectly, twenty five percent (25%) or more of such specified Person's Voting Stock or any executive officer or director of any such specified Person or other Person or, with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

        "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board of Directors.

        "Business Day" means any day which is not a Saturday, a Sunday, or any other day on which banking institutions in New York City are not required to be open.

        "By-laws" means the by-laws of the Company, as the same may be amended or restated from time to time.

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        "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock.

        "Closing Price" means eighty percent (80%) of the lesser of (i) the average of the closing bid prices of the Common Stock, as quoted on the National Association of Securities Dealers Automated Quotation System, for the ten (10) consecutive trading days immediately preceding the closing date of the Offering and (ii) the closing bid price of the Common Stock on the date immediately preceding the closing date of the Offering.

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

        "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, its Chief Executive Officer, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Warrant Agent.

        "Current Market Value" per share of Common Stock of the Company or any other security at any date means (i) if the security is not registered under the Exchange Act, (A) the value of the security, determined in good faith by the Board of Directors and certified in a board resolution, based on the most recently completed arm's-length transaction between the Company and a Person other than an Affiliate of the Company and the closing of which occurs on such date or shall have occurred within the six-month period preceding such date, or (B) if no such transaction shall have occurred on such date or within such six-month period, the fair market value of the security as determined by a nationally or regionally recognized independent financial expert (provided that, in the case of the calculation of Current Market Value for determining the cash value of fractional shares, any such determination within six months that is, in the good faith judgment of the Board of Directors, a reasonable determination of value, may be utilized) or (ii) if the security is registered under the Exchange Act, (a) the average of the daily closing sales prices of the securities for the twenty (20) consecutive trading days immediately preceding such date, or (b) if the securities have been registered under the Exchange Act for less than twenty (20) consecutive trading days before such date, then the average of the daily closing sales prices for all of the trading days before such date for which closing sales prices are available, in the case of each of (ii)(a) and (ii)(b), as certified to the Warrant Agent by the President, any Vice President or the Chief Financial Officer of the Company. The closing sales price for each such trading day shall be: (1) in the case of a security listed or admitted to trading on any United States national securities exchange or quotation system, the closing sales price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day; (2) in the case of a security not then listed or admitted to trading on any national securities exchange or quotation system, the last reported sale price on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reputable quotation source designated by the Company; (3) in the case of a security not then listed or admitted to trading on any national securities exchange or quotation system and as to which no such reported sale price or bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reputable quotation service, or a newspaper of general circulation in the Borough of Manhattan, City and State of New York, customarily published on each Business Day, designated by the Company, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than thirty (30) days prior to the date in question) for which prices have been so reported; and (4) if there are not bid and asked prices reported during the thirty (30) days prior to the date in question, the Current Market Value shall be determined as if the securities were not registered under the Exchange Act.

        "DTC" means The Depository Trust Company, its nominees and their respective successors.

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        "Exchange Act" means the United States Securities Exchange Act of 1934, as amended.

        "Exercise Date" means, with respect to any Warrant, the Business Day on which such Warrant is exercised in accordance with Article III of this Agreement.

        "Exercise Price" means the applicable exercise price with respect to a Warrant determined in accordance with Section 3.01 or Section 3.02, as applicable, in each case subject to adjustment pursuant to the terms of this Agreement.

        "Expiration Date" of any Warrant means the fifth (5th) anniversary of the Issue Date for such Warrant which, if not a Business Day, shall be the next Business Day.

        "Form S-1 Registration Statement" means the registration statement on Form S-1 contemplated by Section 5 of the Purchase Agreements relating to the offer and sale by the Company to the Holders of the Warrants (other than the Investors) of (i) the Warrants Shares acquired by such Holders upon the exercise of any Warrants and (ii) the Class B Warrants acquired by such Holders upon the exercise of any Class A Warrants.

        "Form S-3 Registration Statement" means the registration statement on Form S-3 contemplated by Section 5 of the Purchase Agreements relating to the resale by the Investors of the Common Stock (included in the Units), the Warrants and the Warrant Shares acquired by the Investors upon the exercise of any Warrant.

        "Fundamental Transaction" means any transaction or series of related transactions by which the Company consolidates with or merges with or into any other Person or sells, assigns, transfers, leases, conveys or otherwise disposes of all or substantially all of its properties and assets to another Person or group of affiliated Persons or is a party to a merger or binding share exchange which reclassifies or changes its outstanding Common Stock; provided, however, that the Company may effect any of such transactions with a wholly-owned subsidiary where after such transaction the Company or, in the event the Company is not the surviving entity, the surviving entity has a consolidated net worth which is no less than the consolidated net worth of the Company prior to such transaction.

        "Investors" means the initial purchasers of the Units offered by the Company pursuant to the Purchase Agreements, dated as of December     , 2002, by and between the Company and the Persons identified therein (the "Purchase Agreements").

        "Issue Date" means (i) with respect to the Class A Warrants (other than the Class A Warrants comprising a part of the Unit Purchase Option), the closing date of the Offering, (ii) with respect to the Class A Warrants comprising a part of the Unit Purchase Option, the date of exercise of the Unit Purchase Option and (iii) with respect to the Class B Warrants, the date of exercise of the applicable Class A Warrant.

        "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

        "Placement Agent" means Spencer Trask Ventures, Inc., a Delaware corporation, as exclusive placement agent in connection with the Offering.

        "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, and/or as to the payment of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

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        "Registration Statements" means the collective reference to the Form S-1 Registration Statement and the Form S-3 Registration Statement and any amendments or supplements thereto.

        "Securities" means the Warrants and the Warrant Shares.

        "Securities Act" means the United States Securities Act of 1933, as amended.

        "Unit Purchase Option" means the option issued by the Company to the Placement Agent, in consideration for acting as such, to purchase from the Company at any time during the period commencing on the date hereof and ending at 5:30 p.m., New York time, on the seventh (7^th) year anniversary of the closing date of the Offering, that number of Units equal to twenty percent (20%) of the number of Units sold in the Offering.

        "Voting Stock" means, with respect to any Person, any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).

        "Warrant Shares" mean the shares of Common Stock or any other securities for which the Warrants are exercisable or which have been issued upon exercise of the Warrants.

(b)

Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Agent Members	5.03(a)
Agreement	Forepart
Certificated Warrants	2.03
Class A Warrants	Recitals
Class B Warrants	Recitals
Common Stock	Recitals
Company	Forepart
Global Warrant	2.03
Holders	Recitals
Investors	1.01
Purchase Agreements	1.01
Redemption Notice Date	3.03
Redemption Price	3.03
Redemption Target Price	3.03
Stock Transfer Agent	3.06
Successor Company	4.04(a)
Supplemental Warrant Agreement	4.04(a)
Transaction Date	4.03
Units	Recitals
Warrants	Recitals
Warrant Agent	Forepart
Warrant Certificates	2.01
Warrant Register	5.01

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ARTICLE II

ORIGINAL ISSUE OF WARRANTS

        Section 2.01    Form of Warrant Certificates.    Certificates representing the Class A Warrants and the Class B Warrants (collectively, the "Warrant Certificates") shall be in registered form only and substantially in the form attached hereto as Exhibit A-1 and Exhibit A-2, respectively. The Warrant Certificates shall be dated the date on which they are countersigned by the Warrant Agent and shall have such insertions as are appropriate or required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends and endorsements typed, stamped, printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation pursuant thereto, or to conform to usage.

        The terms and provisions contained in the form of Warrant Certificate annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Agreement.

        The definitive Warrant Certificates shall be typed, printed, lithographed or engraved or produced by any combination of these methods, all as determined by the officer of the Company executing such Warrant Certificates, as evidenced by such officer's execution of such Warrant Certificates.

        Pending the preparation of definitive Warrant Certificates, temporary Warrant Certificates may be issued, which may be printed, lithographed, typewritten, mimeographed or otherwise produced, and which will be substantially of the tenor of the definitive Warrant Certificates in lieu of which they are issued.

        If temporary Warrant Certificates are issued, the Company will cause definitive Warrant Certificates to be prepared without unreasonable delay. After the preparation of definitive Warrant Certificates, the temporary Warrant Certificates shall be exchangeable for definitive Warrant Certificates upon surrender to the Warrant Agent of the temporary Warrant Certificates without charge to the Holder. Until so exchanged the temporary Warrant Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Warrant Certificates.

        Section 2.02    Restrictive Legends.    (a) Each Global Warrant shall bear on the face thereof the legend set forth in Exhibit B.

(b)

Except as provided in Section 2.02(c) and Section 2.02(d), each Warrant Certificate shall bear on the face thereof the legends set forth on Exhibit C.


(c)

The legend contemplated by Paragraph A of Exhibit C may be removed upon the earliest to occur of (i) the transfer of the Warrant evidenced thereby pursuant to a registration statement which has been declared effective under the Securities Act and which continues to be effective at the time of such transfer, (ii) the sale of the Warrant pursuant to Rule 144 promulgated under the Securities Act (or any similar provision of the Securities Act then in effect) and (iii) when the Warrant may be resold without registration under the Securities Act pursuant to Rule 144(k) or otherwise.


(d)

The legend contemplated by Paragraph B of Exhibit C may be removed upon the continuing effectiveness under the Securities Act of the Form S-1 Registration Statement.

        Section 2.03    Execution and Delivery of Warrant Certificates.    Warrant Certificates evidencing (a) the Class A Warrants to purchase initially an aggregate of 10,974,490 shares of Common Stock and (b) the Class B Warrants to purchase initially an aggregate of 10,974,490 shares of Common Stock shall in each case be executed by the Company on the applicable Issue Date and delivered to the Warrant Agent for countersignature, and the Warrant Agent shall thereupon countersign such Warrant Certificates and deliver to the Holders Warrant Certificates representing the Class A Warrants or Class B Warrants, as the case may be. The Warrant Agent is hereby authorized to countersign and

5

deliver Warrant Certificates as required by this Section 2.03 or by Section 2.04, 2.06, 3.03 or 5.03 of this Agreement.

        The Warrant Certificates shall be executed on behalf of the Company by its Chief Executive Officer, President or any Vice President, either manually or by facsimile signature printed thereon. The Warrant Certificates shall be countersigned manually by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company whose signature shall have been placed upon any of the Warrant Certificates shall cease to be such officer of the Company before countersignature by the Warrant Agent and issuance and delivery thereof, such Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer of the Company.

        Initially, the Warrants shall be issued in definitive, fully registered form substantially in the form set forth in Exhibit A ("Certificated Warrants"). To the extent provided in Section 5.03(a), the Warrants may be deposited in the form of book entry (each a "Global Warrant") with the Warrant Agent (subject to the provisions of Section 5.02), which shall act as custodian for DTC, duly executed by the Company and countersigned by the Warrant Agent as hereinafter provided. The number of Warrants represented by the Global Warrant may from time to time be increased or decreased by adjustments made on the records of the Warrant Agent and DTC as hereinafter provided. Pursuant to Section 5.03, interests in the Global Warrant may be converted into or exchanged for Certificated Warrants.

        Section 2.04    Loss or Mutilation.    Upon receipt by the Company and the Warrant Agent of evidence satisfactory to them, in their reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity satisfactory to them and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company or the Warrant Agent that the Warrants represented thereby have been acquired by a bona fide purchaser, the Company shall execute and the Warrant Agent shall countersign and deliver to the registered Holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Section 2.04, the Company may require the payment of a sum sufficient to cover any tax and other costs of the Replacement Warrant, including the cost of obtaining a bond, that may be imposed in relation thereto and other expenses (including the reasonable fees and expenses of the Warrant Agent and of counsel to the Company) in connection therewith. Every new Warrant Certificate executed and delivered pursuant to this Section 2.04 in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, whether or not the allegedly lost, stolen or destroyed Warrant Certificates shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 2.04 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates.

        Section 2.05    CUSIP Numbers.    The Company in issuing the Warrants may use a "CUSIP" number(s), and if so, the Warrant Agent shall use the CUSIP number(s) in notices as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number(s) printed in the notice or on the Warrants, and that reliance may be placed only on the other identification numbers printed on the Warrants.

        Section 2.06    Certificated Warrants.    If DTC is at any time unwilling or unable to continue as a depository for a Global Warrant and a successor depository is not appointed by the Company within ninety (90) days or if so requested by any Holder of at least 10,000 Warrants, the Company will issue Certificated Warrants in exchange for such Global Warrant (to the extent so requested in the case of a request by such a Holder). In connection with the execution and delivery of such Certificated Warrants, the Warrant Agent shall, upon receipt of the order and at the direction of the Company, reflect on its books and records a decrease in the principal amount of the relevant Global Warrant equal to the number of such Certificated Warrants and the Company shall execute and the Warrant Agent shall countersign and deliver one or more Certificated Warrants in an equal aggregate number.

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ARTICLE III

EXERCISE OF WARRANTS; REDEMPTION

        Section 3.01    Exercise of Class A Warrants.    (a) Each Class A Warrant shall, when the certificate therefore is countersigned by the Warrant Agent, entitle the Holder thereof, subject to and upon compliance with the provisions of this Agreement (including, in the case of Holders other than the Investors, the restrictions set forth in Section 3.04(b)), to purchase (i) one (1) share of Common Stock and (ii) one (1) Class B Warrant, in each case subject to adjustment pursuant to the terms of this Agreement.

(b)

The Exercise Price of each Class A Warrant (the "Class A Exercise Price") is $1.33, subject to adjustments pursuant to the terms of this Agreement.

        Section 3.02    Exercise of Class B Warrants.    (a) Each Class B Warrant shall, when the certificate therefor is countersigned by the Warrant Agent, entitle the Holder thereof, subject to and upon compliance with the provisions of this Agreement (including, in the case of Holders other than the Investors, the restrictions set forth in Section 3.04(b)), to purchase one (1) share of Common Stock subject to adjustment pursuant to the terms of this Agreement.

(b)

The Exercise Price of each Class B Warrant (the "Class B Exercise Price") is $1.77, subject to adjustments pursuant to the terms of this Agreement.

        Section 3.03    Redemption.    (a) Notwithstanding anything in this Agreement to the contrary, upon thirty (30) days prior written notice to the Holders of the Warrants (the date of such notice being hereinafter referred to as the "Redemption Notice Date"), the Company shall have the right to redeem from the Holders the Warrants at any time after the applicable Issue Date of such Warrants at a price of $0.01 per Warrant (the "Redemption Price"), if the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days ending within thirty (30) days prior to the Redemption Notice Date is greater than or equal to the amount that is equal to one hundred eighty seven and one-half percent (187.5%) of the then applicable Exercise Price of such Warrant (the "Redemption Target Price"). All Warrants of a class, except those comprising the Warrant portion of the Unit Purchase Option, are subject to being redeemed if any of such class are sought to be redeemed.

(b)

If the conditions set forth in Section 3.03(a) are satisfied, and the Company desires to exercise its right to redeem the Class A Warrants and/or the Class B Warrants, it shall request that the Warrant Agent mail a notice of redemption to each of the Holders of the Class A Warrants and/or the Class B Warrants to be redeemed, first class, postage prepaid, not later than the thirtieth (30th) day prior to the date fixed for redemption, at its last address as shall appear on the records maintained pursuant to Section 5.01. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Holder actually receives such notice.



(c)

The notice of redemption shall specify (i) the Redemption Price, (ii) the date fixed for redemption, (iii) the place where the Warrant Certificates shall be delivered and the Redemption Price paid, (iv) that the Warrant Agent and the Placement Agent will assist each Registered Holder of a Class A or Class B Warrant, as the case may be, in connection with the exercise thereof and (v) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the date fixed for redemption. The date fixed for the redemption of the Warrants shall be the "Redemption Date." No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Holder (a) to whom notice was not mailed or (b) which shall have received a notice of redemption which fails to comply with the first sentence of this Section 3.03(c). An affidavit of the Warrant Agent or of the Secretary or an

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Assistant Secretary of the Warrant Agent or the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(d)

Any right to exercise a Class A or Class B Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Warrants shall have no further rights except to receive, upon due surrender of the Warrant, the Redemption Price.



(e)

From and after the Redemption Date, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the Holder thereof of one or more Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Holder a sum in cash equal to the aggregate Redemption Price of each such Warrant. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Warrants called for redemption and not theretofore duly exercised, such Warrants (including, in the case of the Class A Warrants, the underlying Class B Warrants) shall expire and become void and all rights hereunder and under the Warrant Certificates, except the right to receive payment of the redemption price, shall cease.



(f)

If the shares of the Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the Redemption Price and the Redemption Target Price shall be proportionally adjusted by the ratio which the total number of shares of Common Stock outstanding immediately prior to such event bears to the total number of shares of Common Stock to be outstanding immediately after such event.



(g)

Notwithstanding anything in this Agreement or in the Warrants to the contrary, the Company shall not redeem any Warrant from any Holder who is not an Investor at any time prior to the date the Form S-1 Registration Statement is declared effective by the Commission.

        Section 3.04    Exercise; Restrictions on Exercise.    (a) Subject to the terms and conditions set forth herein, including without limitation Section 3.09, the Warrants shall be exercisable on any Business Day on or after the Issue Date. Any Warrants not exercised by 5:00 p.m., New York City time, on the applicable Expiration Date shall expire and all rights of the Holders of such Warrants shall terminate.

(b)

Notwithstanding anything in this Agreement or in the Warrants to the contrary, the Holders of the Warrants (other than the Investors) shall not be permitted to exercise any of the Class A Warrants or the Class B Warrants until such time as the Form S-1 Registration Statement is declared effective by the Commission under the Securities Act and continues to be effective at the time of such exercise.

        Section 3.05    Method of Exercise.    A Warrant (other than any Warrant comprising a part of the Unit Purchase Option) may be exercised only in whole upon (i) surrender of the related Warrant Certificate to the Warrant Agent at the office of the Warrant Agent, together with the form of election to purchase the securities on the reverse thereof duly filled in and signed by the Holder thereof and (ii) payment to the Warrant Agent, for the account of the Company, of the Exercise Price for each Warrant Share or other security issuable upon the exercise of such Warrants then exercised. Such payment shall be made in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. In the event that a Warrant Certificate is surrendered at any time prior to the Expiration Date for exercise of less than all the Warrants represented by such Warrant Certificate, a new Warrant Certificate representing the remaining Warrants shall be issued to the applicable Holder. The Warrant Agent shall countersign and deliver the required new Warrant Certificates, and the Company, at the Warrant Agent's request, shall supply the Warrant Agent with Warrant Certificates duly signed on behalf of the Company for such purpose. Upon the request of the Company, the Warrant Agent shall

8

provide to the Company information with respect to (x) the total number of Warrants which have been exercised as of the date of such request and (y) the total amount of funds which have been received pursuant to the exercise of such Warrants as of the date of such request.

        Section 3.06    Issuance of Warrant Shares.    Upon the surrender of Warrant Certificates and payment of the aggregate Exercise Price, as set forth in Section 3.05, the Company shall issue and cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock ("Stock Transfer Agent") to countersign and deliver to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise, to the Person or Persons entitled to receive the same (including any depositary institution so designated by a Holder), together with cash as provided in Section 3.07 in respect of any fractional Warrant Shares otherwise issuable upon such exercise (but only to the extent permitted by applicable law and the instruments and agreements governing the indebtedness of the Company and its subsidiaries at such time and if the payment of cash is not so permitted, the Company shall issue Warrant Shares in an amount equal to the next highest whole number). Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the per share Exercise Price, as aforesaid; provided, however, that if, at such date, the transfer books for the Warrant Shares shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened and until such date the Company shall be under no duty to deliver any certificates for such Warrant Shares; provided further, however, that such transfer books, unless otherwise required by law, shall not be closed at any one time for a period longer than twenty (20) calendar days and shall not be closed without ten (10) days prior written notice to the Holders.

        Section 3.07    Fractional Warrant Shares.    The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares which may be purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.07, be issuable upon the exercise of any Warrant, the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent (but only to the extent permitted by applicable law and the instruments and agreements governing the indebtedness of the Company and its subsidiaries at such time and if the payment of cash is not so permitted, the Company shall issue Warrant Shares in an amount equal to the next highest whole number).

        Section 3.08    Reservation of Warrant Shares.    The Company shall at all times keep reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient to provide for the exercise of all outstanding Warrants. The registrar for the Common Stock shall at all times until the Expiration Date reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Stock Transfer Agent. The Company will supply such Stock Transfer Agent with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 3.07. The Company will furnish to the Stock Transfer Agent a copy of all notices of adjustments (and certificates related thereto) transmitted to each Holder.

        Before taking any action which would cause a reduction in the Exercise Price in accordance with Article IV below the then par value (if any) of the Common Stock, the Company shall take any and all corporate action which, in the opinion of its counsel, may be necessary in order that the Company may

9

validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted.

        The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants shall, upon issue, be duly and validly issued, fully paid, nonassessable, free of preemptive rights, free from all taxes and free from all liens, charges and security interests with respect to the issue thereof.

        Section 3.09    Compliance with Law.    (a) Subject to the terms of this Agreement (including the procedures for exercise set forth in Section 3.04), the Warrants shall be exerciseable at any time and from time to time on any Business Day on or after the Exercise Date; provided, however, that notwithstanding anything in this Agreement to the contrary, in no event shall a Holder (other than an Investor) be entitled to exercise a Warrant unless (i) a registration statement filed under the Securities Act in respect of the issuance of the Warrant Shares upon exercise is then effective or (ii) (A) the Company has received the opinion of counsel to the Holder (in form and substance satisfactory to the Company) addressed to the Company and the Warrant Agent to the effect that the issuance of the shares of Common Stock upon the exercise of such Warrants is exempt from the registration requirements of the Securities Act and (B) there is sufficient information for the Company to conclude that such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holder resides. The Company shall use commercially reasonable efforts to cause the Warrant Shares issued upon exercise to be qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holder resides; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.09 or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject.

(b)

If any shares of Common Stock required to be reserved for purposes of the exercise of Warrants require, under any other Federal or state law or applicable governing rule or regulation of any national securities exchange, registration with or approval of any governmental authority, or listing on any such national securities exchange or quotation system before such shares may be issued upon exercise, the Company will use its reasonable efforts to cause such shares to be duly registered or approved by such governmental authority or listed on the relevant national securities exchange or quotation system, as the case may be.

ARTICLE IV

ANTIDILUTION PROVISIONS

        Section 4.01    Changes in Common Stock.    In the event that at any time and from time to time the Company shall (i) pay a dividend or make a distribution on Common Stock in shares of Common Stock or other shares of Capital Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) increase or decrease the number of shares of Common Stock outstanding by reclassification of its Common Stock, then the number of shares of Common Stock issuable upon exercise of each Warrant immediately after the happening of such event shall be adjusted so that, after giving effect to such adjustment, the Holder of each Warrant shall be entitled to receive the number of shares of Common Stock upon exercise of such Warrant that such Holder would have owned or have been entitled to receive had such Warrants been exercised immediately prior to the happening of the events described above (or, in the case of a dividend or distribution of Common Stock, immediately prior to the record date therefor), and the Exercise Price shall be adjusted to the price (calculated to the nearest 100th of one cent) determined by multiplying the Exercise Price immediately prior to such event by a fraction, the numerator of which shall be the number of Warrant Shares purchasable with one Warrant immediately prior to such event and the

10

denominator of which shall be the number of Warrant Shares purchasable with one Warrant after the adjustment referred to above. An adjustment made pursuant to this Section 4.01 shall become effective immediately after the distribution date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock or other shares of Capital Stock, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

        Section 4.02    Cash Dividends and Other Distributions.    In the event that at any time and from time to time the Company shall distribute to all holders of Common Stock (i) any dividend or other distribution (including any dividend or distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of cash, evidences of its indebtedness, shares of its Capital Stock or any other properties or securities or (ii) any options, warrants or other rights to subscribe for or purchase any of the foregoing (other than, in the case of clause (i) and (ii) above, (A) any dividend or distribution described in Section 4.01, (B) any rights, options, warrants or securities described in Section 4.03 or Section 4.04 and (C) any cash dividends or other cash distributions from current or retained earnings), then the number of shares of Common Stock issuable upon the exercise of each Warrant immediately prior to such record date for any such dividend or distribution shall be increased to a number determined by multiplying the number of shares of Common Stock issuable upon the exercise of such Warrant immediately prior to such record date for any such dividend or distribution by a fraction, the numerator of which shall be the Current Market Value per share of Common Stock on the record date for such dividend or distribution, and the denominator of which shall be such Current Market Value per share of Common Stock less the sum of (x) the amount of cash, if any, distributed per share of Common Stock and (y) the then fair value (as determined in good faith by the Board of Directors, whose determination shall be evidenced by a board resolution filed with the Warrant Agent, a copy of which will be sent to Holders upon request) of the portion, if any, of the distribution applicable to one share of Common Stock consisting of evidences of indebtedness, shares of stock, securities, other property, warrants, options or subscription or purchase rights; and, subject to Section 4.09, the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such record date by the above fraction. Such adjustments shall be made, and shall only become effective, whenever any dividend or distribution is made; provided, however, that the Company is not required to make an adjustment pursuant to this Section 4.02 if at the time of such distribution the Company makes the same distribution to Holders of Warrants as it makes to holders of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are then exercisable (whether or not currently exercisable). No adjustment shall be made pursuant to this Section 4.02 which shall have the effect of decreasing the number of shares of Common Stock issuable upon exercise of each Warrant or increasing the Exercise Price.

        Section 4.03    Issuance of Common Stock or Rights or Options.    In the event that at any time or from time to time the Company shall issue shares of Common Stock or rights, options or warrants or securities convertible or exchangeable into Common Stock, other than in a bona fide underwritten public offering by or through a syndicate managed by an investment bank of national or regional standing, (a) for a consideration per share (which, in the case of convertible, exchangeable or exercisable securities shall be the amount received by the Company in consideration for the sale and issuance of such convertible, exchangeable or exercisable securities plus the minimum aggregate amount of additional consideration payable to the Company upon conversion, exchange or exercise thereof (as determined in good faith by the Board of Directors, whose determination shall be evidenced by a board resolution filed with the Warrant Agent, a copy of which will be sent to Holders upon request); provided, however, that the value attributable to such convertible, exchangeable or exercisable securities when issued as part of a unit with debt or other obligations of the Company shall be excluded to the extent it is a result of calculating the discount applicable to such debt or other obligations of the Company under generally accepted accounting principles) that is less than the Closing Price, or (b) entitling the holders of rights, options, warrants or securities not originally issued in connection with an underwritten public offering to subscribe for or purchase shares of Common Stock at a price that is

11

Closing Price, the exercise price of each Warrant immediately following the date the Company agrees in writing to issue such shares, rights, options, warrants or other securities, as the case may be (such date being the "Transaction Date") shall be determined pursuant to the following formula:

Exercise Price		=	(N * EP) + (TN * TP) (N + TN)
Where:
	N	=	The number of shares of Common Stock outstanding immediately preceding the Transaction Date.
	EP	=	The exercise price of the Warrant immediately preceding the Transaction Date.
	TN	=	The number of shares of Common Stock issued in such transaction or offered for subscription or purchase or into which the rights, options, warrants or other securities issued in such transaction are convertible or exchangeable.
	TP	=	The price per share received or to be received by the Company for the shares of Common Stock issued in such transaction or upon the exercise, conversion or exchange of such rights, options, warrants or other securities issued in such transaction.

; provided, however, that no adjustment to the number of Warrant Shares issuable upon the exercise of the Warrants or to the Exercise Price shall be made as a result of (i) the vesting or exercise of the Warrants, (ii) the exercise, conversion or exchange of any right, option, warrant or security, the issuance of which has previously required an adjustment to the number of Warrant Shares issuable upon the exercise of the Warrants or to the Exercise Price pursuant to this Section 4.03, (iii) the exercise, conversion or exchange of any right, option, warrant or security outstanding on the Issue Date (to the extent such exercise, conversion or exchange is made in accordance with the terms of such right, option, warrant or security as in effect on the Issue Date) or (iv) the issuance, exercise, conversion or exchange of options to acquire Common Stock by officers, directors or employees of the Company. Any adjustment required by this Section 4.03 shall be made, and shall only become effective, whenever such shares or such rights, options, warrants or securities are issued. No adjustment shall be made pursuant to this Section 4.03 which shall have the effect of decreasing the number of shares of Common Stock issuable upon exercise of each Warrant or increasing the Exercise Price.

        Section 4.04    Fundamental Transaction; Liquidation.    (a) Except as provided in Section 4.04(b), in the event of a Fundamental Transaction, each Holder shall have the right to receive upon exercise of the Warrants the kind and amount of shares of Capital Stock or other securities or property which such Holder would have been entitled to receive upon completion of or as a result of such Fundamental Transaction had such Warrant been exercised immediately prior to such event or to the relevant record date for any such entitlement (regardless of whether the Warrants are then exercisable), assuming (to the extent applicable) that such Holder (i) was not a constituent Person or an affiliate to a constituent Person to such Fundamental Transaction, (ii) made no election with respect thereto, and (iii) was treated alike with the plurality of non-electing Holders. Unless paragraph (b) is applicable to a Fundamental Transaction, the Company shall provide that the surviving or acquiring Person (the "Successor Company") in such Fundamental Transaction will enter into an agreement (a "Supplemental Warrant Agreement") with the Warrant Agent confirming the Holders' rights pursuant to this Section 4.04(a) and providing for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article IV. Any such Supplemental Warrant Agreement shall further provide that such Successor Company will succeed to and be substituted for every right and obligation of the Company in respect of this Agreement and the Warrants. The provisions of this Section 4.04(a) shall similarly apply to successive Fundamental Transactions involving any Successor Company.

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(b)

In the event of (i) a Fundamental Transaction with another Person (other than a subsidiary of the Company) where consideration to the holders of Common Stock in exchange for their shares is payable solely in cash or (ii) the dissolution, liquidation or winding-up of the Company, the Holders of the Warrants shall be entitled to receive, upon surrender of their Warrant Certificates, such cash distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such event, less the Exercise Price. In the event of any Fundamental Transaction described in this Section 4.04(b), the Successor Company and, in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall deposit promptly with the Warrant Agent the funds, if any, necessary to pay the Holders of the Warrants the amounts to which they are entitled as described above. After such funds and the surrendered Warrant Certificates are received, the Warrant Agent shall make payment to the Holders by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrant Certificates.

        Section 4.05    Other Dilutive Events.    In case any event shall occur as to which the other provisions of this Article IV are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by the Warrants in accordance with the essential intent and principles hereof, then, in each such case, the Company shall appoint a firm of independent public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in this Section 4, and necessary to preserve, without dilution, the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holders of Warrants and shall promptly make the adjustments described therein.

        Section 4.06    Superseding Adjustment.    Upon the expiration of any rights, options, warrants or conversion or exchange privileges which resulted in adjustments pursuant to this Article IV, if any thereof shall not have been exercised, the number of Warrant Shares issuable upon the exercise of each Warrant shall be readjusted pursuant to the applicable section of this Article IV as if (a) only the shares of Common Stock issuable upon exercise of such rights, options, warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) shares of Common Stock actually issued, if any, were issued for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges whether or not exercised and the Exercise Price shall be readjusted inversely; provided, however, that no such readjustment (except by reason of an intervening adjustment under Section 4.01) shall have the effect of decreasing the number of Warrant Shares issuable upon the exercise of each Warrant, or increasing the Exercise Price, by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion or exchange privileges.

        Section 4.07    Minimum Adjustment.    The adjustments required by the preceding sections of this Article IV shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment of the Exercise Price or the number of shares of Common Stock issuable upon exercise of the Warrants that would otherwise be required shall be made unless and until such adjustment either by itself or with other adjustments not previously made increases or decreases by at least one percent (1%) the Exercise Price or the number of shares of Common Stock issuable upon exercise of the Warrants immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Article IV and not previously made,

13

would result in a minimum adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. In computing adjustments under this Article IV, fractional interests in Common Stock shall be taken into account to the nearest one-hundredth of a share.

        Section 4.08    Notice of Adjustment.    Whenever the Exercise Price or the number of shares of Common Stock and other property, if any, issuable upon exercise of the Warrants is adjusted, as herein provided, the Company shall deliver to the Warrant Agent an agreed upon procedures letter of a firm of independent accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which (i) the then fair value of any evidences of indebtedness, other securities or property or warrants, options or other subscription or purchase rights was determined and (ii) the Current Market Value of the Common Stock was determined, if either of such determinations were required), and specifying the Exercise Price and the number of shares of Common Stock issuable upon exercise of the Warrants after giving effect to such adjustment. The Company shall promptly cause the Warrant Agent, at the Company's expense, to mail a copy of such certificate to each Holder in accordance with Section 9.03. The Warrant Agent shall be under no duty or responsibility with respect to any such certificate, except to exhibit the same from time to time, to any Holder desiring an inspection thereof during reasonable business hours. Without limiting the foregoing, the Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Exercise Price or the number of shares of Common Stock or other stock or property issuable on exercise of the Warrants, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment or the validity or value of any shares of Common Stock, evidences of indebtedness, warrants, options, or other securities or property.

        Section 4.09    Notice of Certain Transactions.    In the event that the Company shall propose to (a) pay any dividend payable in securities of any class to the holders of its Common Stock or to make any other non-cash dividend or distribution to the holders of its Common Stock, (b) offer the holders of its Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of stock of any class or any other securities, rights or options, (c) issue any (i) shares of Common Stock, (ii) rights, options or warrants entitling the holders thereof to subscribe for shares of Common Stock or (iii) securities convertible into or exchangeable or exercisable for Common Stock (in the case of (i), (ii) and (iii), if such event would result in an adjustment hereunder), (d) effect any capital reorganization, reclassification, consolidation or merger or other Fundamental Transaction, (e) effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company or (f) make a tender offer or exchange offer with respect to the Common Stock, the Company shall within five (5) days after deciding to take any such action or make any such offer send to the Warrant Agent a notice and the Warrant Agent shall within five (5) days after receipt thereof, at the expense of the Company, send the Holders a notice (in such form as shall be furnished to the Warrant Agent by the Company) of such proposed action or offer. Such notice shall be mailed by the Warrant Agent to the Holders at their addresses as they appear in the Warrant Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect, if any, of such action on the Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, issuable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment pursuant to Article IV which will be required as a result of such action. Such notice shall be given as promptly as possible and (x) in the case of any action covered by clause (a) or (b) above, at least ten (10) days prior to the record date for determining holders of the Common Stock for purposes of such action or (y) in the case of any other

14

such action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier.

        Section 4.10    Adjustment to Warrant Certificate.    The form of Warrant Certificate need not be changed because of any adjustment made pursuant to this Article IV, and Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock issuable upon exercise of the Warrants as are stated in the Warrant Certificates initially issued pursuant to this Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed.

ARTICLE V

WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER

        Section 5.01    Transfer and Exchange.    The Warrant Certificates shall be issued in registered form only. The Company shall cause to be kept at the office of the Warrant Agent a register (the "Warrant Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrant Certificates and transfers or exchanges of Warrant Certificates as herein provided. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefit under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange.

        A Holder may transfer its Warrants only by complying with the terms of this Agreement. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Warrant Agent in the Warrant Register. Prior to the registration of any transfer of Warrants by a Holder as provided herein, the Company, the Warrant Agent, any agent of the Company or the Warrant Agent may treat the Person in whose name the Warrants are registered as the owner thereof for all purposes and as the Person entitled to exercise the rights represented thereby, any notice to the contrary notwithstanding. Furthermore, any Holder of a Global Warrant, shall, by acceptance of such Global Warrant, agree that transfers of beneficial interests in such Global Warrant may be effected only through a book-entry system maintained by the Holder of such Global Warrant (or its agent), and that ownership of a beneficial interest in the Warrants represented thereby shall be required to be reflected in a book entry. When Warrants are presented to the Warrant Agent with a request to register the transfer or to exchange them for an equal amount of Warrants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange in accordance with the provisions hereof.

        Section 5.02    Registration; Registration of Transfer and Exchange.    When Certificated Warrants are presented to the Warrant Agent with a request from the Holder of such Warrants to register the transfer or to exchange them for an equal number of Warrants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange as requested; provided, however, that (i) every Warrant Certificate presented and surrendered for registration of transfer or exchange shall be duly endorsed and be accompanied by a written instrument of transfer in form satisfactory to the Company, duly executed by the Holder thereof or the Holder's attorneys duly authorized in writing and (ii) if being transferred or exchanged pursuant to an effective registration statement under the

15

Securities Act or pursuant to clause (A), (B) or (C) below, shall be accompanied by the following additional information and documents, as applicable:

(A)

if such Certificated Warrants are being delivered to the Warrant Agent by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse of the Warrant); or



(B)

if such Certificated Warrants are being transferred to the Company (by means of a redemption or otherwise), a certification to that effect (in the form set forth on the reverse of the Warrant); or



(C)

if such Certificated Warrants are being transferred (x) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act; or (y) in reliance on another valid exemption from the registration requirements of the Securities Act: (1) a certification to that effect (in the form set forth on the reverse of the Warrant) and (2) if the Company or Warrant Agent so requests, an opinion of counsel (with customary assumptions and exceptions) or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Exhibit C, including, without limitation, in the case of a transfer pursuant to clause (y), a representation letter from the transferee in the form of Exhibit D hereto.

        To permit registrations of transfers and exchanges, the Company shall make available to the Warrant Agent a sufficient number of executed Warrant Certificates to effect such registrations of transfers and exchanges. No service charge shall be made to the Holder for any registration of transfer or exchange of Warrants, but the Company may require from the transferring or exchanging Holder payment of a sum sufficient to cover any transfer tax or similar governmental charge payable upon exchanges pursuant to Section 2.04 and exchanges in respect of portions of Warrants not exercised and the Company may deduct such taxes from any payment of money to be made and such transfer or exchange shall not be consummated (if such taxes are not deducted in full) unless or until the Holder shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company and the Warrant Agent that such tax has been paid.

        Section 5.03    Initial Certificated Warrants; Book-Entry Provisions for the Global Warrants.    (a) Initially the Warrants shall be in the form of Certificated Warrants registered in the name of the respective Investors and the Company shall deliver such Certificated Warrants to the Warrant Agent for counter-signature and direct the Warrant Agent to deliver the Certificated Warrants to the applicable Investors. As soon as reasonably practicable after the effectiveness of the Form S-1 Registration Statement, the Company shall exchange such Certificated Warrants for Global Warrants evidencing the Warrants which initially shall (i) be registered in the name of DTC or the nominee(s) of DTC; and (ii) be delivered to the Warrant Agent, as custodian for DTC; provided, however, that prior to the time of such exchange any transfers of interests in such Certificated Warrants shall be made in accordance with Section 5.02. Members of, or participants in, DTC ("Agent Members") shall have no rights under this Agreement with respect to the Global Warrant held on their behalf by DTC or the Warrant Agent as its custodian, and DTC may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of such Global Warrant for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial owner of any Warrants.

(b)

Transfers of the Global Warrant shall be limited to transfers of such Global Warrant in whole, but not in part, to DTC, its successors or their respective nominees. Interests of beneficial owners in the Global Warrant may be transferred in accordance with the rules and procedures

16

of DTC. Certificated Warrants shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Warrant if (i) DTC notifies the Company that it is unwilling or unable to continue as depositary for the Global Warrant or (ii) DTC ceases to be a "Clearing Agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within ninety (90) days.

(c)

In connection with the transfer of the entire Global Warrant to beneficial owners pursuant to paragraph (b) of this Section 5.03, the Global Warrant shall be deemed to be surrendered to the Warrant Agent for cancellation, and the Company shall execute, and the Warrant Agent shall countersign and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in the Global Warrant, Certificated Warrants of authorized denominations representing, in the aggregate, the number of Warrants theretofore represented by the Global Warrant.



(d)

Any Certificated Warrant delivered in exchange for an interest in a Global Warrant pursuant to paragraph (b) or (c) of this Section 5.03 shall bear applicable legends, if any, as set forth in Section 2.02 hereof.



(e)

The registered holder of the Global Warrant may grant proxies and otherwise authorize any Person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Warrants.



(f)

Beneficial owners of interests in the Global Warrant may receive Certificated Warrants (which shall bear the legends set forth in Exhibit C if required by Section 2.02) in accordance with the procedures of DTC. In connection with the execution, countersigning and delivery of such Certificated Warrants, the Warrant Agent shall reflect on its books and records a decrease in the number of Warrants represented by the Global Warrant equal to the number of Warrants represented by such Certificated Warrants and the Company shall execute and the Warrant Agent shall countersign and deliver one or more Certificated Warrants representing, in the aggregate, the number of Warrants theretofore represented by the Global Warrant.

        Section 5.04    Surrender of Warrant Certificates.    Any Warrant Certificate surrendered for registration of transfer, exchange or exercise of the Warrants represented thereby shall, if surrendered to the Company, be delivered to the Warrant Agent, and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be reissued by the Company and, except as provided in this Article V in case of an exchange or in Article III hereof in case of the exercise of less than all the Warrants represented thereby or in case of a mutilated Warrant Certificate or in the case of a transfer, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to the Company from time to time or otherwise dispose of such canceled Warrant Certificates as the Company may direct in writing.

ARTICLE VI

THE WARRANT AGENT

        Section 6.01    Duties and Liabilities.    The Company hereby appoints the Warrant Agent to act as agent of the Company as set forth in this Agreement. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth, by all of which the Company and the Holders of Warrants, by their acceptance thereof, shall be bound. The Warrant Agent shall not, by countersigning Warrant Certificates or by any other act hereunder, be deemed to make any representations as to the validity or authorization of the Warrants or the Warrant Certificates (except as to its countersignature thereon) or of any securities or other property delivered upon exercise of any Warrant, or as to the accuracy of the calculation of the

17

Exercise Price, or the number or kind or amount of Common Stock or other securities or other property deliverable upon exercise of any Warrant, or as to the correctness of the representations of the Company made in the certificates that the Warrant Agent receives or the validity, sufficiency or adequacy of any offering materials. The Warrant Agent shall not have any obligation to calculate or determine any adjustments with respect to either (i) the Exercise Price, or (ii) the type or quantity of securities receivable by a Holder upon exercise or repurchase of such Holder's Warrants, nor shall the Warrant Agent have a duty to independently verify any such adjustments that may be supplied to it by the Company. The Warrant Agent shall not be (a) liable for any recital or statement of fact contained herein or in the Warrant Certificates or for any action taken, suffered or omitted by it in good faith in the belief that any Warrant Certificate or any other documents or any signatures are genuine or properly authorized, (b) responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in the Warrant Certificates or (c) liable for any act or omission in connection with this Agreement except for a material breach of its obligations hereunder or for its own negligence or willful misconduct. The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer, President, any Vice President or the Secretary or Treasurer of the Company and to apply to any such officer for instructions (which instructions will be promptly given in writing when requested) and the Warrant Agent shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with the instructions of any such officer; however, in its sole discretion, the Warrant Agent may in lieu thereof accept other evidence of such or may require such further or additional evidence as it may deem reasonable. The Warrant Agent shall not be liable for any action taken, or for any failure to take any action, with respect to any matter in the event it requests instructions from the Company as to that matter and does not receive such instructions within a reasonable period of time after the request therefor.

        In the event of any disagreement resulting in adverse claims or demands being made in connection with the matters covered by this Agreement, or in the event that the Warrant Agent, in good faith, shall be in doubt as to what action it should take hereunder, the Warrant Agent may at its option, refuse to comply with any claims or demands on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists, and in any such event, the Warrant Agent shall not be or become liable in any way or to any person for its failure or refusal to act, and the Warrant Agent shall be entitled to continue so to refrain from action until (i) the rights of all interested parties shall have been fully and finally adjudicated by a court of competent jurisdiction or (ii) all differences shall have been adjudged and all doubt resolved by agreement among all of the interested persons, and in each of the cases in clauses (i) and (ii) the Warrant Agent shall have been notified thereof in a writing signed by all such persons. Notwithstanding the preceding, the Warrant Agent may in its discretion obey the order, judgment, decree or levy of any court, whether with or without jurisdiction, or of any agency of the United States or any political subdivision thereof, or of any agency of the State of New York or of any political subdivision thereof, and the Warrant Agent is hereby authorized in its sole discretion, to comply with and obey (and shall have no liability to any person for so doing) any such orders, judgments, decrees or levies which the Warrant Agent is advised by legal counsel of its own choosing is binding upon it. The rights of the Warrant Agent under this paragraph are in addition to all other rights which it may have by law or otherwise.

        The Warrant Agent may execute and exercise any of the rights and powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys, agents or employees; provided, however, reasonable care has been exercised in the selection and in the continued employment of any such attorney, agent or employee. The Warrant Agent shall not be under any obligation or duty to institute, appear in or defend any action, suit or legal proceeding in respect hereof, unless first indemnified to its satisfaction, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider

18

proper, whether with or without such indemnity. The Warrant Agent shall promptly notify the Company in writing of any claim made or action, suit or proceeding instituted against it arising out of or in connection with this Agreement.

        The Warrant Agent may rely and shall be fully protected in acting or refraining from acting upon any certificate, notice, instruction, Warrant, document or other writing believed by it to be genuine and to have been signed or presented by the proper Person. The Warrant Agent need not investigate any fact or matter stated in any such certificate, notice, instruction, Warrant, document or other writing. The Warrant Agent shall not be liable for any action that it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

        The Company will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further acts, instruments and assurances as are consistent with this Agreement and as may reasonably be required by the Warrant Agent in order to enable it to carry out or perform its duties under this Agreement.

        The Warrant Agent shall act hereunder solely as agent of the Company. The Warrant Agent shall not be liable except for (i) the failure to perform such duties as are specifically set forth herein and (ii) its own negligence or willful misconduct, and no implied covenants or obligations shall be read into this Agreement against the Warrant Agent, whose duties and obligations shall be determined solely by the express provisions hereof.

        With respect to the identity of beneficial owners of interests in the Global Warrant and the number of Warrants beneficially owned by any beneficial owner, the Warrant Agent shall be entitled to rely conclusively on the records of DTC and shall be fully protected in so relying.

        Section 6.02    Right To Consult Counsel.    The Warrant Agent may at any time consult with legal counsel acceptable to it (who may be legal counsel for the Company), and the opinion or advice of such counsel shall be full and complete authorization and protection to the Warrant Agent and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel.

        Section 6.03    Compensation; Indemnification.    The Company agrees to pay to the Warrant Agent from time to time compensation for all services rendered by it hereunder as the Company and the Warrant Agent may agree in writing from time to time, and to reimburse the Warrant Agent for reasonable expenses and disbursements incurred in connection with the execution and administration of this Agreement (including the reasonable fees and the expenses of its legal counsel), and further agrees to indemnify the Warrant Agent for, and to hold it harmless against, any claim, loss, liability or expense arising out of or in connection with the acceptance and administration of this Agreement, including the reasonable costs and expenses of defending itself against any such claim or liability, except that the Company shall have no liability hereunder to the extent that any such loss, liability or expense results from the Warrant Agent's material breach of its obligations hereunder or its own negligence or willful misconduct. The obligations of the Company under this Section 6.03 shall survive the exercise and the expiration of the Warrants and the resignation or removal of the Warrant Agent. No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

        Section 6.04    No Restrictions on Actions.    The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in transactions in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as

19

though it were not the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

        Section 6.05    Discharge or Removal; Replacement Warrant Agent.    Except as otherwise provided in this Section 6.05, and except after the exercise of all of the outstanding Warrants and the delivery of Warrant Shares with respect thereto, no resignation or removal of the Warrant Agent and no appointment of a successor warrant agent shall become effective until the acceptance of appointment by the successor warrant agent provided herein. The Warrant Agent may resign from its position as such and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's material breach of its obligations hereunder or its own negligence or willful misconduct), after giving one month's prior written notice to the Company. The Company may remove the Warrant Agent upon one month's prior written notice specifying the date when such discharge shall take effect, and the Warrant Agent shall thereupon in like manner be discharged from all further duties and liabilities hereunder, except as aforesaid. The Warrant Agent or the Company shall cause to be mailed (by first-class mail, postage prepaid) to each Holder of a Warrant a copy of said notice of resignation or notice of removal, as the case may be. Upon such resignation or removal the Company shall appoint in writing a new warrant agent. If the Company shall fail to make such appointment within a period of thirty (30) calendar days after it has been notified in writing of such resignation by the resigning Warrant Agent or after such removal, then the resigning Warrant Agent or the Holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a bank or trust company doing business under the laws of the United States or any state thereof, in good standing and having a combined capital and surplus of not less than $50,000,000. The combined capital and surplus of any such new warrant agent shall be deemed to be the combined capital and surplus as set forth in the most recent annual report of its condition published by such warrant agent prior to its appointment; provided, however, that such reports are published at least annually pursuant to law or to the requirements of a federal or state supervising or examining authority. After acceptance in writing of such appointment by the new warrant agent, it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; however, the original Warrant Agent, upon payment of its fees and expenses, shall in all events deliver and transfer to the successor Warrant Agent all property, if any, at the time held hereunder by the original Warrant Agent and if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning or removed Warrant Agent. Not later than the effective date of any such appointment, the Company shall file a notice thereof with the resigning or removed Warrant Agent and shall forthwith cause a copy of such notice to be mailed to each Holder of a Warrant. Failure to give any notice provided for in this Section 6.05, however, or any defect therein, shall not affect the legality or validity of the resignation of the Warrant Agent or the appointment of a new warrant agent, as the case may be.

        Section 6.06    Successor Warrant Agent.    Any corporation into which the Warrant Agent or any successor warrant agent may be merged or converted, or any corporation resulting from any consolidation to which the Warrant Agent or any successor warrant agent shall be a party, and any corporation that acquires substantially all of the corporate trust business of the Warrant Agent, shall be a successor Warrant Agent under this Agreement without any further act; provided, however, that such corporation would be eligible for appointment as successor to the Warrant Agent under the provisions of Section 6.05 hereof. Any such successor Warrant Agent shall promptly cause notice of its succession as Warrant Agent to be mailed (by first-class mail, postage prepaid) to each Holder of a Warrant.

20

ARTICLE VII

WARRANT HOLDERS

        Section 7.01    Warrant Holder Not Deemed a Holder of Common Stock.    Prior to the exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any rights of a holder of Common Stock.

        Section 7.02    Right of Action.    All rights of action with respect to the Warrants are vested in the Holders of the Warrants, and any Holder of any Warrant, without the consent of the Warrant Agent or the Holder of any other Warrant, may, on such Holder's own behalf and for such Holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such Holder's right to exercise, exchange or tender for purchase such Holder's Warrants in the manner provided in the Warrant Certificate representing its Warrants and in this Agreement.

ARTICLE VIII

MISCELLANEOUS

        Section 8.01    Payment of Taxes.    The Company shall pay any stamp, registration, and other similar taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery thereof or of other securities deliverable upon exercise of Warrants (other than income taxes imposed on the Holders). The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any Warrant Shares to any Person other than the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and in case of such transfer or payment, the Warrant Agent and the Company shall not be required to issue any Warrant Shares or pay any cash until such tax or charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no such tax or other charge is due.

        Section 8.02    Reports to Holders.    The Company shall:

(a)

file the reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) required to be filed by it, if any, under the Securities Act and the Exchange Act, and the rules, regulations and policies adopted by the Commission thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act; and



(b)

file with the Warrant Agent and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Agreement as may be required from time to time by such rules and regulations.

        Section 8.03    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any air courier (a) if to a Holder of the Warrants, at the address of such Holder maintained by the Warrant Agent, (b) if to the Company, to The Immune Response Corporation, 5935 Darwin Court, Carlsbad, California 92008, Attention: Michael L. Jeub, Vice President of Finance and Chief Financial Officer and (c) if to the Warrant Agent, to Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401, Attention:                         .

        All such notices and communications shall be deemed to have been duly given; at the time delivered by hand, if personally delivered; at the time received, if mailed or sent by air courier; when

21

answered back, if telexed; and when receipt is acknowledged, by recipient's telecopy operator, if telecopied.

        Section 8.04    Severability.    If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

        Section 8.05    Binding Effect.    This Agreement shall be binding upon and inure to the benefit of the Company and the Warrant Agent and their respective successors and permitted assigns, and the Holders from time to time of the Warrants. Nothing in this Agreement is intended or shall be construed to confer upon any Person, other than the Company, the Warrant Agent and the Holders of the Warrants, any right, remedy or claim under or by reason of this Agreement or any part hereof.

        Section 8.06    Third-Party Beneficiaries.    The Holders and holders of Warrant Shares shall be intended third-party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Warrant Agent, on the other hand, and each Holder and holder of Warrant Shares shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders or holders of Warrant Shares hereunder.

        Section 8.07    Amendments.    The Company may, without the consent of the Holders of the Warrants, by supplemental agreement or otherwise, make any changes or corrections in this Agreement that it shall have been advised by counsel (a) are required to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein or (b) add to the covenants and agreements of the Company for the benefit of the Holders, or surrender any rights or power reserved to or conferred upon the Company in this Agreement; provided, however, that, in each case, such changes or corrections shall not adversely affect the interests of the Holders or holders of Warrant Shares in any material respect. Amendments or supplements which do not meet the requirements of the preceding sentence shall require the written consent of the Holders of a majority of the then outstanding Warrants; provided, however, that the consent of each Holder is required for any amendment or supplement pursuant to which the Exercise Price would be increased (other than pursuant to adjustments as provided in Article IV of this Agreement). The Warrant Agent shall join with the Company in the execution and delivery of any such supplemental agreements unless it affects the Warrant Agent's own rights, duties of immunities hereunder, in which case the Warrant Agent may, but shall not be required to, join in such execution and delivery.

        Section 8.08    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof.

Section 8.09GOVERNING LAW.THIS AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

        Section 8.10    Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

22

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

THE IMMUNE RESPONSE CORPORATION
By:	/s/  MICHAEL L. JEUB
	Name: Michael L. Jeub Title: Vice President of Finance and Chief Financial Officer
COMPUTERSHARE TRUST COMPANY, INC.,     as Warrant Agent
By:	/s/  DEBORAH SORHEIM
	Name: Deborah Sorheim Title: Corporate Secretary
and
By:	/s/  IAN YEWER
	Name: Ian Yewer Title: President

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EXHIBIT A-1
TO WARRANT AGREEMENT

CUSIP No. [    ]¹
No. [    ] Certificate for [    ]

¹

To be filled in as applicable to the Class A Warrants.

CLASS A WARRANTS TO PURCHASE COMMON STOCK OF
THE IMMUNE RESPONSE CORPORATION

        THIS CERTIFIES THAT [    ], or its registered assigns, is the registered holder of the number of Class A Warrants set forth above (the "Class A Warrants"). Each Class A Warrant entitles the holder thereof (the "Holder"), at its option and subject to the provisions contained herein and in the Warrant Agreement referred to below, to purchase from THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the "Company"), (a) one (1) share of Common Stock, par value of $0.0025 per share, of the Company (the "Common Stock") and (b) one (1) Class B Warrant to purchase one share of Common Stock, at the exercise price of $1.33 (the "Exercise Price"). Each Class A Warrant shall terminate and become void as of 5:00 p.m., New York City time, on the fifth (5^th) anniversary of the Issue Date (as defined in the Warrant Agreement) of the Class A Warrants (the "Expiration Date") if not previously exercised. The number of shares issuable upon exercise of the Class A Warrants and the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement.

        This Warrant Certificate is issued under and in accordance with the Warrant Agreement, dated as of December, 2002 (the "Warrant Agreement"), between the Company and Computershare Trust Company, Inc., as Warrant Agent (the "Warrant Agent," which term includes any successor Warrant Agent under the Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of the Class A Warrants evidenced by this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of the Class A Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement.

        Subject to the terms of the Warrant Agreement, the Class A Warrants may be exercised in whole by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly executed and with the simultaneous payment of the Exercise Price in cash (subject to adjustment) to the Warrant Agent for the account of the Company at the office of the Warrant Agent. Payment of the Exercise Price in cash shall be made by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose.

        As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Class A Warrants shall be exercisable at any time and from time to time on any Business Day on or after the Exercise Date; provided, however, that Holders of Class A Warrants (other than the Investors) will be able to exercise their Class A Warrants only if (i) the Form S-1 Registration Statement relating to the Common Stock and Class B Warrants underlying the Class A Warrants is effective or (ii) the exercise of such Class A Warrants is exempt from the registration requirements of the Securities Act of 1933, and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside; provided further, however, that no Class A Warrant shall be exercisable after the fifth (5^th) anniversary of its Issue Date.

A1-1

        As provided in, and subject to, the Warrant Agreement, notwithstanding anything herein or therein to the contrary, upon thirty (30) days prior written notice to the Holders of the Class A Warrants, the Company shall have the right to redeem from the Holders the Class A Warrants at any time after the Issue Date at a price of $0.01 per Class A Warrant if the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days ending within thirty (30) days prior to the Redemption Notice Date (as defined in the Warrant Agreement) is greater than or equal to the amount that is equal to one hundred eighty seven and one-half (187.5%) of the Exercise Price.

        In the event of a Fundamental Transaction, the Holder hereof will be entitled to receive upon exercise of the Class A Warrants the kind and amount of shares of capital stock or other securities or other property as the Holder would have received had the Holder exercised its Class A Warrants immediately prior to such Fundamental Transaction; provided, however, that in the event that, in connection with such Fundamental Transaction (other than with a wholly-owned subsidiary of the Company that does not result in a reduction in consolidated net worth), consideration to holders of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will be entitled to receive such cash distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Class A Warrants, as if the Class A Warrants had been exercised immediately prior to such Fundamental Transaction, less the Exercise Price.

        As provided in the Warrant Agreement, the number of shares of Common Stock issuable upon the exercise of the Class A Warrants and the Exercise Price are subject to adjustment upon the happening of certain events.

        The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 5.02 of the Warrant Agreement, but not for any exchange or original issuance (not involving a transfer) with respect to temporary Warrant Certificates, the exercise of the Class A Warrants or the Warrant Shares.

        Upon any exercise of the Class A Warrants for less than all of the Class A Warrants represented by this Warrant Certificate, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate representing those Class A Warrants which were not exercised. This Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Class A Warrants. No fractional Warrant Shares will be issued upon the exercise of the Class A Warrants, but the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share on the day immediately preceding the date the Class A Warrant is exercised, multiplied by the fraction of a Warrant Share that would be issuable on the exercise of any Class A Warrant.

        All shares of Common Stock issuable by the Company upon the exercise of the Class A Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.

        The holder in whose name this Warrant Certificate is registered may be deemed and treated by the Company and the Warrant Agent as the absolute owner of the Class A Warrants evidenced by this Warrant Certificate for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary.

        The Class A Warrants do not entitle any Holder hereof to any of the rights of a stockholder of the Company.

[SIGNATURE PAGE FOLLOWS.]

A1-2

        This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent.

THE IMMUNE RESPONSE CORPORATION

By:

COMPUTERSHARE TRUST COMPANY, INC.,
    as Warrant Agent

By:

By:

A1-3

FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Class A Warrants)

THE IMMUNE RESPONSE CORPORATION

        The undersigned hereby irrevocably elects to exercise                          Class A Warrants to acquire (a) shares of Common Stock, par value $0.0025 per share, and (b) Class B Warrants, each of The Immune Response Corporation, at an aggregate exercise price of $1.33 and otherwise on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to The Immune Response Corporation and directs that the shares of Common Stock and Class B Warrants deliverable upon the exercise of such Class A Warrants be registered or placed in the name and at the address specified below and delivered thereto.

Date:

(Signature of Owner)²

(Street Address)

(City) (State) (Zip Code)

Signature Guaranteed by:

Securities and/or check to be issued to:

Please insert social security or identifying number:

Name:
Street Address:
City, State and Zip Code:

²

The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange.

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        A new Warrant Certificate evidencing any unexercised Class A Warrants evidenced by the within Warrant Certificate is to be issued to:

        Please insert social security or identifying number:

        Name:

        Street Address:

        City, State and Zip Code:

        In connection with any transfer of any of the Class A Warrants evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the Issue Date of such Class A Warrants and the last date, if any, on which such Class A Warrants were owned by the Company or any Affiliate of the Company, the undersigned certifies that such Class A Warrants are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	o	to the Company; or
(2)	o	pursuant to an effective registration statement under the Securities Act of 1933; or
(3)	o	pursuant to another available exemption from registration provided under the Securities Act of 1933.

        Unless one of the boxes is checked, the Warrant Agent will refuse to register any of the Class A Warrants evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) is checked, the Warrant Agent may require, prior to registering any such transfer of the Class A Warrants, such legal opinions, additional certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature
Signature Guarantee:

Signature must be guaranteed

A1-5

SCHEDULE OF EXCHANGES OF CLASS A GLOBAL WARRANTS³

        The following exchanges of a part of this Class A Global Warrant Certificate for definitive Class A Warrants have been made:

Date of
Exchange Amount of change in this Global
Warrant Certificate Number of Warrants in this
Global Warrant Certificate
following such change Signature of authorized
officer of Warrant Agent

³

To be included only if Class A Warrant is in Global form.

A1-6

EXHIBIT A-2
TO WARRANT AGREEMENT

CUSIP No. [    ]⁴
No. [    ] Certificate for [    ]

⁴

To be filled in as applicable to the Class B Warrants.

CLASS B WARRANTS TO PURCHASE COMMON STOCK OF
THE IMMUNE RESPONSE CORPORATION

        THIS CERTIFIES THAT [    ], or its registered assigns, is the registered holder of the number of Class B Warrants set forth above (the "Class B Warrants"). Each Class B Warrant entitles the holder thereof (the "Holder"), at its option and subject to the provisions contained herein and in the Warrant Agreement referred to below, to purchase from THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the "Company"), one (1) share of Common Stock, par value of $0.0025 per share, of the Company (the "Common Stock") at the exercise price of $1.77 (the "Exercise Price"). Each Class B Warrant shall terminate and become void as of 5:00 p.m., New York City time, on the fifth (5^th) anniversary of the Issue Date (as defined in the Warrant Agreement) of the Class B Warrant (the "Expiration Date") if not previously exercised. The number of shares issuable upon exercise of the Class B Warrants and the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement.

        This Warrant Certificate is issued under and in accordance with the Warrant Agreement, dated as of December 10, 2002 (the "Warrant Agreement"), between the Company and Computershare Trust Company, Inc., as Warrant Agent (the "Warrant Agent," which term includes any successor Warrant Agent under the Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of the Class B Warrants evidenced by this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of the Class B Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement.

        Subject to the terms of the Warrant Agreement, the Class B Warrants may be exercised in whole by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly executed and with the simultaneous payment of the Exercise Price in cash (subject to adjustment) to the Warrant Agent for the account of the Company at the office of the Warrant Agent. Payment of the Exercise Price in cash shall be made by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose.

        As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Class B Warrants shall be exercisable at any time and from time to time on any Business Day on or after the Exercise Date; provided, however, that Holders of Class B Warrants (other than the Investors) will be able to exercise their Class B Warrants only if (i) the Form S-1 Registration Statement relating to the Common Stock underlying the Class B Warrants is effective or (ii) the exercise of such Class B Warrants is exempt from the registration requirements of the Securities Act of 1933, and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside; provided further, however, that no Class B Warrant shall be exercisable after the fifth (5^th) anniversary of its Issue Date.

        As provided in, and subject to, the Warrant Agreement, notwithstanding anything herein or therein to the contrary, upon thirty (30) days prior written notice to the Holders of the Class B Warrants, the

A2-1

Company shall have the right to redeem from the Holders the Class B Warrants at any time after the Issue Date at a price of $0.01 per Class B Warrant if the average of the closing bid prices of the Common Stock for any ten (10) consecutive trading days ending within thirty (30) days prior to the Redemption Notice Date (as defined in the Warrant Agreement) is greater than or equal to the amount that is equal to one hundred eighty seven and one-half (1875.5%) of the Exercise Price.

        In the event of a Fundamental Transaction, the Holder hereof will be entitled to receive upon exercise of the Class B Warrants the kind and amount of shares of capital stock or other securities or other property as the Holder would have received had the Holder exercised its Class B Warrants immediately prior to such Fundamental Transaction; provided, however, that in the event that, in connection with such Fundamental Transaction (other than with a wholly-owned subsidiary of the Company that does not result in a reduction in consolidated net worth), consideration to holders of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will be entitled to receive such cash distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Class B Warrants, as if the Class B Warrants had been exercised immediately prior to such Fundamental Transaction, less the Exercise Price.

        As provided in the Warrant Agreement, the number of shares of Common Stock issuable upon the exercise of the Class B Warrants and the Exercise Price are subject to adjustment upon the happening of certain events.

        The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 5.02 of the Warrant Agreement, but not for any exchange or original issuance (not involving a transfer) with respect to temporary Warrant Certificates, the exercise of the Class B Warrants or the Warrant Shares.

        Upon any exercise of the Class B Warrants for less than all of the Class B Warrants represented by this Warrant Certificate, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate representing those Class B Warrants which were not exercised. This Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Class B Warrants. No fractional Warrant Shares will be issued upon the exercise of the Class B Warrants, but the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share on the day immediately preceding the date the Class B Warrant is exercised, multiplied by the fraction of a Warrant Share that would be issuable on the exercise of any Class B Warrant.

        All shares of Common Stock issuable by the Company upon the exercise of the Class B Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.

        The holder in whose name this Warrant Certificate is registered may be deemed and treated by the Company and the Warrant Agent as the absolute owner of the Class B Warrants evidenced by this Warrant Certificate for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary.

        The Class B Warrants do not entitle any Holder hereof to any of the rights of a stockholder of the Company.

[SIGNATURE PAGE FOLLOWS.]

A2-2

        This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent.

THE IMMUNE RESPONSE CORPORATION

By:

COMPUTERSHARE TRUST COMPANY, INC.,
    as Warrant Agent

By:

By:

A2-3

FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Class B Warrants)

THE IMMUNE RESPONSE CORPORATION

        The undersigned hereby irrevocably elects to exercise                          Class B Warrants to acquire shares of Common Stock, par value $0.0025 per share, of The Immune Response Corporation, at an exercise price per share of Common Stock of $1.77 and otherwise on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to The Immune Response Corporation and directs that the shares of Common Stock deliverable upon the exercise of such Class B Warrants be registered or placed in the name and at the address specified below and delivered thereto.

(Signature of Owner)²

(Street Address)

(City) (State) (Zip Code)

Signature Guaranteed by:

Securities and/or check to be issued to:

Please insert social security or identifying number:

Name:
Street Address:
City, State and Zip Code:

²

The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange.

A2-4

        A new Warrant Certificate evidencing any unexercised Class B Warrants evidenced by the within Warrant Certificate is to be issued to:

        Please insert social security or identifying number:

        Name:

        Street Address:

        City, State and Zip Code:

        In connection with any transfer of any of the Class B Warrants evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the Issue Date of such Class B Warrants and the last date, if any, on which such Class B Warrants were owned by the Company or any Affiliate of the Company, the undersigned certifies that such Class B Warrants are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	o	to the Company; or
(2)	o	pursuant to an effective registration statement under the Securities Act of 1933; or
(3)	o	pursuant to another available exemption from registration provided under the Securities Act of 1933.

        Unless one of the boxes is checked, the Warrant Agent will refuse to register any of the Class B Warrants evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) is checked, the Warrant Agent may require, prior to registering any such transfer of the Class B Warrants, such legal opinions, additional certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature
Signature Guarantee:

Signature must be guaranteed

A2-5

SCHEDULE OF EXCHANGES OF CLASS B GLOBAL WARRANTS⁶

        The following exchanges of a part of this Class B Global Warrant Certificate for definitive Warrants have been made:

Date of
Exchange Amount of change in this Global
Warrant Certificate Number of Warrants in this
Global Warrant Certificate
following such change Signature of authorized
officer of Warrant Agent

⁶

To be included only if Class B Warrant is in Global form.

A2-6

EXHIBIT B
TO WARRANT AGREEMENT

FORM OF LEGEND FOR GLOBAL WARRANTS

        Any Global Warrant authenticated and delivered hereunder shall bear a legend in substantially the following form:

THIS WARRANT IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS WARRANT IS NOT EXCHANGEABLE FOR WARRANTS REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER OF THIS WARRANT (OTHER THAN A TRANSFER OF THIS WARRANT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

B-1

EXHIBIT C
TO THE WARRANT AGREEMENT

FORM OF LEGEND

PARAGRAPH A

THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (OR, IN THE CASE OF AN AFFILIATE OF THE COMPANY, FOLLOWING) THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH OFFER, SALE OR TRANSFER OR (C) PURSUANT TO A VALID AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PARAGRAPH B

THE SECURITY EVIDENCED BY THIS CERTIFICATE MAY NOT BE EXERCISED BY ANY HOLDER (OTHER THAN A HOLDER WHO OR WHICH HAS PURCHASED THIS SECURITY DIRECTLY FROM THE COMPANY) UNTIL SUCH TIME AS A REGISTRATION STATEMENT ON FORM S-1 COVERING THE ISSUANCE BY THE COMPANY TO SUCH HOLDER OF THE SECURITIES UNDERLYING THIS SECURITY HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH EXERCISE.

C-1

EXHIBIT D
TO WARRANT AGREEMENT

FORM OF ACCREDITED INVESTOR CERTIFICATE
TRANSFEREE LETTER OF REPRESENTATION

Computershare Trust Company, Inc.

[                        ]

[                        ]

Attention: [                        ]

Ladies and Gentlemen:

        In connection with our proposed purchase of [    ] Warrants (the "Warrants") entitling the holders thereof to purchase (i) shares of common stock, par value $0.0025 per share, and (ii) in the case of the Class A Warrants, Class B Warrants, of The Immune Response Corporation (the "Issuer"), we confirm that:

1.

We are (a) an "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" as to which we exercise sole investment discretion, and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any account for which we are acting are each able to bear the economic risk of our or its investment, (b) a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) or (c) a non-"U.S. person" (as defined in Rule 902 of the Securities Act).

2.

We understand and acknowledge that the Warrants have not been registered under the Securities Act or any other applicable securities law, and that the Warrants may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any account for which we are acting, that if we should sell any Warrants within the time period referred to in Rule 144(k) of the Securities Act, we will do so only (A) to the Issuer or any subsidiary thereof, (B) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (C) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Warrants from us a notice advising such purchaser that resales of the Warrants are restricted as stated herein.

3.

We understand that, on any proposed resale of any Warrants, we will be required to furnish to the Issuer and the Warrant Agent such certifications, legal opinions and other information as the Issuer and the Warrant Agent may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect.

4.

We are acquiring the Warrants for investment purposes and not with a view to distribution thereof or with any present intention of offering or selling any Warrants, except as permitted above; provided that the disposition of our property and property of any accounts for which we are acting as fiduciary will remain at all times within our control.

        You and the Issuer are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

D-1

PURSUANT TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Very truly yours,

(Name of Purchaser)

By:

Name:

Title:

Date:

        Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:

By:
	Date: Taxpayer ID number:

D-2

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WARRANT AGREEMENT
TABLE OF CONTENTS
WARRANT AGREEMENT
ARTICLE I CERTAIN DEFINITIONS
ARTICLE II ORIGINAL ISSUE OF WARRANTS
ARTICLE III EXERCISE OF WARRANTS; REDEMPTION
ARTICLE IV ANTIDILUTION PROVISIONS
ARTICLE V WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
ARTICLE VI THE WARRANT AGENT
ARTICLE VII WARRANT HOLDERS
ARTICLE VIII MISCELLANEOUS
EXHIBIT A-1 TO WARRANT AGREEMENT
CLASS A WARRANTS TO PURCHASE COMMON STOCK OF THE IMMUNE RESPONSE CORPORATION
FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be executed only upon exercise of Class A Warrants)
THE IMMUNE RESPONSE CORPORATION
SCHEDULE OF EXCHANGES OF CLASS A GLOBAL WARRANTS³
EXHIBIT A-2 TO WARRANT AGREEMENT
CLASS B WARRANTS TO PURCHASE COMMON STOCK OF THE IMMUNE RESPONSE CORPORATION
FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be executed only upon exercise of Class B Warrants)
THE IMMUNE RESPONSE CORPORATION
SCHEDULE OF EXCHANGES OF CLASS B GLOBAL WARRANTS⁶
EXHIBIT B TO WARRANT AGREEMENT
FORM OF LEGEND FOR GLOBAL WARRANTS
EXHIBIT C TO THE WARRANT AGREEMENT
FORM OF LEGEND
EXHIBIT D TO WARRANT AGREEMENT
FORM OF ACCREDITED INVESTOR CERTIFICATE TRANSFEREE LETTER OF REPRESENTATION

EX-10.1

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Exhibit 10.1

SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire Purchase Agreement which follows)

A.

Complete the following items on BOTH Purchase Agreements:

1.

Page 24—Signature:

(i)

Name of Purchaser (Individual or Institution)

(ii)

Number of Units Purchaser Elects to Purchase

(iii)

Aggregate Purchase Price

(iv)

Name of Individual representing Purchaser (if an Institution)

(v)

Title of Individual representing Purchaser (if an Institution)

(vi)

Signature of Individual Purchaser or Individual representing Purchaser

2.

Appendix I—Stock and Warrant Certificate Questionnaire / Registration Statement Questionnaire (follows Page 24)

3.

Appendix II—Accredited Investor Certification & Investor Profile (follows Appendix I)

4.

Fax all forms to Diann Ellis at 212-319-8457 and then send BOTH completed and signed original Purchase Agreements including Appendix I and Appendix II to:

Diann Ellis
Spencer Trask Ventures, Inc.
535 Madison Avenue, 18^th Floor
New York, NY 10022

B.

Upon the resale of the Unit Securities (or the shares of Common Stock underlying the Warrants by the Purchasers), AFTER the Registration Statement covering the resale of the Unit Securities (and the exercise by subsequent purchasers of the Warrants) is effective, as described in the Purchase Agreement, the Purchaser:

1.

must deliver a current prospectus of the Company to the buyer (prospectuses may be obtained from the Company at the Purchaser's request); and

2.

must send a letter in the form of Appendix III to the Company so that the Unit Securities may be properly transferred.

C.

Upon the resale of the Unit Securities (or the shares of Common Stock underlying the Warrants by the Purchasers), BEFORE the Registration Statement covering the resale of the Unit Securities (and the exercise by subsequent purchasers of the Warrants) is effective, as described in the Purchase Agreement, the Purchaser:

1.

shall cause the transferee or assignee to agree in writing to also be bound by all of the provisions of the Purchase Agreement and the Warrant Agreement applicable to the Purchaser;

2.

agree in writing with the transferee or assignee to assign his rights under the Purchase Agreement and the Warrant Agreement and furnish copies of such agreements to the Company after such assignment;

B-1

3.

furnish to the Company written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned; and



4.

must send a letter in the form of Appendix III to the Company so that the Unit Securities may be properly transferred.

B-2

PURCHASE AGREEMENT

        PURCHASE AGREEMENT (this "Agreement") is made as of the    ^th day of November 2002, by and between The Immune Response Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), with its principal offices at 5935 Darwin Court, Carlsbad, California 92008, and the purchaser whose name and address is set forth on the signature page hereto (the "Purchaser").

        IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchaser agree as follows:

        SECTION 1.    Authorization of Sale of the Units.    Subject to the terms and conditions of this Agreement and the Warrant Agreement attached hereto as Exhibit A (the "Warrant Agreement"), the Company has authorized the sale of up to eighty (80) Units (plus up to an additional twenty-four (24) Units to cover any over-subscriptions). Each "Unit" consists of (a) shares of the Company's common stock, par value $0.0025 per share (the "Common Stock"), and (b) warrants (the "Class A Warrants") to purchase initially (i) one (1) share of Common Stock and (ii) one (1) warrant (the "Class B Warrants"; and, together with the Class A Warrants, the "Warrants") to purchase initially one (1) share of Common Stock. The number of (x) shares of Common Stock and (y) Class A Warrants per Unit will be equal in each case to the purchase price of $100,000 per Unit divided by that amount equal to eighty (80%) percent multiplied by the lesser of the (i) average of the closing bid prices per share of Common Stock, as quoted on The Nasdaq Stock Market, for the ten (10) consecutive trading days immediately preceding the Closing Date (as defined in Section 3 hereof) and (ii) closing bid price of the Common Stock on the Closing Date. The shares of Common Stock and/or the Warrants sold to the Purchaser pursuant to this Agreement shall collectively be referred to herein as the "Unit Securities." The offer by the Company for the sale of the Units is hereinafter referred to as the "Offering."

        SECTION 2.    Agreement to Sell and Purchase the Units.    At the Closing (as defined in Section 3 hereof), the Company will sell to the Purchaser, and the Purchaser will purchase from the Company, upon the terms and conditions hereinafter set forth, the number of Units set forth on the signature page (page 24) of this Agreement.

        The Company proposes to enter into this same form of purchase agreement with certain other investors (the "Other Purchasers") and expects to complete sales of the Units to them. The Purchaser and the Other Purchasers are hereinafter sometimes collectively referred to as the "Purchasers," and this Agreement and the agreements executed by the Other Purchasers are hereinafter sometimes collectively referred to as the "Agreements." The term "Placement Agent" shall mean Spencer Trask Ventures, Inc.

        If the Closing has not occurred on or prior to the date that is one hundred and twenty (120) calendar days after the date of the Memorandum (as defined in Section 4 hereof), the Company's obligation to sell, and the Purchaser's obligation to purchase, the Units will expire as of such date.

        SECTION 3.    Delivery of the Units at the Closing.    The completion of the purchase and sale of the Units (the "Closing") shall occur at a place and time (the "Closing Date") to be agreed upon by the Company and the Placement Agent and of which the Purchasers will be promptly notified by facsimile transmission or otherwise in accordance with Section 9 hereof.

        At the Closing, the Company shall deliver to the Purchaser one or more stock and warrant certificates registered in the name of the Purchaser, or in such nominee name(s) as designated by the Purchaser in writing, representing the number of Units set forth in Section 2 above and bearing an appropriate legend indicating that the Units were sold in reliance upon the exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(2) thereof and Rule 506 thereunder. The name(s) in which the certificates are to be

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registered are set forth in the Stock and Warrant Certificate Questionnaire attached hereto as part of Appendix I. The Company's obligation to complete the sale of the Units and deliver such stock and warrant certificate(s) to the Purchaser at the Closing shall be subject to the following conditions only, any one or more of which may be waived in writing by the Company: (a) the receipt by the Company of same-day funds in the full amount of the purchase price for the Units being purchased hereunder; (b) the completion of the purchases and sales, for cash, under the Agreements with all Purchasers of a minimum of sixty (60) Units; and (c) the accuracy of the representations and warranties made herein by the Purchaser as of the date hereof and the fulfillment of the undertakings of the Purchaser set forth in this Agreement to be fulfilled by it prior to the Closing. The Purchaser's obligation to accept delivery of such stock and warrant certificate(s) and to pay for the Unit Securities evidenced thereby shall be subject to the following conditions only: (a) the accuracy of the representations and warranties made herein by the Company as of the date hereof and as of the Closing Date as if made on such date; (b) the fulfillment of the undertakings of the Company set forth in this Agreement to be fulfilled by it prior to Closing; and (c) the completion of the purchases and sales, for cash, under the Agreements with all Purchasers of a minimum of sixty (60) Units.

        SECTION 4.    Representations, Warranties and Covenants of the Company.    The Company hereby represents and warrants to, and covenants with, the Purchaser as follows that, except as disclosed or incorporated by reference in, (i) the Confidential Private Placement Memorandum, dated October 22, 2002, prepared by the Company, including all exhibits, supplements and amendments thereto (the "Memorandum"), (ii) the SEC Reports (as defined in Section 4.14 hereof) or (iii) the Disclosure Schedule to be delivered by the Company prior to the execution and delivery of this Agreement (the "Disclosure Schedule"):

        4.01    Organization and Qualification.    The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify could not reasonably be expected to have a material adverse effect upon the business, financial condition, properties or operations of the Company taken as a whole (a "Material Adverse Effect"). The only subsidiaries of the Company are as set forth on Section 4.1 of the Disclosure Schedule.

        Section 4.1A of the Disclosure Schedule discloses all Special Purpose Entities (as defined below) owned directly or indirectly, in whole or in part, by the Company or any of its affiliates or in or with respect to which the Company or its affiliates have a direct or indirect business relationship or interest of any kind, in whole or in part, including any equity interest, any leasing relationship, any loan or other financing relationship, any other contractual relationship or any other economic interest, relationship or arrangement of any kind, where such interest or interests are directly or indirectly related to, or part of, the business or the assets owned by or the liabilities of the Company. Section 4.1B of the Disclosure Schedule hereto separately discloses any guarantees by the Company, its subsidiaries or other affiliates of the liabilities of or with respect to any Special Purpose Entities. "Special Purpose Entities" has the meaning given that term under U.S. accounting rules governing consolidation, including proposed rules and interpretations of the FASB, such as those contained in guidance (as proposed or as finally adopted) interpreting Statement of Financial Accounting Standard 94, Consolidation of all Majority-Owned Subsidiaries and Accounting Research Bulletin No. 51, Consolidated Financial Statements.

        4.02    Authorized Capital Stock.    Except as set forth in Section 4.2 of the Disclosure Schedule, the Company had the authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Memorandum as of the date set forth or incorporated by reference therein; all issued and outstanding shares of the Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in material compliance with all Federal and State securities laws and were not issued in violation of or subject to any preemptive rights or other rights to

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subscribe for or purchase securities. Except as set forth in Section 4.2 of the Disclosure Schedule, the Company does not have any outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations.

        4.03    No Other Registration Rights.    Except (a) as set forth in Section 4.3 of the Disclosure Schedule and (b) as contemplated by Section 7 hereof, no holder of any security of the Company has any demand, "piggy-back" or other right to require the Company to register the sale of any security owned by such holder under the Securities Act or any right to join or participate in any such registration of the Company's securities (including such registrations contemplated by the Registration Statement described and defined in Section 7 hereof).

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

        4.05    Due Execution, Delivery and Performance of Agreements.    The Company has all requisite corporate power and authority to enter into this Agreement and the Warrant Agreement and to perform the transactions contemplated hereby and thereby. This Agreement and the Warrant Agreement have been duly authorized, executed and delivered by the Company. The execution, delivery and performance of this Agreement and the Warrant Agreement by the Company and the consummation of the transactions contemplated hereby and thereby will not (i) violate any provision of the organizational documents of the Company or (ii) result in the creation of any lien, charge, security interest, adverse claim or encumbrance upon any assets or properties of the Company pursuant to the terms or provisions of, or conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under (A) any material agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other material instrument to which the Company is a party or by which the Company or any of its assets or properties may be otherwise bound or affected or (B) any statute or any judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its properties. No material consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the Warrant Agreement or the consummation of the transactions contemplated by this Agreement or the Warrant Agreement, except for compliance with the "blue sky" laws and Federal securities laws applicable to the (i) Offering, (ii) resale of the Unit Securities and (iii) offering and sale of the Common Stock underlying the Warrants. Upon the execution and delivery by the Company of this Agreement and the Warrant Agreement, and assuming the valid execution and delivery thereof by the Purchaser, this Agreement and the Warrant Agreement constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company in Section 7.3 hereof may be held violative of public policy and therefore legally unenforceable.

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

        4.07    No Defaults.    Except as set forth in Section 4.7 of the Disclosure Schedule, the Company is not in violation or default of any provision of its certificate of incorporation or any provision of its

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bylaws, and, except for defaults, violations and breaches which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, it is not in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its assets or properties are bound; and there does not exist any state of fact known to the Company which, with notice or lapse of time or both, would constitute an event of default or breach on the part of the Company as provided in such documents, except such defaults which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

        4.08    No Actions.    There are no legal or governmental actions, suits or proceedings pending or threatened in writing to which the Company is a party or of which any property owned or leased by the Company is the subject, which actions, suits or proceedings, individually or in the aggregate, prevent or could reasonably be expected to materially and adversely affect the transactions contemplated by this Agreement and/or the Warrant Agreement or to have a Material Adverse Effect; no material labor disturbance by the employees of the Company exists or, to the best knowledge of the Company, is imminent; and the Company is not party to or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body.

        4.09    No Material Change.    Except as set forth on Section 4.9 of the Disclosure Schedule, since June 30, 2002, (i) the Company has not incurred any known material liabilities or obligations, indirect or contingent, or entered into any material verbal or written agreement or other transaction which was not in the ordinary course of business or which could reasonably be expected to have a Material Adverse Effect; (ii) the Company has not sustained any material loss or interference with its businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) the Company has not paid, made or declared any dividends or other distribution with respect to its capital stock; (iv) there has not been any change in the capital stock of the Company or increase in indebtedness material to the Company; and (v) the Company has not incurred or sustained any other event or change that could reasonably be expected to have a Material Adverse Effect.

        4.010    Intellectual Property.

        (a)  Except as set forth on Section 4.10 of the Disclosure Schedule, the Company has ownership, license or legal right to use all material patent, copyright, trade secret and trademark rights necessary to the conduct of the business of the Company as now conducted (collectively, "Intellectual Property"), other than intellectual property generally available on commercial terms from other sources.

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

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

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

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Company do not violate any material agreements or material arrangements which the Company has with other persons.

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

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

        4.011    Compliance.    The Company is in compliance in all material respects with all applicable laws, rules and regulations of the jurisdictions in which it is conducting its business. Except as set forth in Section 4.11 of the Disclosure Schedule, the business, activities and operations of the Company are in compliance in all material respects with the Good Manufacturing Practice regulations issued by the United States Food and Drug Administration.

        4.012    Offering Materials.    The Company has not distributed and will not (unless requested by the Placement Agent in writing) distribute prior to the Closing Date any offering material in connection with the Offering and sale of the Units other than the Memorandum. The Company has not in the past nor will it hereafter take any action to sell, offer for sale or solicit offers to buy any securities of the Company which cause the offer, issuance or sale of the Units, as contemplated by this Agreement and the Warrant Agreement to fail to qualify for the exemptions of Section 4 of the Securities Act.

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

        4.014    Additional Information.    The information contained in the following documents does not include any 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, in the light of the circumstances in which they were made, not misleading, as of their respective filing dates, or if amended, as so amended:

        (a)  the Company's Annual Report on Form 10-K, as amended by Amendment No. 1 to Form 10-K for the year ended December 31, 2001;

        (b)  the Company's Quarterly Reports on Form 10-Q for the periods ended March 31, 2002 and June 30, 2002, respectively;

        (c)  Notice of Annual Meeting of Shareholders and Proxy Statement for the Company's Annual Meeting held on June 17, 2002;

        (d)  Notice of Special Meeting of Stockholders and Proxy Statement for the Company's Special Meeting held on April 2, 2002;

        (e)  Notice of Special Meeting of Stockholders and Proxy Statement for the Company's Special Meeting held on October 28, 2002;

        (f)    the Company's Current Reports, on Form 8-K, filed on June 19, 2002, July 3, 2002, August 7, 2002 and September 10, 2002 (and with Dates of Reports of June 26, 2002, August 5, 2002 and September 9, 2002, respectively);

        (g)  the Memorandum, including all addenda and exhibits thereto; and

        (h)  all other documents, if any, filed by the Company with the Securities and Exchange Commission (the "Commission") since June 30, 2002 and prior to the date hereof pursuant to

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the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

        The forms, reports and documents described in paragraphs (a), (b), (c), (d), (e), (f), (g) and (h) of this Section 4.14, including any exhibits, annexes and amendments thereto, being collectively the "SEC Reports".

        4.015    Legal Opinion.    At the Closing, Pillsbury Winthrop LLP, counsel to the Company, will deliver its legal opinion to the Placement Agent in the form attached hereto as Exhibit B.

        4.016    Access to Intellectual Property Counsel.    Prior to the Closing, the Company shall use its reasonable best efforts to afford the Placement Agent reasonable access to the Company's special counsel on intellectual property matters to discuss (i) any rights of parties other than the Company to any of the Company's patents or patent applications, (ii) pending or threatened actions, suits, proceedings or claims by others challenging the Company's rights to or in any such patents or patent applications and (iii) any pending or, to such counsel's best knowledge, threatened actions, suits, proceedings or claims by others that the Company is infringing or otherwise violating any patent or trade secret rights of others.

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

        4.018    Warrant Agreement.    At the Closing, the Company and the Warrant Agent shall have executed and delivered the Warrant Agreement and made a copy thereof available to the Purchaser.

        4.019    Reliance by Placement Agent.    The Company hereby acknowledges that the Placement Agent may rely on the representations and warranties set forth in this Section 4 as if such representations and warranties were made to the Placement Agent directly.

        4.020    No Material, Non-public Information.    At the time of the announcement of the transaction contemplated by the Agreements, the Memorandum, as it may be amended or supplemented, will include no material non-public information with respect to the Company.

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

        (a)  The Purchaser represents and warrants to, and covenants with, the Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments representing an investment decision like that involved in the purchase of the Units and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Units; (ii) the Purchaser is acquiring the number of Units set forth in Section 2 above in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any Unit Securities or any arrangement or understanding with any other persons regarding the distribution of such Unit Securities (this representation and warranty not limiting the Purchaser's right to resell pursuant to the Registration Statements or, other than with respect to any claims arising out of a breach of this representation and warranty, the Purchaser's right to indemnification under Section 7.3); (iii) the Purchaser will not, directly or

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indirectly, offer, sell, pledge, sell short, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Unit Securities except in compliance with each of the Securities Act, the Exchange Act, the Rules and Regulations and the provisions hereof and all other applicable laws; (iv) the Purchaser has completed or caused to be completed the Registration Statement Questionnaire attached hereto as part of Appendix I for use in preparation of the Registration Statements, and the answers thereto are true and correct as of the date hereof and will be true and correct as of the effective date of the Registration Statements and the Purchaser will notify the Company immediately of any material change in any such information provided in the Registration Statement Questionnaire occurring prior to the sale by it of all of the Unit Securities; (v) the Purchaser has, in connection with its decision to purchase the number of Units set forth in Section 2 above, relied solely upon the representations and warranties of the Company contained herein; and (vi) the Purchaser is unaware of, is in no way relying on, and did not become aware of the Offering through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, in connection with the Offering and sale of the Units and is not subscribing for Units, and did not become aware of the Offering, through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally.

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

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

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        (d)  The Purchaser understands that its investment in the Units involves a significant degree of risk and uncertainty and that the market price of the Common Stock has been and may continue to be volatile and that no representation or warranty is being made as to the future value or trading volume of the Common Stock or the Warrants. In addition, the Purchaser understands that, although the Company shall seek authorization for quotation of the Warrants on The Nasdaq Stock Market (or such other exchange or automated quotation system on which the Common Stock is then traded or quoted), there is no assurance that such authorization would be obtained or, if obtained, that the criteria for quotation will remain satisfied by the Company thereafter. Moreover, the Purchaser understands that there is no assurance that the Company will satisfy the criteria for continued quotation of the Common Stock on The Nasdaq Stock Market. The Purchaser has the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units and has the ability to bear the full economic risks of an investment in the Units. The Purchaser is not relying on the Company, the Placement Agent or any of their respective employees, representatives or agents with respect to the legal, tax, economic and related considerations as to an investment in the Units, and the Purchaser has relied on the advice of, or has consulted with, only its own advisors.

        (e)  The Purchaser understands that no United States Federal or state agency or any other governmental agency has passed upon or made any recommendation or endorsement of any of the Unit Securities.

        (f)    The Purchaser understands that, until such time as the Form S-3 Registration Statement (as defined in Section 7.1(a) hereof) has been declared effective or the Unit Securities may be sold pursuant to Rule 144(k) under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately resold, the Unit Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the securities comprising the Unit Securities):

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

        The Purchaser also understands that, until such time as the shares of Common Stock comprising the Unit Securities may be sold in accordance with Section 5(h) hereof, such shares of Common Stock also shall bear an additional restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the shares of Common Stock comprising the Unit Securities):

THE TRANSFER OR SALE OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF A PURCHASE AGREEMENT, INCLUDING SECTION 5(H) THEREOF, DATED AS OF NOVEMBER     , 2002, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY.

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

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

        Notwithstanding anything to the contrary contained in this Agreement, until the earlier of the date which is (i) two hundred and ten (210) days following the Closing Date and (ii) ninety (90) days following the date on which the Commission declares effective the Form S-1 Registration Statement (as defined in Section 7.1(a) hereof) (the earlier of (i) and (ii), the "Lock-Up Expiration Date"), the Purchaser shall not offer, sell, transfer or otherwise dispose of any shares of Common Stock comprising the Unit Securities (but not including any shares of Common Stock which might be issued to the Purchaser upon exercise of the Warrants) owned by the Purchaser, except in connection with a sale, merger or other disposition of the Company approved by the Company's Board of Directors; provided, however, that the Placement Agent may, in its sole discretion, upon written notice to the Purchaser and the Other Purchasers permit the sale or other disposition of shares of Common Stock comprising the Unit Securities prior to the Lock-Up Expiration Date; provided, further, that any decision by the Placement Agent to permit such a sale or other disposition by the Purchasers of shares of Common Stock comprising the Unit Securities prior to the Lock-Up Expiration Date shall be made only in respect of all (but not less than all) shares of Common Stock comprising all of the Unit Securities sold in the Offering. Notwithstanding the foregoing sentence, the Purchaser may make transfers to a Permitted Transferee (as defined below in this paragraph); provided, however, that such Permitted Transferees shall agree in writing (in form and substance reasonably acceptable to the Company) to be subject to the provisions of this Section 5(h). The Purchaser acknowledges that there is no assurance that the Form S-1 or Form S-3 Registration Statement shall be declared effective by the Commission by the respective Registration Deadline (as defined in Section 7.1(d) hereof), if at all. "Permitted Transferee" shall mean (i) if the Purchaser is an individual, such Purchaser's spouse, children, grandchildren, nieces, nephews, siblings, parents and adoptive children and step-children or any trust or family limited partnership established for the benefit of any of the foregoing persons and (ii) if the Purchaser is an entity, such Purchaser's partners, stockholders or members.

        Subject, and in addition, to the preceding paragraph, the Purchaser hereby covenants with the Company not to make any resale or other disposition of any Unit Securities prior to such time that the Registration Statements may become effective under the Securities Act unless (i) such sale is made pursuant to a valid exemption from registration under the Securities Act, (ii) the transferee or assignee thereof shall agree in writing also to be bound by all of the provisions of this Agreement and the Warrant Agreement, (iii) the Purchaser agrees in writing with the transferee or assignee to assign its rights under this Agreement and the Warrant Agreement and copies of such agreements are furnished to the Company after such assignment, (iv) the Company is furnished with written notice of the name and address of such transferee or assignee, (v) the certificate submitted to the transfer agent evidencing the Unit Securities is accompanied by a separate Purchaser's Certificate of Subsequent Sale: (a) in the form of Appendix III hereto, (b) executed by the Purchaser (if a natural person) or, if not, by an officer of, or other authorized person expressly designated by, the Purchaser and (c) to the effect that the Unit Securities have been sold in accordance with a valid exemption from registration under the

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Securities Act and any applicable State securities or "blue sky" laws, (vi) the Purchaser shall have complied with all applicable provisions of this Agreement and the Warrant Agreement relating to any resale of any Unit Securities, (vii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws and (viii) if reasonably requested by the Company, the Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of the Unit Securities under the Securities Act. For purposes of this subsection, the term "Unit Securities" shall be deemed to include the shares of Common Stock issuable upon exercise of the Warrants.

        The Purchaser acknowledges that there may occasionally be times when the Company must suspend the use of the prospectus forming a part of either of the Registration Statements (a "Suspension") until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act or appropriately supplemented the prospectus forming a part of the Registration Statement. The Purchaser hereby covenants that it will not sell any Unit Securities pursuant to said prospectus during the period commencing at the time at which the Company gives the Purchaser written notice of the Suspension of the use of said prospectus and ending at the time the Company gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to said prospectus, except as permitted in Section 7.2(c) hereof; provided, however, that the Purchaser shall be in compliance with the provisions contained in Section 7.2(b) hereof, and provided further that the Company will use its reasonable best efforts to cause the prospectus so suspended to be promptly resumed.

        (i)    The Purchaser further represents and warrants to, and covenants with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and thereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the Warrant Agreement, and (ii) upon the execution and delivery by the Purchaser of this Agreement, this Agreement shall constitute legal, valid and binding obligations of the Purchaser, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Purchaser contained in Section 7.3 hereof may be held violative of public policy and legally unenforceable.

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

        (k)  The Purchaser hereby acknowledges that the Placement Agent may rely on the representations, warranties and covenants set forth in this Section 5 as if such representations, warranties and covenants were made to the Placement Agent directly.

        SECTION 6.    Survival of Representations, Warranties and Agreements.    Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Purchaser herein and in the certificates delivered pursuant hereto shall survive the Closing, the delivery to the Purchaser of the Units being purchased and the payment therefor; provided, however, that the representations and warranties of the Company contained in Section 4 hereof (other than Section 4.12, which shall survive indefinitely) shall terminate on October 31, 2003.

        SECTION 7.    Registration of the Unit Securities; Listing of Warrants; Compliance with the Securities Act.

        7.01    Registration Procedures.    The Company shall:

        (a)  subject to receipt by the Company of necessary information from the Purchasers, as promptly as practicable, but in no event later than the Filing Deadline (which, in respect of the Form S-3 Registration Statement, shall mean three (3) business days after the Closing Date and, in respect of the Form S-1 Registration Statement, shall mean ten (10) calendar days), file with the Commission a registration statement on Form S-3 (the "Form S-3 Registration Statement") covering the resale by the Purchasers of the Unit Securities from time to time and (a registration statement on Form S-1 (the "Form S-1 Registration Statement" and, collectively with the Form S-3 Registration Statement, the "Registration Statements") covering the sale by the Company of Common Stock and, in the case of the

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Class A Warrants, the Class B Warrants to subsequent purchasers of such Warrants upon the exercise thereof, which Registration Statements, to the extent allowable under the Securities Act, shall state that such Registration Statements also cover such indeterminate number of additional shares of Common Stock as may become issuable upon exercise of the Warrants to prevent dilution resulting from stock splits, stock dividends or similar transactions;

        (b)  provide the Registration Statements (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) to the Placement Agent and its counsel for their review at least two (2) business days prior to the filing or other submission of such Registration Statements;

        (c)  use its reasonable best efforts, subject to receipt of any necessary information from the Purchasers, to cause the Commission to declare the Registration Statements effective as soon as practicable and in any event, (i) in respect of the Form S-3 Registration Statement, within sixty (60) days and (ii) in respect of the Form S-1 Registration Statement, within one hundred twenty (120) days of the Closing Date (the "Registration Deadline");

        (d)  if either Registration Statement is not filed by the Company with the Commission by the Filing Deadline and/or if either Registration Statement is not declared effective by the Commission on or before the Registration Deadline substantially due to action or inaction on the part of the Company in violation of Section 7.1(a) and/or Section 7.1(c), as applicable, make payments to the Purchasers in such amounts and at such times as shall be determined as follows as relief for the damages to the Purchasers by reason of any such delay in or reduction of their ability to sell and/or exercise the Unit Securities (which remedy shall not be exclusive of any other remedies available at law or in equity): the Company shall pay to each Purchaser an amount equal to (i) the aggregate purchase price paid by the Purchaser for its purchase of Units, multiplied by (ii) one percent (1%) (with respect to the period commencing on the Filing Deadline or the Registration Deadline, as applicable; provided, that such percentage shall increase to and remain at one and one-half percent (1.5%) for all calculations to the extent that such calculations apply to time periods after the sixtieth (60th) day after the Filing Deadline or the Registration Deadline, as applicable), multiplied by (iii) the sum of (x) the quotient calculated by dividing (A) the number of days after the Filing Deadline such Registration Statement is filed with the Commission by (B) fifteen (15), plus (y) the quotient calculated by dividing (A) the number of days after the Registration Deadline and prior to the date such Registration Statement is declared effective by the Commission by (B) fifteen (15);

        (e)  promptly prepare and file with the Commission such amendments and supplements to the Registration Statements and the prospectuses used in connection therewith as may be necessary to keep the Registration Statements effective and in compliance with applicable securities laws until, (i) in respect of the Form S-3 Registration Statement, the earlier of the date (x) as of which all Unit Securities owned by the Purchasers shall have been resold and (y) on which the Unit Securities may be resold by non-affiliates of the Company without registration by reason of Rule 144(k) under the Securities Act or any other rule of similar effect and (ii) in respect of the Form S-1 Registration Statement, the earlier of the date (x) as of which all Warrants owned by the Purchasers shall have been exercised and (y) ten (10) years following the Closing Date;

        (f)    furnish to the Purchaser with respect to the securities registered under the Registration Statements such number of copies of prospectuses and such other documents as the Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Unit Securities by the Purchaser; provided, however, that the obligation of the Company to deliver copies of prospectuses to the Purchaser shall be subject to the receipt by the Company of reasonable assurances from the Purchaser that the Purchaser will comply

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with the applicable provisions of the Securities Act and of such State securities or "blue sky" laws as may be applicable in connection with any use of such prospectuses, and the resale of the Unit Securities;

        (g)  file documents required of the Company for any "blue sky" clearance in states specified in writing by the Purchaser and keep such qualification or registration in effect for as long as the Registration Statements are in effect; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

        (h)  file all reports required to be filed with the Commission pursuant to the Exchange Act, and shall 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;

        (i)    advise the Purchaser, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the Commission delaying or suspending the effectiveness of either Registration Statement or of the initiation of any proceeding for that purpose; and it will promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest practicable time if such stop order should be issued; and

        (j)    bear all expenses in connection with the procedures in subsections (a) through (i) of this Section 7.1 and the registration of the resale and/or exercise of the Unit Securities pursuant to the Registration Statements, other than fees and expenses, if any, of counsel or other advisers to the Purchaser or the Other Purchasers or underwriting discounts, brokerage fees and commissions incurred by the Purchaser or the Other Purchasers, if any.

        The Company understands that the Purchaser hereby disclaims being an underwriter, but, notwithstanding the Purchaser nonetheless being deemed an underwriter, shall not, subject to the Purchaser's compliance with applicable law and this Agreement and the Warrant Agreement, relieve the Company of any obligations it has hereunder. The Registration Statement to be filed by the Company are available free of charge upon request and a questionnaire to be completed by the Purchaser is attached hereto as Appendix I.

        7.02    Listing of Warrants; Transfer of Unit Securities Before and After Effectiveness of the Registration Statements.

        (a)  The Company shall use its reasonable efforts to cause the listing on The Nasdaq Stock Market (or such other exchange or automated quotation system on which the Common Stock is then traded or quoted) of all Warrants and additional shares of Common Stock (including shares of Common Stock underlying the Warrants) covered by the Registration Statements within sixty (60) days after the date of this Agreement. The Company shall bear all expenses in connection with the listing of such Unit Securities on The Nasdaq Stock Market.

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

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

        7.03    Indemnification. For the purpose of this Section 7.3:

(i)

the term "Purchaser/Affiliate" shall mean any affiliate of the Purchaser and any person who controls the Purchaser or any affiliate of the Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; and



(ii)

the term "Registration Statements" shall include any final prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statements.

        (a)  The Company agrees to indemnify and hold harmless, and pay and/or reimburse, each of the Purchasers and each Purchaser/Affiliate, against any losses, claims, damages, liabilities or expenses, to which such Purchasers or such Purchaser/Affiliates may become subject, under the Securities Act, the Exchange Act, or any other Federal or state law or regulation, at common law or otherwise (including in settlement of any claims or litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in either of the Registration Statements, as amended at the time of effectiveness of the Registration Statements, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of either of the Registration Statements at the time of effectiveness if no Rule 424(b) filing is required (the "Prospectus"), or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, or arise out of or are based in whole or in part on any material inaccuracy in the representations and warranties of the Company contained in this Agreement or the Warrant Agreement, or any failure of the Company to perform in all material respects its obligations hereunder or under law, and will reimburse each Purchaser and each such Purchaser/Affiliate for any legal and other expenses as such expenses are reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in either of the Registration Statements, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser expressly for use therein, (ii) the failure of such Purchaser to comply with the covenants and agreements contained in this Agreement (including, without limitation, Sections 5(h) and 7.2(b)

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hereof in respect of the resale of Unit Securities) or the Warrant Agreement or to perform its obligations under law, (iii) the inaccuracy of any representations or warranties made by such Purchaser in this Agreement or (iv) any statement or omission in any Prospectus or any amendment or supplement thereto that is corrected in any subsequent Prospectus or any amendment or supplement thereto that was delivered to the Purchaser reasonably prior to the pertinent sale or sales by the Purchaser.

        (b)  Each Purchaser will severally, but not jointly, indemnify and hold harmless, and pay and/or reimburse, the Company, each of its directors, each of its officers who signed a Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed a Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other Federal or state law or regulation, at common law or otherwise (including in settlement of any claim or litigation, if such settlement is effected with the written consent of such Purchaser), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure by the Purchaser to comply with the covenants and agreements contained in this Agreement (including Sections 5(h) and 7.2 (b) hereof in respect of the resale of Unit Securities) or the Warrant Agreement or to perform its obligations under law, (ii) the inaccuracy of any representations or warranties made by such Purchaser herein or (iii) any untrue or alleged untrue statement of any material fact contained in a Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in a Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in a Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein, and will reimburse the Company, each of its directors, each of its officers who signed a Registration Statement or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. Notwithstanding any other provisions of this Section 7.3(b), no Purchaser shall be required to indemnify any party in excess of the gross proceeds paid by such Purchaser for Units purchased pursuant to its respective Agreement or if the Purchaser shall resell Unit Securities pursuant to a Registration Statement, if greater, the net proceeds received by the Purchaser from those resales.

        (c)  Promptly after receipt by an indemnified party under this Section 7.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying party in writing thereof; however, the failure to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under this Section 7.3 to the extent the indemnifying party is not prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to

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participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnifed Party for any fees of counsel or any other expenses, in each case subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and, based upon the advice of such indemnified party's counsel, the indemnified party shall have reasonably concluded that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.

        If the indemnifying party elects to compromise or defend an asserted liability, it shall promptly, but in any event within ten (10) days (or sooner, if the nature of the asserted liability so requires), notify the indemnified party of its intent to do so, and the indemnified party shall reasonably cooperate, at the request and reasonable expense of the indemnifying party, in the compromise of, or defense against, such asserted liability. The indemnifying party will not be released from any obligation to indemnify the indemnified party hereunder with respect to a claim without the prior written consent of the indemnified party, unless the indemnifying party delivers to the indemnified party a duly executed agreement settling or compromising such claim with no monetary liability to or injunctive relief against the indemnified party and a complete release of the indemnified party with respect thereto. The indemnifying party shall have the right, except as provided below in this subsection, to conduct and control the defense of any third-party claim made for which it has been provided notice hereunder. Upon receipt of written notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and reasonable approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, representing the indemnified parties who are parties to such action, plus local counsel, if appropriate) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party.

        (d)  If the indemnification provided for in this Section 7.3 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under subsections (a) or (b) of this Section 7.3 in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative economic benefits received by the Company and the Purchaser from the placement of the Units contemplated by this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company and the

B-18

Purchaser in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement or the Warrant Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and each Purchaser, on the other, shall be deemed to be in the same proportion as the amount paid by such Purchaser to the Company pursuant to this Agreement for the Unit Securities purchased by such Purchaser that are resold pursuant to the Registration Statement bears to the difference (the "Difference"), if any, between the amount such Purchaser paid for the Unit Securities, that are sold pursuant to a Registration Statement and the amount received by such Purchaser from such resale. The relative fault of the Company, on the one hand, and each Purchaser, on the other, shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or by such Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission and/or its distribution. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in subsection (c) of this Section 7.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in subsection (c) of this Section 7.3 with respect to the notice of the threat or commencement of any action shall apply if a claim for contribution is to be made under this subsection (d); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under subsection (c) for purposes of indemnification. The Company and the Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 7.3 were determined solely by pro rata allocation (even if the Purchaser were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser shall be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers' obligations to contribute pursuant to this Section 7.3 are several and not joint.

        7.04    Termination of Conditions and Obligations.    The restrictions imposed by Section 5(h) hereof and this Section 7 upon the transferability of the Unit Securities shall cease and terminate as to any particular number of the Unit Securities upon the passage of two (2) years from the date of their issuances or at such time as an opinion of counsel reasonably satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act; provided, however, that in respect of the shares of Common Stock underlying the Warrants such restrictions shall cease and terminate upon the passage of two (2) years from the date of the exercises of the Warrants; provided, further, that in respect of the Class B Warrants such restrictions shall cease and terminate upon the passage of two (2) years from the date of their issuances.

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        7.05    Information Available.    So long as a Registration Statement is effective covering the resale of Unit Securities owned by the Purchaser, the Company will furnish or otherwise make available to the Purchaser:

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

        (b)  upon the request of the Purchaser, all exhibits in the form filed with the Commission excluded by the parenthetical to Section 7.5(a)(vi); and

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

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

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

        SECTION 8.    Broker's Fee.    The Purchaser acknowledges that the Company intends to pay to the Placement Agent fees in respect of the sale of the Units to the Purchaser. Each of the parties hereby represents that, on the basis of any actions and agreements by it, there are no other brokers or finders entitled to compensation in connection with the sale of the Units to the Purchaser.

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

(a)
if to the Company, to:

The Immune Response Corporation
5935 Darwin Court
Carlsbad, California 92008
Attention: President
Facsimile: (760) 431-8636

with a copy to:

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

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

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

        SECTION 10.    Changes.    This Agreement may not be modified or amended except pursuant to an instrument in writing signed by both the Company and the Purchaser.

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

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

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

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

        SECTION 15.    Entire Agreement.    This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to any such matters.

        SECTION 16.    Third Party Beneficiaries.    Subject to Section 7.3 hereof, this Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Notwithstanding the foregoing, the Placement Agent may rely on the representations, warranties and covenants made in Sections 4 and 5 hereof as if such representations, warranties and covenants were made to the Placement Agent directly.

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

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

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

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

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

THE IMMUNE RESPONSE CORPORATION
By:	Name: Title:

Print or Type:	Name of Purchaser (Individual or Institution):
	Number of Units Purchaser Elects to Purchase at a Price of $100,000 per Unit:
		Units
	Aggregate Purchase Price:
		Units × $100,000 Unit Price $
	Name of Individual Representing Purchaser (if an Institution):
	Title of Individual Representing Purchaser (if an Institution):

Signature by:	Individual Purchaser, or Individual Representing Purchaser:
	Address:
	Telephone:
	Facsimile:

B-22

APPENDIX I

THE IMMUNE RESPONSE CORPORATION

STOCK AND WARRANT CERTIFICATE QUESTIONNAIRE

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

1.	The exact name that your Unit Securities are to be registered in (this is the name that will appear on your stock certificate(s)). You may use a nominee name if appropriate:
2.	The relationship between the Purchaser of the Unit Securities and the Registered Holder listed in response to item 1 above:
3.	The mailing address of the Registered Holder listed in response to item 1 above:
4.	The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above:

Appendix I-1

APPENDIX I
(continued)

THE IMMUNE RESPONSE CORPORATION

REGISTRATION STATEMENT QUESTIONNAIRE

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

1.

In connection with the Registration Statements, please state your or your organization's name exactly as it should appear in the Registration Statements:

2.

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

3.

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

          Yes                  No

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

4.

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

          Yes                  No

If "yes," please below:

Appendix I-2

APPENDIX I
(continued)

THE IMMUNE RESPONSE CORPORATION

GLOSSARY OF TERMS

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

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

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

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

Appendix I-3

APPENDIX II

Accredited Investor Certification
Initial the appropriate item(s)

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

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

1.

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

2.

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

3.

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

4.

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

5.

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

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

1.

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

2.

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

3.

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

4.

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

5.

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

6.

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

7.

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

Appendix II-1

APPENDIX II
(continued)

Investor Profile
(Must be completed by Investor)
Section A—Personal Investor Information

Investor Name(s):

Individual executing Profile or Trustee:

Social Security Numbers / Federal I.D. Number:

Date of Birth:
Marital Status:
Joint Party Date of Birth:
Investment Experience (Years):
Annual Income:
Liquid Net Worth:
Net Worth:
Investment Objectives: (circle one or more)	Long Term Capital Appreciation, Short Term Trading, Income Businessman's Risk, Safety of Principal, Tax Exempt Income or other
Home Street Address:

Home City, State & Zip Code:
Home Phone:	Home Fax:	Home Email:
Employer:
Employer Street Address:
Employer City, State & Zip Code:
Business Phone:	Bus. Fax:	Business Email:
Type of Business:
Spencer Trask Account Executive / Outside Broker/Dealer:

Section B—Certificate Delivery Instructions

          Please deposit Certificate in my Spencer Trask Account #                    

          Please open a Spencer Trask account and subsequently deposit my certificate in it

          Please deliver certificate to the Employer Address listed in Section A

Appendix II-2

          Please deliver certificate to the Home Address listed in Section A

          Please deliver certificate to the following address:                              

Section C—Form of Payment—Check or Wire Transfer

          Check payable to "Citibank Private Bank, Escrow Agent for The Immune Response Corporation

          Wire funds from my outside account according to the following:

CITIBANK, NA
ABA# 021000089
ATTN: PBID Custody Concentration Account
A/C:
F/F/C to: A/C#                
A/C Name:

          Wire funds from my Spencer Trask Account—See Following Page

          Funds for this investment are rolled over, tax deferred from                          within the allowable 60-day window

Please check if you are a NASD member, or affiliate of a NASD member firm:                

Investor Signature Date

Appendix II-3

APPENDIX II
(continued)

Memorandum
Wire Transfer Authorization

TO:	Lydia Soler—Operations Manager Spencer Trask Ventures, Inc.
RE:	Client Wire Transfer Authorization The Immune Response Corporation
DATE:

This memorandum authorizes the transfer of the following listed funds from my Spencer Trask Brokerage Account as follows:

Spencer Trask Brokerage Account #
Wire Amount	$

To:	CITIBANK, NA ABA# 021000089 ATTN: PBID Custody Concentration Account A/C: F/F/C to: A/C#                                      A/C Name: The Immune Response Corporation
	REFERENCE: SUBSCRIBER LEGAL NAME      TAX ID NUMBER      SUBSCRIBER ADDRESS

FBO:
Investment Title:
Signature:
Signature:	(Joint Signature)

Appendix II-4

APPENDIX III

Attention:

PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE

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

	hereby certifies
[fill in official name of individual or institution]

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

and as such, sold such shares on		in accordance with [Registration Statement
	[date]

number 333- ] [a valid exemption (i.e., ) from

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

Print or Type:

Name of Purchaser
(Individual or Institution):

Name of Individual Representing Purchaser (if an Institution):

Title of Individual Representing Purchaser (if an Institution):

Signature by Individual Purchaser, or Representative of Purchaser:

Appendix III-1

QuickLinks

SUMMARY INSTRUCTION SHEET FOR PURCHASER (to be read in conjunction with the entire Purchase Agreement which follows)
PURCHASE AGREEMENT
THE IMMUNE RESPONSE CORPORATION
STOCK AND WARRANT CERTIFICATE QUESTIONNAIRE
THE IMMUNE RESPONSE CORPORATION
REGISTRATION STATEMENT QUESTIONNAIRE
THE IMMUNE RESPONSE CORPORATION
GLOSSARY OF TERMS
Accredited Investor Certification Initial the appropriate item(s)
Investor Profile ( Must be completed by Investor) Section A—Personal Investor Information
Section B—Certificate Delivery Instructions
Section C—Form of Payment—Check or Wire Transfer
Memorandum Wire Transfer Authorization
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE