VION PHARMACEUTICALS INC
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

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                                                                    Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
June 19, 2003, among Vion Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers"); and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and the Purchasers, severally and not jointly, desire to
purchase from the Company in the aggregate, up to 3,846,150 shares of Common
Stock and Warrants to purchase up to 1,923,075 shares of Common Stock.

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

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

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

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

                  "Closing Date" means the date of the Closing, which shall be
         within one Business Day of the satisfaction of all closing conditions.

                  "Closing Price" means on any particular date (a) the last
         reported closing bid price per share of Common Stock on such date on
         the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
         time) as the last reported closing bid price for regular session
         trading on such day), or (b) if there is no such price on such date,
         then the closing bid price on the Trading Market on the date nearest
         preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York
         time) as the closing bid price for

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

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock of the Company, $0.01
         par value per share, and any securities into which such common stock
         may hereafter be reclassified.

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

                  "Company Counsel" means Fulbright & Jaworski, LLP.

                  "Disclosure Schedules" means the Disclosure Schedules
         concurrently delivered herewith.

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

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

                  "FW" shall mean Feldman Weinstein LLP with offices at 420
         Lexington Avenue, New York, New York 10170-0002.

                  "Intellectual Property Rights" shall have the meaning ascribed
         to such term in Section 3.1(o).

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

                  "Material Adverse Effect" shall have the meaning ascribed to
         such term in Section 3.1(b).

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

                  "Per Share Purchase Price" equals $1.30, subject to adjustment
         for reverse and forward stock splits, stock dividends, stock
         combinations and other similar transactions of the Common Stock that
         occur after the date of this Agreement.

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

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

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

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

                  "SEC Reports" shall have the meaning ascribed to such term in
         Section 3.1(h).

                  "Securities" means the Shares, the Warrants and the Warrant
         Shares.

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

                  "Shares" means the shares of Common Stock issued to each
         Purchaser pursuant to this Agreement.

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

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

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

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

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                  "Transaction Documents" means this Agreement, the Registration
         Rights Agreement, the Warrant and any other documents or agreements
         executed in connection with the transactions contemplated hereunder.

                  "Warrants" means the Common Stock Purchase Warrants, in the
         form of Exhibit C, issuable to the Purchasers at Closing, which
         warrants shall be exercisable immediately and have an exercise price
         equal to $2.20 and a term of exercise of 5 years.

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

                                  ARTICLE II.
                                PURCHASE AND SALE

         2.1 Closing. At the Closing, the Purchasers shall purchase, severally
and not jointly, and the Company shall issue and sell, in the aggregate, up to
3,846,150 shares of Common Stock and Warrants to purchase up to 1,923,075 shares
of Common Stock on the Closing Date. Each Purchaser shall purchase from the
Company, and the Company shall issue and sell to each Purchaser, a number of
Shares equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price. Upon satisfaction of the conditions set forth in Section 2.2,
the Closing shall occur at the offices of FW, or such other location as the
parties shall mutually agree.

         2.2 Closing Conditions.

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

                           (i) this Agreement duly executed by the Company;

                           (ii) within 3 Business Days of the Closing Date, a
                  certificate evidencing a number of Shares equal to such
                  Purchaser's Subscription Amount divided by the Per Share
                  Purchase Price, registered in the name of such Purchaser;

                           (iii) within 3 Business Days of the Closing Date, a
                  Warrant, registered in the name of such Purchaser, pursuant to
                  which such Purchaser shall have the right to acquire up to the
                  number of shares of Common Stock equal to 50% of the Shares to
                  be issued to such Purchaser at such Closing;

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

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

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

                           (i) this Agreement duly executed by such Purchaser;

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

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

                  (c) All representations and warranties of the other party
         contained herein shall remain true and correct as of the Closing Date.

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

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:

                  (a) Subsidiaries. The Company has no direct or indirect
         subsidiaries. Any references to Subsidiaries in the Transaction
         Documents shall be disregarded.

                  (b) Organization and Qualification. Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the requisite corporate power and authority to own and use its
         properties and assets and to carry on its business as currently
         conducted. Neither the Company nor any Subsidiary is in violation of
         any of the provisions of its respective certificate or articles of
         incorporation, bylaws or other organizational or charter documents.
         Each of the Company and the Subsidiaries is duly qualified to conduct
         business and is in good standing as a foreign corporation or other
         entity in each jurisdiction in which the nature of the business
         conducted or property owned by it makes such qualification necessary,
         except where the failure to be so qualified or in good standing, as the
         case may be, would not have or reasonably be expected to result in (i)
         a material adverse effect on the legality, validity or enforceability
         of any Transaction Document, (ii) a material adverse effect on the
         results of operations, assets, business or financial condition of the
         Company

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         and the Subsidiaries, taken as a whole, or (iii) a material adverse
         effect on the Company's ability to perform in any material respect on a
         timely basis its obligations under any Transaction Document (any of
         (i), (ii) or (iii), a "Material Adverse Effect").

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

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

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

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

                  (g) Capitalization. The authorized and outstanding
         capitalization of the Company is as described in the Company's most
         recent periodic report filed with the Commission. The Company has not
         issued any capital stock since such filing other than pursuant to the
         exercise of employee stock options under the Company's stock option
         plans and pursuant to the conversion or exercise of Common Stock
         Equivalents outstanding on the date thereof. No Person has any right of
         first refusal, preemptive right, right of participation, or any similar
         right to participate in the transactions contemplated by the
         Transaction Documents. Except as a result of the purchase and sale of
         the Securities and except for employee and director stock options under
         the Company's stock option plans, there are no outstanding options,
         warrants, script rights to subscribe to, calls or commitments of any
         character whatsoever relating to, or securities, rights or obligations
         convertible into or exchangeable for, or giving any Person any right to
         subscribe for or acquire, any shares of Common Stock, or contracts,
         commitments, understandings or arrangements by which the Company or any
         Subsidiary is or may become bound to issue additional shares of Common
         Stock, or securities or rights convertible or exchangeable into shares
         of Common Stock. The issue and sale of the Securities will not obligate
         the Company to issue shares of Common Stock or other securities to any
         Person (other than the Purchasers) and will not result in a right of
         any holder of Company securities to adjust the exercise, conversion,
         exchange or reset price under such securities.

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

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         required by GAAP, and fairly present in all material respects the
         financial position of the Company and its consolidated subsidiaries as
         of and for the dates thereof and the results of operations and cash
         flows for the periods then ended, subject, in the case of unaudited
         statements, to normal, immaterial, year-end audit adjustments.

                  (i) Material Changes. Since the date of the most recent
         quarterly report on Form 10-Q, except as disclosed in the SEC Reports,
         (i) there has been no event, occurrence or development that has had or
         that could reasonably be expected to result in a Material Adverse
         Effect, (ii) the Company has not incurred any liabilities (contingent
         or otherwise) other than (A) trade payables and accrued expenses
         incurred in the ordinary course of business consistent with past
         practice and (B) liabilities not required to be reflected in the
         Company's financial statements pursuant to GAAP or required to be
         disclosed in filings made with the Commission, (iii) the Company has
         not altered its method of accounting, (iv) the Company has not declared
         or made any dividend or distribution of cash or other property to its
         stockholders or purchased, redeemed or made any agreements to purchase
         or redeem any shares of its capital stock and (v) the Company has not
         issued any equity securities to any officer, director or Affiliate,
         except pursuant to existing Company stock option plans. The Company
         does not have pending before the Commission any request for
         confidential treatment of information.

                  (j) Litigation. Except as disclosed in the SEC Reports, there
         is no action, suit, inquiry, notice of violation, proceeding or
         investigation pending or, to the knowledge of the Company, threatened
         against or affecting the Company, any Subsidiary or any of their
         respective properties before or by any court, arbitrator, governmental
         or administrative agency or regulatory authority (federal, state,
         county, local or foreign) (collectively, an "Action") which (i)
         adversely affects or challenges the legality, validity or
         enforceability of any of the Transaction Documents or the Securities or
         (ii) could, if there were an unfavorable decision, have or reasonably
         be expected to result in a Material Adverse Effect. Neither the Company
         nor any Subsidiary, nor, to the knowledge of the Company, any director
         or officer thereof, is or has been the subject of any Action involving
         a claim of violation of or liability under federal or state securities
         laws or a claim of breach of fiduciary duty. There has not been, and to
         the knowledge of the Company, there is not pending or contemplated, any
         investigation by the Commission involving the Company or any current or
         former director or officer of the Company. The Commission has not
         issued any stop order or other order suspending the effectiveness of
         any registration statement filed by the Company or any Subsidiary under
         the Exchange Act or the Securities Act.

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

                  (l) Compliance. Except as disclosed in the SEC Reports,
         neither the Company nor any Subsidiary (i) is in default under or in
         violation of (and no event has occurred that has not been waived that,
         with notice or lapse of time or both, would result in a default by the
         Company or any Subsidiary under), nor has the Company or any Subsidiary
         received notice of a claim that it is in default under or that it is in
         violation of, any indenture, loan or credit agreement or any other
         agreement or instrument to which it

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         is a party or by which it or any of its properties is bound (whether or
         not such default or violation has been waived), (ii) is in violation of
         any order of any court, arbitrator or governmental body, or (iii) is or
         has been in violation of any statute, rule or regulation of any
         governmental authority, including without limitation all foreign,
         federal, state and local laws applicable to its business, except in the
         case of clauses (i), (ii) and (iii) as would not have or reasonably be
         expected to result in a Material Adverse Effect.

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

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

                  (o) Patents and Trademarks. To the knowledge of the Company
         and each Subsidiary, the Company and the Subsidiaries have, or have
         rights to use, all patents, patent applications, trademarks, trademark
         applications, service marks, trade names, copyrights, licenses and
         other similar rights that are necessary or material for use in
         connection with their respective businesses as described in the SEC
         Reports and which the failure to so have could have or reasonably be
         expected to result in a Material Adverse Effect (collectively, the
         "Intellectual Property Rights"). Neither the Company nor any Subsidiary
         has received a written notice that the Intellectual Property Rights
         used by the Company or any Subsidiary violates or infringes the rights
         of any Person. To the knowledge of the Company, all such Intellectual
         Property Rights are enforceable.

                  (p) Insurance. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which the Company and the Subsidiaries are engaged.
         Neither the Company nor any Subsidiary has any reason to believe that
         it will not be able to renew its existing insurance coverage as and
         when such coverage expires or to obtain similar coverage from similar
         insurers as may be necessary to continue its business without a
         significant increase in cost.

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                  (q) Transactions With Affiliates and Employees. Except as set
         forth in the SEC Reports, none of the officers or directors of the
         Company and, to the knowledge of the Company, none of the employees of
         the Company is presently a party to any transaction with the Company or
         any Subsidiary (other than for services as employees, officers and
         directors), including any contract, agreement or other arrangement
         providing for the furnishing of services to or by, providing for rental
         of real or personal property to or from, or otherwise requiring
         payments to or from any officer, director or such employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any such employee has a substantial interest or is an officer,
         director, trustee or partner, in each case in excess of $60,000 other
         than (a) for payment of salary or consulting fees for services
         rendered, (b) reimbursement for expenses incurred on behalf of the
         Company and (c) for other employee benefits, including stock option
         agreements under any stock option plan of the Company.

                  (r) Internal Accounting Controls. The Company and each of its
         subsidiaries maintains a system of internal accounting controls
         sufficient to provide reasonable assurance that (i) transactions are
         executed in accordance with management's general or specific
         authorizations, (ii) transactions are recorded as necessary to permit
         preparation of financial statements in conformity with GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization, and
         (iv) the recorded accountability for assets is compared with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-14 and
         15d-14) for the Company and designed such disclosure controls and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities, particularly during the period in which
         the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
         The Company's certifying officers have evaluated the effectiveness of
         the Company's controls and procedures as of a date within 90 days prior
         to the filing date of the Form 10-Q for the quarter ended March 31,
         2003 (such date, the "Evaluation Date"). The Company presented in its
         Form 10-Q for the quarter ended March 31, 2003 the conclusions of the
         certifying officers about the effectiveness of the disclosure controls
         and procedures based on their evaluations as of the Evaluation Date.
         Since the Evaluation Date, there have been no significant changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of Regulation S-K under the Exchange Act) or, to the Company's
         knowledge, in other factors that could significantly affect the
         Company's internal controls.

                  (s) Certain Fees. Except for fees payable to Rodman & Renshaw,
         Inc. and Gerard Klauer Mattison, no brokerage or finder's fees or
         commissions are or will be payable by the Company to any broker,
         financial advisor or consultant, finder, placement agent, investment
         banker, bank or other Person with respect to the transactions
         contemplated by this Agreement. The Purchasers shall have no obligation
         with respect to any fees or with respect to any claims made by or on
         behalf of other Persons for fees of a type contemplated in this Section
         that may be due in connection with the transactions contemplated by
         this Agreement.

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

                  (u) Investment Company. The Company is not, and is not an
         Affiliate of, an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended.

                  (v) Registration Rights. Other than the holders of the
         warrants issued under the warrant agreement, by and between the Company
         and Brean Murray Co., Inc., dated October 29, 1999, no Person has any
         right to cause the Company to effect the registration under the
         Securities Act of any securities of the Company.

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

                  (x) Listing and Maintenance Requirements. Except as set forth
         in the SEC Reports, the Company has not, in the 12 months preceding the
         date hereof, received notice from any Trading Market on which the
         Common Stock is or has been listed or quoted to the effect that the
         Company is not in compliance with the listing or maintenance
         requirements of such Trading Market. The Company is, and has no reason
         to believe that it will not in the foreseeable future continue to be,
         in compliance with all such listing and maintenance requirements.

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

                  (z) Disclosure. The Company confirms that, neither the Company
         nor any other Person acting on its behalf has provided any of the
         Purchasers or their agents or counsel with any information that
         constitutes or might constitute material, non-public information. The
         Company understands and confirms that the Purchasers will rely on the
         foregoing representations and covenants in effecting transactions in
         securities of the Company. All disclosure provided to the Purchasers
         regarding the Company, its business and the transactions contemplated
         hereby, including the Disclosure Schedules to this Agreement, furnished
         by or on behalf of the Company are true and correct and do not contain
         any untrue statement of a material fact or omit to state any material
         fact necessary in order to make the statements made therein, in light
         of the circumstances under which they were made, not misleading.

                                       11




<PAGE>



                  (aa) No Integrated Offering. Neither the Company, nor any of
         its affiliates, nor any Person acting on its or their behalf has,
         directly or indirectly, made any offers or sales of any security or
         solicited any offers to buy any security, under circumstances that
         would cause this offering of the Securities to be integrated with prior
         offerings by the Company for purposes of the Securities Act or any
         applicable shareholder approval provisions, including, without
         limitation, under the rules and regulations of any exchange or
         automated quotation system on which any of the securities of the
         Company are listed or designated.

                  (bb) Solvency. Based on the financial condition of the Company
         as of the Closing Date, (i) the Company's fair saleable value of its
         assets exceeds the amount that will be required to be paid on or in
         respect of the Company's existing debts and other liabilities
         (including known contingent liabilities) as they mature; (ii) the
         Company's assets do not constitute unreasonably small capital to carry
         on its business for the current fiscal year as now conducted and as
         proposed to be conducted including its capital needs taking into
         account the particular capital requirements of the business conducted
         by the Company, and projected capital requirements and capital
         availability thereof, and including the anticipated proceeds of the
         sale of the Securities; and (iii) the current cash flow of the Company,
         together with the proceeds the Company would receive, were it to
         liquidate all of its assets, after taking into account all anticipated
         uses of the cash, would be sufficient to pay all amounts on or in
         respect of its debt when such amounts are required to be paid. The
         Company does not intend to incur debts beyond its ability to pay such
         debts as they mature (taking into account the timing and amounts of
         cash to be payable on or in respect of its debt).

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

                  (a) Organization; Authority. Such Purchaser is an entity duly
         organized, validly existing and in good standing under the laws of the
         jurisdiction of its organization with full right, corporate or
         partnership power and authority to enter into and to consummate the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations thereunder. The execution, delivery and
         performance by such Purchaser of the transactions contemplated by this
         Agreement has been duly authorized by all necessary corporate or
         similar action on the part of such Purchaser. Each Transaction Document
         to which it is a party has been duly executed by such Purchaser, and
         when delivered by such Purchaser in accordance with the terms hereof,
         will constitute the valid and legally binding obligation of such
         Purchaser, enforceable against it in accordance with its terms.

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

                                       12




<PAGE>



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

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

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

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

                  (g) No Governmental Review. Such Purchaser understands that no
         United States federal or state agency or any other government or
         governmental agency has passed on or made any recommendation or
         endorsement of the Shares and Warrants or the fairness or suitability
         of the investment in the Shares and Warrants nor have such authorities
         passed upon or endorsed the merits of the offering of the Shares and
         Warrants.

                  (h) Experience of Such Purchaser. Such Purchaser, either alone
         or together with its representatives, has such knowledge,
         sophistication and experience in business and financial matters,
         including investing in biotechnology companies, so as to be capable of
         evaluating the merits and risks of the prospective investment in the
         Shares and

                                       13




<PAGE>



         Warrants, and has so evaluated the merits and risks of such investment.
         Such Purchaser is able to bear the economic risk of an investment in
         the Shares and Warrants and, at the present time, is able to afford a
         complete loss of such investment.

                  (i) Tax Liability. Such Purchaser has reviewed with its own
         tax advisors the federal, state, local and foreign tax consequences of
         this investment and the transactions contemplated by the Transaction
         Documents. With respect to such matters, such Purchaser relies solely
         on such advisors and not on any statements or representations of the
         Company or any of its agents other than the representations and
         warranties set forth herein. Such Purchaser understands that it (and
         not the Company) shall be responsible for its own tax liability that
         may arise as a result of this investment or the transactions
         contemplated by this Agreement.

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

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 Transfer Restrictions.

                  The Securities may only be disposed of in compliance with
         state and federal securities laws. In connection with any transfer of
         Securities other than pursuant to an effective registration statement,
         to the Company, to an Affiliate of a Purchaser or in connection with a
         pledge as contemplated in Section 4.1(b), the Company may require the
         transferor thereof to provide to the Company an opinion of counsel
         selected by the transferor, the form and substance of which opinion
         shall be reasonably satisfactory to the Company, to the effect that
         such transfer does not require registration of such transferred
         Securities under the Securities Act. As a condition of transfer, any
         such transferee shall agree in writing to be bound by the terms of this
         Agreement and shall have the rights of a Purchaser under this Agreement
         and the Registration Rights Agreement.

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

                  THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
                  AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
                  STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
                  AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                  ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
                  TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
                  THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
                  SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
                  THE TRANSFEROR TO SUCH

                                       14




<PAGE>



                  EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
                  TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
                  WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
                  BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
                  IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER
                  THE SECURITIES ACT.

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

                  (c) Certificates evidencing the Shares and Warrant Shares
         shall not contain any legend (including the legend set forth in Section
         4.1(b)), (i) while a registration statement (including the Registration
         Statement) covering the resale of such security is effective under the
         Securities Act, or (ii) following any sale of such Shares or Warrant
         Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
         are eligible for sale under Rule 144(k), or (iv) if such legend is not
         required under applicable requirements of the Securities Act (including
         judicial interpretations and pronouncements issued by the Staff of the
         Commission). The Company shall cause its counsel to issue a legal
         opinion to the Company's transfer agent promptly after the Effective
         Date if required by the Company's transfer agent to effect the removal
         of the legend hereunder. If all or any portion of a Warrant is
         exercised at a time when there is an effective registration statement
         to cover the resale of the Warrant Shares, such Warrant Shares shall be
         issued free of all legends. The Company agrees that following the
         Effective Date or at such time as such legend is no longer required
         under this Section 4.1(c), it will, no later than three Trading Days
         following the delivery by a Purchaser to the Company or the Company's
         transfer agent of a certificate representing Shares or Warrant Shares,
         as the case may be, issued with a restrictive legend, deliver or cause
         to be delivered to such Purchaser a certificate representing such
         Securities that is free from all restrictive and other legends. The
         Company may not make any notation on its records or give instructions
         to any transfer agent of the Company that enlarge the restrictions on
         transfer set forth in this Section.

                  (d) In addition to such Purchaser's other available remedies,
         the Company shall pay to a Purchaser, in cash, as liquidated damages
         and not as a penalty, for each $1,000 of Shares or Warrant Shares
         (based on the Closing Price of the Common Stock on the date such
         Securities are submitted to the Company's transfer agent) subject to
         Section

                                       15




<PAGE>



         4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5)
         Trading Days after such damages have begun to accrue) for each Trading
         Day after such third Trading Day until such certificate is delivered.
         Nothing herein shall limit such Purchaser's right to pursue actual
         damages for the Company's failure to deliver certificates representing
         any Securities as required by the Transaction Documents, and such
         Purchaser shall have the right to pursue all remedies available to it
         at law or in equity including, without limitation, a decree of specific
         performance and/or injunctive relief.

                  (e) Each Purchaser, severally and not jointly, agrees that the
         removal of the restrictive legend from certificates representing
         Securities as set forth in this Section 4.1 is predicated upon the
         Company's reliance on, and the Purchaser's agreement that, and each
         Purchaser hereby agrees that, the Purchaser will not sell any
         Securities except pursuant to either the registration requirements of
         the Securities Act, including any applicable prospectus delivery
         requirements, or an exemption therefrom.

         4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

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

         4.4 Limitation on Future Financing. From the date hereof until the
earlier of 120 calendar days after the Closing Date or 15 calendar days after
the Effective Date, the Company shall not effect a financing of its Common Stock
or Common Stock Equivalents (a "Subsequent Financing"). Further, the Company
shall not file any registration statement with respect to any Subsequent
Financing prior to 15 calendar days after the Effective Date. Notwithstanding
anything to the contrary herein, this Section 4.4 shall not apply to the
following: (a) the granting of options to employees, officers and directors of
the Company pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose (and the exercise of such options), or (b) the exercise of any security
issued by the Company in connection with the offer and sale of the Company's
securities pursuant to this Agreement, or (c) the exercise of or conversion of
any convertible securities, options or warrants

                                       16




<PAGE>



issued and outstanding on the date hereof, provided such securities have not
been amended since the date hereof, or (d) acquisitions or strategic
investments, the primary purpose of which is not to raise capital.

         4.5 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Business Day following the Closing Date, file a Current
Report on Form 8-K, disclosing the transactions contemplated hereby and make
such other filings and notices in the manner and time required by the
Commission. The Company and each Purchaser shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

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

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

         4.8 Use of Proceeds. Except as set forth on Schedule 4.8 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.

         4.9 [Intentionally Omitted]

         4.10 Indemnification of Purchasers. The Company will indemnify and hold
the Purchasers and their Affiliates, directors, officers, shareholders,
partners, employees, controlling persons and agents (each, a "Purchaser Party")
harmless from any and all losses, liabilities,

                                       17




<PAGE>



obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to: (a) any misrepresentation, breach or
inaccuracy, or any allegation by a third party that, if true, would constitute a
breach or inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction
Documents; or (b) any cause of action, suit or claim brought or made against
such Purchaser Party by any Person and arising solely out of or solely resulting
from the execution, delivery, performance or enforcement of this Agreement or
any of the other Transaction Documents, including without limitation by the
purchase of the Securities, and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser. The Company
will reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred. The
Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company solely as a result of acquiring the Securities under this
Agreement.

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

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

         4.13 Beneficial Ownership Limitation. Notwithstanding anything herein
to the contrary, in the event that an issuance of Securities to a Purchaser
hereunder would otherwise cause such Purchaser's beneficial ownership of the
Common Stock to exceed 4.999% of the then issued and outstanding shares of
Common Stock of the Company ("Issuance Cap"), then such Purchaser shall notify
the Company that such issuance of Securities will cause its beneficial ownership
to exceed the Issuance Cap and the Company shall not issue any Securities
hereunder to the extent such Securities cause such Purchaser to exceed the
Issuance Cap until the later of (y) a date 75 days from such proposed date of
issuance and (z) a date 75 Trading Days after the Effective Date (or such date
that the Purchaser may dispose of all of the already issued Shares and Warrant
Shares pursuant to Rule 144). The Purchaser shall include in its notification to
the Company the number of Securities to be deferred. The Issuance Cap and the
delayed issuance of Securities shall apply to successive issuances hereunder.

         4.14 Short Selling. Each Purchaser understands and acknowledges that
the SEC currently takes the position that coverage of short sales of shares of
the Common Stock "against

                                       18




<PAGE>



the box" with the Shares purchased hereunder prior to the Effective Date of the
Registration Statement is a violation of Section 5 of the Securities Act, as set
forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Accordingly, each Purchaser hereby
agrees not to use any of the Shares to cover any short sales prior to the
Effective Date.

                                   ARTICLE V.
                                  MISCELLANEOUS

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

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

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

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

         5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

                                       19




<PAGE>



The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.

         5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the "Purchasers".

         5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.9 and 4.10.

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

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

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

                                       20




<PAGE>



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

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

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

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

         5.14 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

         5.15 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a

                                       21




<PAGE>



group with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FW. FW
does not represent any of the Purchasers in this transaction but only the
placement agent. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

                            (Signature Page Follows)

                                       22




<PAGE>



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

VION PHARMACEUTICALS, INC.                               Address for Notice:
                                                         -------------------
                                                         4 Science Park
                                                         New Haven, CT 06511
                                                         Attn: Howard Johnson
By: /s/ Howard Johnson                                   Tel: 203-498-4210
    ------------------                                   Fax: 203-498-4211
    Name: Howard Johnson
    Title: Vice President, Finance and
           Chief Financial Officer

With copy to (which shall not constitute notice):

Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attn: Paul Jacobs, Esq.
Tel: 212-318-3000
Fax: 212-318-3400

                           [SIGNATURE PAGE CONTINUES]

                                       23




<PAGE>



          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

AIG DKR SOUNDSHORE PRIVATE INVESTORS HOLDING FUND LTD.

                                              Address for Notice:
                                              -------------------
                                              AIG DKR Soundshore Funds
                                              1281 East Main St., 3rd Floor
By: /s/ Howard I. Fischer                     Stamford, CT 06902
    ---------------------
Name: Howard I. Fischer
Title: Trading Manager                        Fax:

Subscription Amount: $100,000

                                       24




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

OTAPE INVESTMENTS LLC                          Address for Notice:
                                               -------------------
                                               1 Manhattanville Road, Suite 102
                                               Purchase, NY 10577
By: /s/ James W. Santini
Name: James W. Santini
Title: CFO                                     Fax: 914-694-5831

Subscription Amount: $300,000
-----------------------------

                                       25




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

GRYPHON MASTER FUND, LP                      Address for Notice:
                                             -------------------
                                             500 Crescent Court, Suite 270
                                             Dallas, TX 75201
By: /s/ Warren W. Garden
------------------------
Name: Warren W. Garden
Title: Authorized Agent                      Fax: 214-871-6909

Subscription Amount: $400,000

                                       26




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

CRANSHIRE CAPITAL L.P.

By: /s/ Mitchell Kopin
    ------------------
Name: Mitchell Kopin
Title: President, Downsview Capital, Inc.,
         its General Partner

Address for Notice:

Attn: Mitchell Kopin
666 Dundee Road
Suite 1901
Northbrook, IL 60062
Fax: 847-562-9031

Subscription amount: $600,000

                                       27




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

OMICRON MASTER TRUST                              Address for Notice:
                                                  -------------------
By:  Omicron Capital L.P., as subadvisor          c/o Omicron Capital L.P.
By:  Omicron Capital Inc., its general partner    810 Seventh Avenue, 39th Floor
                                                  New York, New York 10019
                                                  Attn: Brian Daly
By:  /s/ Olivier Morali                           Fax: (212) 803-5269
     ------------------
         Olivier Morali, President

Subscription Amount: $500,000
-----------------------------

                                       28




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

CAPITAL VENTURES INTERNATIONAL
By HEIGHTS CAPITAL MANGEMENT, its authorized agent

By: /s/ Martin Kobinger
    -------------------
    Martin Kobinger
    Investment Manager

Address for Notice:
425 California Street, Suite 1100
San Francisco, CA 94133
Fax: 415-403-6525

Subscription Amount: $500,000
-----------------------------

                                       29




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

ALPHA CAPITAL AG                            Address for Notice:
                                            -------------------
                                            Lettstrasse 32
                                            Furstentum 9490
By: /s/ Konrad Ackerman                     Vaduz, Liechtenstein
    -------------------                     Fax: 011-423 232 3196
    Name: Konrad Ackerman                   Attn: Director
    Title: Director

Subscription Amount: $700,000
-----------------------------

                                       30




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

PALISADES MASTER FUND L.P.          Address for Notice:
By: PEF Advisors, LLC,              -------------------
Its authorized agent                C/o PEF Advisors, LLC
By: /s/ Paul T. Mannion, Jr.        200 MAnsell Court East
    ------------------------        Suite 550
    Name: Paul T. Mannion, Jr.      Roswell, Georgia 30076
    Title: General Partner          Attn: Fund Manager
                                    Fax: 678-353-2188

Subscription Amount: $300,000
-----------------------------

                                       31




<PAGE>



          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

CRESCENT INTERNATIONAL LTD.                 Address for Notice:
                                            -------------------
                                            c/o GreenLight (Switzerland) SA
                                            84, Avenue Louis-Casai
                                            CH 1216 Cointrin, Geneva
By: /s/ Mel Craw/Maxi Brezzi                Switzerland
    ------------------------                Attention: Mel Craw / Maxi Brezzi
    Name: Mel Craw/Maxi Brezzi              Tel.: + 41 22 791 7170 /
    Title: Authorized Signatories           +41 22 791 7256
                                            Fax : +41 22 929 5394

Subscription Amount: $800,000
-----------------------------

                                       32




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

THE TAIL WIND FUND LIMITED
By: Tail Wind Advisory & Management Ltd.

By: /s/ David Crook
    ---------------
        David Crook, Chief Executive Officer
Address for Notice:
David Crook, Esq.
Chief Executive Officer
Tail Wind Advisory & Management Ltd.
1st Floor, No. 1 Regent Street
London, SW1Y 4NS, UK
Fax: +44 20 7468 7657

                            Please copy all correspondence to:
                            Peter J. Weisman, P.C.
                            110 East 59th Street
                            New York, NY  10005
                            Tel:  +212-418-4792  Fax:  212-317-8855
                            Please send the common shares a.s.a.p. directly to:
                            Bishop Rosen & Co.
                            Attn:  Mr. D. Freedman
                            100 Broadway, 18th Floor
                            New York, NY  10006
                            Tel:  +212-602-0054  Fax:  +212-602-0697
                            Please send the warrants to:
                            The Tail Wind Fund, Ltd.
                            The Bank of Nova Scotia (Bahamas) Ltd.
                            Attn:  Ngaire Rolle,
                            Windermere House, 404 East Bay St.,
                            PO Box SS 5539, Nassau, Bahamas
                            Tel:  242-393-8777  Fax:  242-393-9021

Subscription Amount: $250,000
-----------------------------

                                       33




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

Address for Notice:                     SPECTRA CAPITAL MANAGEMENT
-------------------

120 Broadway, Suite 1050                By: /s/ Gregory Porges
New York, NY 10271                          ------------------
                                        Name: Gregory Porges
                                        Title: President of the General Partner
Tax ID: 204560996

Subscription Amount: $150,000
-----------------------------

                                       34




<PAGE>



[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

<TABLE>
<S>                                                  <C>
Address for Notice:                                  TRUK OPPORTUNITY FUND
-------------------

45 Rockefeller Plaza                                 By: /s/ Michael E. Fein
Suite 2000                                               -------------------
New York, NY 10111                                       Name: Michael E. Fein
                                                         Title: Principal, Atoll Asset Management, LLC
                                                             Managing Member of Truk Opportunity Fund, LLC

Subscription Amount: $100,000
-----------------------------

Address for Notice:                                  ELLIS INVESTMENTS
-------------------

115 E. 57th St., Suite 1112                          By: /s/ Wilhelm Ungar
New York, NY 10027                                       -----------------
Attn: Cedarbrook Partners                                Name: Wilhelm Ungar
                                                         Title: Director

Subscription Amount: $200,000
-----------------------------

Address for Notice:                                  BARUCHA LTD.
-------------------

115 E. 57th St., Suite 1112                          By: /s/ Ezra Birnbaum
New York, NY 10027                                       ------------------
Attn: Cedarbrook Partners                                Name: Ezra Birnbaum
                                                         Title: Owner

Subscription Amount: $100,000
-----------------------------
</TABLE>

                                       35




</TEXT>
</DOCUMENT>
