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                                                                     EXHIBIT 4.2

                         SECURITIES PURCHASE AGREEMENT

        This SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
December 14, 2001, is entered into by and among EntreMed, Inc., a Delaware
corporation, with headquarters located at 9640 Medical Center Drive, Rockville,
Maryland 20850 (the "COMPANY"), and the investors listed on Schedule 1 attached
hereto (individually, a "BUYER" and collectively, the "BUYERS").

        WHEREAS:

        A.      The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");

        B.      The Company desires to sell and the Buyers desire to purchase,
upon the terms and conditions stated in this Agreement, shares of the Company's
Common Stock (the "COMMON STOCK"), par value $.01 per share (the "SHARES"), and
warrants, in substantially the same form attached hereto as Exhibit A (the
"WARRANTS"), to acquire shares of Common Stock (as exercised, collectively, the
"WARRANT SHARES"); and

        C.      Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder.

        NOW THEREFORE, the Company and the Buyers hereby agree as follows:

I.      PURCHASE AND SALE OF COMMON STOCK AND WARRANTS.

        A.      Purchase of Common Stock and Warrants. In connection with the
                offering by the Company of the Shares and Warrants to the
                Buyers, and subject to the satisfaction (or waiver) of the
                conditions set forth in Sections 5 and 6 below, the Company
                shall issue and sell to each Buyer and each Buyer severally
                agrees to purchase from the Company at the Closing (defined
                below) shares of Common Stock and Warrants for the aggregate
                purchase price set forth opposite such Buyer's name on Schedule
                1 (such Buyer's "COMMITTED AMOUNT") at the Price Per Unit
                (defined below). A "UNIT" shall consist of one (1) share of
                Common Stock and a warrant to acquire 0.25 (25/100) shares of
                Common Stock. Unless the Company elects to exercise its right to
                require the mandatory exercise thereof in accordance with its
                terms, each Warrant shall have a term of five (5) years, and an
                exercise price per share equal to $11.81. To determine the
                number of Units each Buyer shall purchase, such Buyer's
                Committed Amount shall


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                be divided by the Price Per Unit. The "PRICE PER UNIT" shall
                equal seven and 75/100 dollars ($7.75).

        B.      Closing; Closing Date. Subject to the satisfaction (or waiver)
                of the conditions contained in Sections 5 and 6, each Buyer's
                Committed Amount shall be paid to the Company by wire transfer
                of immediately available funds, and the Company shall thereupon
                issue a certificate representing the Shares (the "COMMON STOCK
                CERTIFICATES") and the Warrants purchased by such Buyer, duly
                executed on behalf of the Company and registered in the name of
                such Buyer or its designee. The Closing Date shall be such date
                as the Company and Pali Capital, LLC, the placement agent for
                the transactions contemplated by this Agreement, shall mutually
                agree, but in no event later than December 21, 2001 (such date
                being hereinafter referred to as the "CLOSING DATE"). The term
                "Closing" as used herein shall mean the delivery to the Closing
                Agent (defined below) of the Common Stock Certificates, the
                delivery of the Warrants, the payment of the Price Per Unit, and
                the delivery of such other documents and taking of such other
                actions as are required to be delivered or taken at the Closing
                pursuant to this Agreement. All payments contemplated by this
                Section 1(b) shall be deposited by wire transfer of immediately
                available funds as soon as practicable after the execution of
                this Agreement on the date hereof for such Buyer's benefit in an
                escrow account with The Bank of New York (the "ESCROW AGENT")
                and no interest shall be payable to such Buyer with respect to
                such funds. Payments will be returned promptly, without interest
                or deduction, if the purchase and sale of the Securities
                (defined below) contemplated by this Agreement is terminated for
                any reason.

II.     BUYER'S REPRESENTATIONS AND WARRANTIES.

                Each Buyer represents and warrants with respect to only itself
                that:

        A.      Investment Purpose. Such Buyer is acquiring the Shares and
                Warrants purchased hereunder, and any Warrant Shares
                subsequently purchased (such Shares, Warrants and Warrant Shares
                may also be referred to herein as the "SECURITIES"), for its own
                account for investment only 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 1933 Act; provided, however, that by making the
                representations herein, such Buyer 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 1933 Act. Such Buyer does not have any
                agreement or understanding, directly or indirectly, with any
                person to distribute any of the Securities.


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        B.      Accredited Investor Status. Such Buyer is an "accredited
                investor" as that term is defined in Rule 501(a) of Regulation
                D. Such Buyer is not registered as a broker-dealer under Section
                15 of the Exchange Act. Such Buyer is not an affiliate of the
                Company.

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

        D.      Information. Such Buyer and its advisors, if any, have been
                furnished with all materials relating to the business, finances
                and operations of the Company and materials relating to the
                offer and sale of the Securities which have been requested by
                such Buyer. Such Buyer 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 Buyer or its advisors, if any,
                or its representatives shall modify, amend or affect such
                Buyer's right to rely on the Company's representations and
                warranties contained in Section 3 below. Such Buyer understands
                that its investment in the Securities involves a high degree of
                risk. Such Buyer 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
                Securities.

        E.      No Governmental Review. Such Buyer 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 Securities or the fairness or suitability of
                the investment in the Securities nor have such authorities
                passed upon or endorsed the merits of the offering of the
                Securities.

        F.      Transfer or Resale. Such Buyer understands that except as
                provided in the Registration Rights Agreement: (i) the
                Securities have not been and are not being registered under the
                1933 Act or any state securities laws, and may not be offered
                for sale, sold, assigned or transferred unless (A) subsequently
                registered thereunder, (B) such Buyer shall have delivered to
                the Company an opinion of counsel, in generally acceptable form,
                to the effect that such Securities to be sold, assigned or
                transferred may be sold, assigned or transferred pursuant to an
                exemption from such registration, or (C) such Buyer provides the
                Company with reasonable assurance that such Securities can be
                sold, assigned or transferred pursuant to Rule 144(k)
                promulgated under the 1933 Act, as amended, (or a successor rule
                thereto) ("RULE 144(k)").


                                      -3-
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        G.      Validity; Enforcement. This Agreement has been duly and validly
                authorized, executed and delivered on behalf of such Buyer and
                is a valid and binding agreement of such Buyer enforceable
                against such Buyer in accordance with its terms, subject as to
                enforceability to general principles of equity and to applicable
                bankruptcy, insolvency, reorganization, moratorium, liquidation
                and other similar laws relating to, or affecting generally, the
                enforcement of applicable creditors' rights and remedies.

        H.      Residency. Such Buyer is a resident of that country and state,
                if applicable, specified in its address on Schedule 1.

III.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

                The Company represents and warrants to each of the Buyers that:

        A.      Organization and Qualification. The Company and its
                "SUBSIDIARIES" (which for purposes of this Agreement means any
                entity in which the Company, directly or indirectly, owns a
                controlling position of capital stock or holds a controlling
                position of an equity or similar interest), other than Cytokine
                Sciences, Inc., are corporations duly organized and validly
                existing in good standing under the laws of the jurisdiction in
                which they are incorporated, and have the requisite corporate
                power and authorization to own their properties and to carry on
                their business as now being conducted. Each of the Company and
                its Subsidiaries is duly qualified as a foreign corporation to
                do business and is in good standing in every jurisdiction in
                which its ownership of property or the nature of the business
                conducted by it makes such qualification necessary, except to
                the extent that the failure to be so qualified or be in good
                standing would not have a Material Adverse Effect. As used in
                this Agreement, "MATERIAL ADVERSE EFFECT" means any material
                adverse effect on the business, properties, assets, operations,
                results of operations or financial condition of the Company and
                its Subsidiaries, taken as a whole, or on the transactions
                contemplated hereby or by the agreements and instruments to be
                entered into in connection herewith, or on the authority or
                ability of the Company to perform its obligations under the
                Transaction Documents (defined below).

        B.      Authorization; Enforcement; Validity. (i) The Company has the
                requisite corporate power and authority to enter into and
                perform this Agreement, the Registration Rights Agreement and
                the Warrants and each of the other agreements entered into by
                the parties hereto in connection with the transactions
                contemplated by this Agreement (collectively, the "TRANSACTION
                DOCUMENTS"), and to issue the Securities in accordance with the
                terms hereof and thereof, (ii) the execution and delivery of the
                Transaction Documents by the Company and the consummation by it
                of the transactions contemplated hereby and thereby, including
                without limitation the issuance of the Common Stock and the
                Warrants and the


                                      -4-
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                reservation for issuance and the issuance of the Warrant Shares
                issuable upon exercise thereof, have been duly authorized by the
                Company's Board of Directors and no further consent or
                authorization is required by the Company, its Board of Directors
                or its stockholders, (iii) the Transaction Documents have been
                duly executed and delivered by the Company, and (iv) the
                Transaction Documents constitute the valid and binding
                obligations of the Company enforceable against the Company in
                accordance with their terms, except as such enforceability may
                be limited by general principles of equity or applicable
                bankruptcy, insolvency, reorganization, moratorium, liquidation
                or similar laws relating to, or affecting generally, the
                enforcement of creditors' rights and remedies.

        C.      Issuance of Securities. The Securities are duly authorized and,
                upon issuance in accordance with the terms hereof, shall be (i)
                validly issued, fully paid and non-assessable and (ii) free from
                all taxes, liens and charges with respect to the issue thereof.
                The Company has duly authorized and reserved for issuance upon
                exercise of the Warrants not less than 100% of the number of
                shares of Common Stock needed to provide for the issuance of the
                shares of Common Stock upon exercise of the Warrants. Upon
                exercise in accordance with the Warrants, the Warrant Shares
                will be validly issued, fully paid and nonassessable and free
                from all taxes, liens and charges with respect to the issue
                thereof, with the holders being entitled to all rights accorded
                to a holder of Common Stock. Assuming the accuracy of each
                Buyer's representations set forth in Section 2, the offer,
                issuance and sale by the Company of the Securities is, and the
                issuance by the Company of the Warrant Shares shall be, exempt
                from registration under the 1933 Act.

        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 hereby and thereby
                (including, without limitation, the Company's issuance of the
                Securities and the reservation for issuance and issuance of the
                Warrant Shares) will not (i) result in a violation of the
                Company's Certificate of Incorporation, as amended and as in
                effect on the date hereof (the "CERTIFICATE OF INCORPORATION")
                or the Company's By-laws, as amended and as in effect on the
                date hereof (the "BY-LAWS"), or (ii) conflict with, or
                constitute a default (or an event which 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 of, any agreement, indenture or instrument to which
                the Company or any of its Subsidiaries is a party, or result in
                a violation of any law, rule, regulation, order, judgment or
                decree (including (assuming the accuracy of the representations
                and warranties of each Buyer set forth in Section 2) federal and
                state securities laws and regulations and the rules and
                regulations of The Nasdaq National Market ("NASDAQ") applicable
                to the Company or any of its Subsidiaries or by which any
                property or asset of the Company or any of its Subsidiaries is
                bound or affected), except


                                      -5-
<PAGE>


                with respect to clause (ii), for such conflicts, defaults,
                terminations, amendments, accelerations, cancellations and
                violations as would not, individually or in the aggregate,
                reasonably be expected to result in a Material Adverse Effect.
                Neither the Company nor any of its Subsidiaries is in violation
                of any term of or in default under its Certificate of
                Incorporation or By-laws or their organizational charter or
                by-laws, and neither the Company nor any of its Subsidiaries is
                in violation or any term of or in default under any contract,
                agreement, mortgage, indebtedness, indenture, instrument,
                judgment, decree or order or any statute, rule or regulation
                applicable to the Company or its Subsidiaries (except for
                possible conflicts, defaults, terminations, amendments as would
                not, individually or in the aggregate, have a Material Adverse
                Effect). The business of the Company and its Subsidiaries is not
                being conducted, and shall not be conducted, in violation of any
                law, ordinance, regulation of any governmental entity, except
                for possible violations the sanctions which would not,
                individually or in the aggregate, have a Material Adverse
                Effect. Except as specifically contemplated by the Transaction
                Documents and as required under the 1933 Act and any applicable
                state securities laws, the Company is not required to obtain any
                consent, authorization or order of, or make any filing or
                registration with, any court or governmental agency or any
                regulatory or self-regulatory agency in order for it to execute,
                deliver or perform any of its obligations under or contemplated
                by the Transaction Documents in accordance with the terms hereof
                or thereof. All consents, authorizations, orders, filings and
                registrations which the Company is required to obtain prior to
                Closing pursuant to the preceding sentence have been obtained or
                effected or will be obtained or effected on or prior to the
                Closing Date. The Company and its Subsidiaries are unaware of
                any facts or circumstances which might give rise to any of the
                foregoing. The offer and sale of the Securities does not violate
                the rules and regulations of Nasdaq. The Company is not in
                violation of the listing requirements of Nasdaq and, other than
                as may be caused by fluctuations of its stock price, has no
                reason to believe that it will not in the foreseeable future
                continue to satisfy such listing requirements.

        E.      SEC Documents; Financial Statements. As of the Closing, the
                Company has filed all reports, schedules, forms, statements and
                other documents required to be filed by it with the SEC pursuant
                to the reporting requirements of the Securities Exchange Act of
                1934, as amended (the "1934 ACT") (all of the foregoing filed
                prior to the date hereof and all exhibits included therein and
                financial statements and schedules thereto and documents
                incorporated by reference therein being hereinafter referred to
                as the "SEC DOCUMENTS"). As of their respective dates, the SEC
                Documents complied in all material respects with the
                requirements of the 1934 Act and the rules and regulations of
                the SEC promulgated thereunder applicable to the SEC Documents,
                and none of the SEC Documents, at the time they were filed with
                the SEC, contained any untrue


                                      -6-
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                statement of a material fact or omitted to state a material fact
                required to be stated therein or necessary in order to make the
                statements therein, in light of the circumstances under which
                they were made, not misleading. As of their respective dates,
                the financial statements of the Company included in the SEC
                Documents complied as to form in all material respects with
                applicable accounting requirements and the published rules and
                regulations of the SEC with respect thereto. Such financial
                statements have been prepared in accordance with generally
                accepted accounting principles, consistently applied, during the
                periods involved (except (i) as may be otherwise indicated in
                such financial statements or the notes thereto, or (ii) in the
                case of unaudited interim statements, to the extent they may
                exclude footnotes or may be condensed or summary statements) and
                fairly present in all material respects the financial position
                of the Company as of the dates thereof and the results of its
                operations and cash flows for the periods then ended (subject,
                in the case of unaudited statements, to normal year-end audit
                adjustments). No other information provided by or on behalf of
                the Company to the Buyers which is not included in the SEC
                Documents contains any untrue statement of a material fact or
                omits to state any material fact necessary in order to make the
                statements therein, in the light of the circumstance under which
                they are or were made, not misleading. Neither the Company nor
                any of its Subsidiaries or any of their officers, directors,
                employees or agents have provided the Buyers with any material,
                nonpublic information.

        F.      Absence of Certain Changes. Since the most recent filing by the
                Company with the SEC, there has been no material adverse change
                and no material adverse development in the business, properties,
                operations, financial condition or results of operations of the
                Company and its Subsidiaries, taken as a whole, that could
                reasonably be expected to have or result in a Material Adverse
                Effect. The Company has not taken any steps, and does not
                currently expect to take any steps, to seek protection pursuant
                to any bankruptcy law nor does the Company or any of its
                Subsidiaries have any knowledge or reason to believe that its
                creditors intend to initiate involuntary bankruptcy proceedings.

        G.      Absence of Litigation. Except as set forth in the SEC Documents,
                there is no action, suit, proceeding, inquiry or investigation
                before or by any court, public board, government agency,
                self-regulatory organization or body pending or, to the
                knowledge of the Company or any of its Subsidiaries, threatened
                against or affecting the Company, the Common Stock, the Shares
                or any of the Company's Subsidiaries or any of the Company's or
                the Company's Subsidiaries' officers or directors in their
                capacities as such that would have a Material Adverse Effect.

        H.      Acknowledgment Regarding Buyers' Purchase of Common Stock and
                Warrants. The Company acknowledges and agrees that each of the
                Buyers is acting solely in the capacity of an arm's length
                purchaser with respect to


                                      -7-
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                the Transaction Documents and the transactions contemplated
                hereby and thereby. The Company further acknowledges that each
                Buyer is not acting as a financial advisor or fiduciary of the
                Company (or in any similar capacity) with respect to the
                Transaction Documents and the transactions contemplated hereby
                and thereby and any advice given by any of the Buyers or any of
                their respective representatives or agents in connection with
                the Transaction Documents and the transactions contemplated
                hereby and thereby is merely incidental to such Buyer's purchase
                of the Securities. The Company further represents to each Buyer
                that the Company's decision to enter into the Transaction
                Documents has been based solely on the independent evaluation by
                the Company and its representatives.

        I.      No Undisclosed Events, Liabilities, Developments or
                Circumstances. No event, liability, development or circumstance
                has occurred or exists, or is contemplated to occur, with
                respect to the Company or its Subsidiaries or their respective
                business, properties, prospects, operations or financial
                condition, that would be required to be disclosed by the Company
                under applicable securities laws on a registration statement
                filed with the SEC relating to an issuance and sale by the
                Company of Common Stock and which has not been publicly
                announced.

        J.      No General Solicitation. Neither the Company, nor any of its
                affiliates, nor any person acting on its or their behalf, has
                engaged in any form of general solicitation or general
                advertising (within the meaning of Regulation D under the 1933
                Act) in connection with the offer or sale of the Securities.

        K.      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 require registration of any of the Securities under
                the 1933 Act or cause this offering of the Securities to be
                integrated with prior offerings by the Company for purposes of
                the 1933 Act or any applicable stockholder 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, nor will
                the Company or any of its Subsidiaries take any action or steps
                that would require registration of any of the Securities under
                the 1933 Act or cause the offering of the Securities to be
                integrated with other offerings so as to render invalid the
                exemption from registration provided under Regulation D.

        L.      Employee Relations. Neither the Company nor any of its
                Subsidiaries is involved in any union labor dispute nor, to the
                knowledge of the Company or any of its Subsidiaries, is any such
                dispute threatened.


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        M.      Intellectual Property Rights. The Company and its Subsidiaries
                own or possess adequate rights or licenses to use all
                trademarks, trade names, service marks, service mark
                registrations, service names, patents, patent rights,
                copyrights, inventions, licenses, approvals, governmental
                authorizations, trade secrets and rights necessary to conduct
                their respective businesses as now conducted. None of the
                Company's trademarks, trade names, service marks, service mark
                registrations, service names, patents, patent rights,
                copyrights, inventions, licenses, approvals, government
                authorizations, trade secrets or other intellectual property
                rights material to the conduct of its business as now conducted
                have expired or terminated, or are expected to expire or
                terminate within two years from the date of this Agreement.
                Except as set forth in the SEC Documents, the Company and its
                Subsidiaries do not have any knowledge of any infringement by
                the Company or its Subsidiaries of trademark, trade name rights,
                patents, patent rights, copyrights, inventions, licenses,
                service names, service marks, service mark registrations, trade
                secret or other similar rights of others, or of any such
                development of similar or identical trade secrets or technical
                information by others and the Company and its Subsidiaries are
                unaware of any facts or circumstances which might give rise to
                any of the foregoing. The Company and its Subsidiaries have
                taken reasonable security measures to protect the secrecy,
                confidentiality and value of all of their intellectual
                properties.

        N.      Environmental Laws. The Company and its Subsidiaries (i) are in
                compliance with any and all applicable foreign, federal, state
                and local laws and regulations relating to the protection of
                human health and safety, the environment or hazardous or toxic
                substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
                LAWS"), (ii) have received all permits, licenses or other
                approvals required of them under applicable Environmental Laws
                to conduct their respective businesses and (iii) are in
                compliance with all terms and conditions of any such permit,
                license or approval.

        O.      Title. The Company and its Subsidiaries have good and marketable
                title in fee simple to all real property and good and marketable
                title to all personal property owned by them which is material
                to the business of the Company and its Subsidiaries, in each
                case free and clear of all liens, encumbrances and defects
                except such as are described in the SEC Documents or such as do
                not materially affect the value of such property and do not
                interfere with the use made and proposed to be made of such
                property by the Company and any of its Subsidiaries. Any real
                property and facilities held under lease by the Company and any
                of its Subsidiaries are held by them under valid, subsisting and
                enforceable leases with such exceptions as are not material and
                do not interfere with the use made and proposed to be made of
                such property and buildings by the Company and its Subsidiaries.


                                      -9-
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        P.      Insurance. The Company and each of its Subsidiaries are insured
                by insurers of recognized financial responsibility against such
                losses and risks and in such amounts as management of the
                Company believes to be prudent and customary in the businesses
                in which the Company and its Subsidiaries are engaged and the
                Company does not have any reason to believe it will not be able
                to renew its existing insurance coverage under substantially
                similar terms for the next two (2) years other than for
                increases in the premiums payable with respect to such insurance
                that would not, individually or in the aggregate, reasonably be
                expected to have a Material Adverse Effect.

        Q.      Regulatory Permits. The Company and its Subsidiaries possess all
                certificates, authorizations and permits issued by the
                appropriate federal, state or foreign regulatory authorities
                necessary to conduct their respective businesses as presently
                conducted, and neither the Company nor any such Subsidiary has
                received any notice of proceedings relating to the revocation or
                modification of any such certificate, authorization or permit.

        R.      Tax Status. The Company and each of its Subsidiaries has made or
                filed all federal and state income and all other tax returns,
                reports and declarations required by any jurisdiction to which
                it is subject (unless and only to the extent that the Company
                and each of its Subsidiaries has set aside on its books
                provisions reasonably adequate for the payment of all unpaid and
                unreported taxes) and has paid all taxes and other governmental
                assessments and charges that are material in amount, shown or
                determined to be due on such returns, reports and declarations,
                except those being contested in good faith and has set aside on
                its books provision reasonably adequate for the payment of all
                taxes for periods subsequent to the periods to which such
                returns, reports or declarations apply. There are no unpaid
                taxes in any material amount claimed to be due by the taxing
                authority of any jurisdiction, and the officers of the Company
                know of no basis for any such claim.

        S.      Transactions With Affiliates. Except as set forth in the SEC
                Documents filed at least ten days prior to the date hereof, none
                of the officers, control parties, control entities, directors,
                or employees of the Company is presently a party to any material
                transaction with the Company or any of its Subsidiaries (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 corporation, partnership,
                trust or other entity in which any officer, director, or any
                such employee has a substantial interest or is an officer,
                director, trustee or partner.


                                      -10-
<PAGE>


        T.      Eligibility. The Company is currently eligible to register the
                resale of the Common Stock and Warrant Shares on a registration
                statement on Form S-3 under the 1933 Act.

        U.      Dilutive Effect. The Company acknowledges that its obligation to
                issue the Warrant Shares upon exercise of the Warrants in
                accordance with this Agreement and the Warrants, is absolute and
                unconditional regardless of the dilutive effect that such
                issuance may have on the ownership interests of other
                stockholders of the Company.

        V.      Company Acknowledgement. The Company acknowledges and agrees
                that no Buyer makes or has made any representations or
                warranties with respect to the transactions contemplated by this
                Agreement other than those specifically set forth in this
                Section 2.

IV.     COVENANTS.

        A.      Reasonable Best Efforts. Each party shall use its reasonable
                best efforts timely to satisfy each of the conditions to be
                satisfied by it as provided in Sections 5 and 6 of this
                Agreement.

        B.      Form D and Blue Sky. The Company agrees to file a Form D with
                respect to the Securities as required under Regulation D and to
                provide a copy thereof to each Buyer promptly after such filing.
                The Company shall, on or before the Closing Date, take such
                action as the Company shall reasonably determine is necessary in
                order to obtain an exemption for or to qualify the Securities
                for sale to the Buyers at the Closing pursuant to this Agreement
                under applicable securities or "Blue Sky" laws of the states of
                the United States, and shall provide evidence of any such action
                so taken to the Buyers on or prior to the Closing Date. The
                Company shall make all filings and reports relating the offer
                and sale of the Securities required under applicable securities
                or "Blue Sky" laws of the states of the United States following
                the Closing Date.

        C.      Reporting Status. Until the earlier of (i) the date which is one
                year after the date as of which the Investors (as that term is
                defined in the Registration Rights Agreement) may sell all of
                the Common Stock and Warrant Shares without restriction pursuant
                to Rule 144(k) promulgated under the 1933 Act (or successor
                thereto), or (ii) the date on which the Investors shall have
                sold all the Common Stock and Warrant Shares (the "REGISTRATION
                PERIOD"), the Company shall file all reports required to be
                filed with the SEC pursuant to the 1934 Act, and the Company
                shall not terminate its status as an issuer required to file
                reports under the 1934 Act even if the 1934 Act or the rules and
                regulations thereunder would otherwise permit such termination.


                                      -11-
<PAGE>


        D.      Use of Proceeds. The Company will use the proceeds from the sale
                of the Common Stock and Warrants for working capital needs and
                other general corporate purposes.

        E.      Right of First Refusal. Subject to the exceptions described
                below, the Company shall not negotiate or contract with any
                party for any equity financing (including any debt financing
                with an equity component) or issue in a transaction any equity
                securities of the Company or securities convertible or
                exchangeable into or for equity securities of the Company
                (including debt securities with an equity component and any
                equity line of credit) in any form ("FUTURE OFFERINGS") during
                the period beginning on the date hereof and ending on, and
                including, the date which is 90 days after the Effective Date
                (defined below), unless it shall have first delivered to each
                Buyer or a designee appointed by such Buyer written notice (the
                "FUTURE OFFERING NOTICE") describing the proposed Future
                Offering, including the terms and conditions thereof, and
                providing each Buyer an option to purchase up to its Aggregate
                Percentage (defined below) of the securities to be issued in
                such Future Offering, as of the date of delivery of the Future
                Offering Notice, in the Future Offering (the limitations
                referred to in this sentence is referred to as the "CAPITAL
                RAISING LIMITATIONS"). For purposes of this Section 4(e),
                "AGGREGATE PERCENTAGE" at any time with respect to any Buyer
                shall mean the percentage obtained by dividing (i) the aggregate
                number of the shares of Common Stock initially issued at the
                Closing to such Buyer by (ii) the aggregate number of the shares
                of Common Stock sold to the Buyers by the Company at the Closing
                in connection with the Offering. A Buyer can exercise its option
                to participate in a Future Offering by delivering written notice
                thereof to participate to the Company within five (5) business
                days after receipt of a Future Offering Notice, which notice
                shall state the quantity of securities being offered in the
                Future Offering that such Buyer will purchase, up to its
                Aggregate Percentage, and that number of securities it is
                willing to purchase in excess of its Aggregate Percentage. In
                the event that one or more Buyers fail to elect to purchase up
                to each such Buyer's Aggregate Percentage, then each Buyer which
                has indicated that it is willing to purchase a number of
                securities in such Future Offering in excess of its Aggregate
                Percentage shall be entitled to purchase its pro rata portion
                (determined in the same manner as described in the preceding
                sentence) of the securities in the Future Offering which one or
                more of the Buyers have not elected to purchase. In the event
                the Buyers fail to elect to fully participate in the Future
                Offering within the periods described in this Section 4(e), the
                Company shall have 45 days thereafter to sell the securities of
                the Future Offering that the Buyers did not elect to purchase,
                upon terms and conditions, no more favorable to the purchasers
                thereof than specified in the Future Offering Notice. In the
                event the Company has not sold such securities of the Future
                Offering within such 45 day period, the Company shall not
                thereafter issue or sell such securities without first offering
                such securities to the Buyers in the manner provided


                                      -12-
<PAGE>


                in this Section 4(e). Notwithstanding anything to the contrary
                set forth in this Agreement, the Capital Raising Limitations
                shall not apply to (i) any public offering of equity securities
                (including any debt financing with an equity component)
                (provided, however, that the exception contained in this clause
                (i) shall not apply to equity lines or similar transactions),
                (ii) a loan from a commercial bank which does not have any
                equity feature, (iii) any transaction involving the Company's
                issuance of securities as consideration (A) in any sale,
                acquisition, merger, consolidation, reorganization or similar
                transaction involving the Company or any Subsidiary, (B) for the
                acquisition of a business, product, license or other assets by
                the Company or any Subsidiary, or (C) strategic alliance
                involving the Company or any Subsidiary, (iv) the issuance of
                securities of the Company or any Subsidiary upon exercise or
                conversion of the options, warrants or other convertible
                securities outstanding as of the date hereof, (v) the grant of
                additional options or warrants, or the issuance of additional
                securities (and the issuance of securities of the Company or any
                Subsidiary upon exercise or conversion of such additional
                options or warrants), under any Company or Subsidiary stock
                option plan, restricted stock plan, stock purchase plan or any
                other agreement or contract for the benefit of the Company's or
                any Subsidiary's employees, consultants, agents or directors, or
                (vi) financing transactions by any Subsidiary of the Company
                that include as a component thereof the issuance by the Company
                of warrants to purchase Common Stock; provided, however, that
                Warrants to purchase no more than an aggregate of 25,000 shares
                of Common Stock (as adjusted to account for any stock splits,
                combinations, reclassifications or other similar transactions
                involving the Common Stock) may be issued in transactions
                contemplated by this clause (vi) and any such Subsidiary shall
                not transfer or distribute to the Company the proceeds of such
                financing. The Buyers shall not be required to participate in or
                exercise their right of first refusal with respect to a
                particular Future Offering in order to exercise their right of
                first refusal with respect to later Future Offerings.

        F.      Listing. The Company shall promptly secure the listing of all of
                the Registrable Securities (as that term is defined in the
                Registration Rights Agreement) on Nasdaq and shall maintain, so
                long as any other shares of Common Stock shall be so listed,
                such listing of all Registrable Securities from time to time
                issuable under the terms of the Transaction Documents. Neither
                the Company nor any of its Subsidiaries shall take any action
                which would be reasonably expected to result in the delisting or
                suspension of the Common Stock on Nasdaq. The Company shall
                promptly, and in no event later than the following business day,
                provide to each Buyer copies of any notices it receives from
                Nasdaq regarding the continued eligibility of the Common Stock
                for listing on Nasdaq. The Company shall pay all fees and
                expenses in connection with satisfying its obligations under
                this Section 4(f).


                                      -13-
<PAGE>


        G.      Reservation of Shares. The Company shall take all action
                necessary to at all times have authorized, and reserved for the
                purpose of issuance, no less than 100% of the number of shares
                of Common Stock needed to provide for the issuance of the shares
                of Common Stock upon exercise of all outstanding Warrants.

        H.      Issuance of Warrant Shares. The issuance of the Warrant Shares
                shall be duly authorized, and when issued in accordance with the
                Warrants, the Warrant Shares will be validly issued, fully paid
                and non-assessable and free of all taxes, liens, charges and
                preemptive rights with respect to the issue thereof.

        I.      Limitation on Filing Registration Statements. The Company shall
                not file a registration statement (other than (i) a Registration
                Statement (as defined in the Registration Rights Agreement),
                (ii) a registration statement relating solely to employee
                benefit plans or (iii) a registration statement on Form S-4
                relating to a merger, acquisition or similar transaction or
                corporate reorganization involving the Company or any
                Subsidiary) covering the sale or resale of shares of Common
                Stock with the SEC during the period beginning on the date
                hereof and ending on the Effective Date.

        J.      Independent Auditors. The Company shall, until at least three
                (3) years after the Closing Date, maintain as its independent
                auditors an accounting firm authorized to practice before the
                SEC.

        K.      Corporate Existence and Taxes. The Company shall, until at least
                the later of (i) the date that is three (3) years after the
                Closing Date or (ii) the exercise of all Warrants purchased
                pursuant to this Agreement, maintain its corporate existence in
                good standing (provided, however, that the foregoing covenant
                shall not prevent the Company from entering into any merger or
                corporate reorganization as long as the surviving entity in such
                transaction, if not the Company, has common stock listed for
                trading on Nasdaq, the New York Stock Exchange or the American
                Stock Exchange and shall pay all its taxes when due except for
                taxes which the Company disputes.

        L.      Filing of Form 8-K. On or before the first day after the Closing
                Date, the Company shall file a Form 8-K with the SEC describing
                the terms of the transactions contemplated by the Transaction
                Documents in the form required by the 1934 Act.

        M.      Legends.

                1.      Such Buyer understands and agrees that the certificates
                        or other instruments representing the Securities, except
                        as set forth below, shall bear a restrictive legend in
                        substantially the following form (and the Company shall
                        be entitled to issue a stop-transfer order


                                      -14-
<PAGE>


                        against transfer of such certificates if the Securities
                        represented by such certificates are not transferred in
                        accordance with the following legend):

        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
        APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
        INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
        ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
        THE SECURITIES UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS,
        (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN GENERALLY ACCEPTABLE
        FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS
        SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144(K) UNDER THE 1933
        ACT.

The legend set forth above shall be removed and the Company shall issue a
certificate, within three (3) trading days of a request thereof, without such
legend to the holder of the Securities upon which it is stamped or otherwise
imprinted if: (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with any transaction other than as described in clause (i),
such holder provides the Company with an opinion of counsel, in generally
acceptable form, to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act, or (iii) such
holder provides the Company with reasonable assurances that the Securities may
be sold pursuant to Rule 144(k).

                2.      If the Company fails to issue a certificate, without the
                        legend set forth in Section 4(m)(i) within three (3)
                        trading days following the request therefor as provided
                        in Section 4(m)(i), and if after such third (3rd)
                        trading day such holder purchases (in an open market
                        transaction or otherwise) shares of Common Stock to
                        deliver in satisfaction of a sale by such holder of the
                        shares that the holder anticipated receiving from the
                        Company (a "BUY-IN"), then the Company shall (i)
                        promptly honor its obligation to issue to such holder a
                        certificate without the legend set forth in Section
                        4(m)(i) and (ii) pay cash to such holder in an amount
                        equal to the excess (if any) of the total purchase price
                        (including brokerage commissions, if any) of the shares
                        of Common Stock so purchased over the product of (A)
                        such number of shares of Common Stock, times (B) the
                        closing sale price of the Common Stock on the date of
                        the event giving rise to the Company's obligation to
                        deliver such certificates.

        N.      Restrictions on Sales of Securities. Such Buyer has not and will
                not, prior to the earlier of (i) 90 days following the Closing
                Date or (ii) the date that


                                      -15-
<PAGE>


                the Registration Statement (as defined in the Registration
                Rights Agreement) required to be filed pursuant to Section 2(a)
                of the Registration Rights Agreement is first declared effective
                by the SEC (the "EFFECTIVE DATE"), when the trading price of the
                Common Stock is less than $9.00 per share, if then prohibited by
                law or regulation, sell, dispose of, or grant any rights with
                respect to (collectively, a "DISPOSITION"), the Shares or
                Warrant Shares, nor will such Buyer engage in any hedging or
                other transaction which is designed to result in a Disposition
                of Shares or Warrant Shares by such Buyer prior to such date. In
                addition, such Buyer represents that as of the date of this
                Agreement such Buyer does not have any existing short position
                in the Common Stock that was entered into subsequent to such
                Buyer obtaining knowledge of the transactions contemplated
                hereby nor has such Buyer executed any derivative instruments
                with any third party, which in either case is designed to
                dispose of the Shares or Warrant Shares prior to the earlier of
                (i) 90 days following the Closing Date or (ii) the Effective
                Date.

        O.      Limitations on Certain Sales of Securities by the Company.

                1.      Without the prior written consent of Buyers who then
                        hold at least two-thirds (2/3) of the shares of Common
                        Stock purchased pursuant to this Agreement and then
                        outstanding, from the Closing Date until the Effective
                        Date, the Company shall not engage in any offering of
                        its equity securities (including any public offering of
                        debt securities with an equity component), whether under
                        its existing shelf registration statement, a new
                        registration statement or otherwise; provided, however,
                        that the foregoing limitation shall not apply to (i) a
                        loan from a commercial bank which does not have any
                        equity feature, (ii) any transaction involving the
                        Company's issuance of securities as consideration (A) in
                        any sale, acquisition, merger, consolidation,
                        reorganization or similar transaction involving the
                        Company or any Subsidiary, (B) for the acquisition of a
                        business, product, license or other assets by the
                        Company or any Subsidiary, or (C) in any strategic
                        alliance involving the Company or any Subsidiary, (iii)
                        the issuance of securities of the Company or any
                        Subsidiary upon exercise or conversion of the options,
                        warrants or other convertible securities outstanding as
                        of the date hereof, (iv) the grant of additional options
                        or warrants, or the issuance of additional securities
                        (and the issuance of securities of the Company or any
                        Subsidiary upon exercise or conversion of such
                        additional options or warrants), under any Company or
                        Subsidiary stock option plan, restricted stock plan,
                        stock purchase plan or any other agreement or contract
                        for the benefit of the Company's or any Subsidiary's
                        employees, consultants, agents or directors, or (v)
                        financing transactions by any Subsidiary of the Company
                        that include as a component thereof the issuance by the
                        Company of warrants to purchase


                                      -16-
<PAGE>


                        Common Stock; provided, however, that Warrants to
                        purchase no more than an aggregate of 25,000 shares of
                        Common Stock (as adjusted to account for any stock
                        splits, combinations, reclassifications or other similar
                        transactions involving the Common Stock) may be issued
                        in transactions contemplated by this clause (v) and any
                        such Subsidiary shall not transfer or distribute to the
                        Company the proceeds of such financing.

                2.      Without the prior written consent of Buyers who then
                        hold at least two-thirds (2/3) of the shares of Common
                        Stock purchased pursuant to this Agreement and then
                        outstanding, during the thirty (30) day period
                        immediately following the Effective Date, the Company
                        shall not engage in a offering of its equity securities
                        (including any public offering of debt securities with
                        an equity component) at price per share that is less
                        than the Price Per Unit; provided, however, that the
                        foregoing limitation shall not apply to (i) a loan from
                        a commercial bank which does not have any equity
                        feature, (ii) any transaction involving the Company's
                        issuance of securities as consideration (A) in any sale,
                        acquisition, merger, consolidation, reorganization or
                        similar transaction involving the Company or any
                        Subsidiary, (B) for the acquisition of a business,
                        product, license or other assets by the Company or any
                        Subsidiary, or (C) in any strategic alliance involving
                        the Company or any Subsidiary, (iii) the issuance of
                        securities of the Company or any Subsidiary upon
                        exercise or conversion of the options, warrants or other
                        convertible securities outstanding as of the date
                        hereof, (iv) the grant of additional options or
                        warrants, or the issuance of additional securities (and
                        the issuance of securities of the Company or any
                        Subsidiary upon exercise or conversion of such
                        additional options or warrants), under any Company or
                        Subsidiary stock option plan, restricted stock plan,
                        stock purchase plan or any other agreement or contract
                        for the benefit of the Company's or any Subsidiary's
                        employees, consultants, agents or directors, or (v)
                        financing transactions by any Subsidiary of the Company
                        that include as a component thereof the issuance by the
                        Company of warrants to purchase Common Stock; provided,
                        however, that Warrants to purchase no more than an
                        aggregate of 25,000 shares of Common Stock (as adjusted
                        to account for any stock splits, combinations,
                        reclassifications or other similar transactions
                        involving the Common Stock) may be issued in
                        transactions contemplated by this clause (v) and any
                        such Subsidiary shall not transfer or distribute to the
                        Company the proceeds of such financing

V.      CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.


                                      -17-
<PAGE>


        The obligation of the Company hereunder to issue and sell the Common
Stock and Warrants to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:

        A.      Such Buyer shall have executed each of the Transaction Documents
                to which it is a party and delivered the same to the closing
                agent(s) (the "CLOSING AGENT") for the transactions contemplated
                by this Agreement.

        B.      The representations and warranties of such Buyer shall be true
                and correct in all material respects as of the date when made
                and as of the Closing Date as though made at that time (except
                for representations and warranties that speak as of a specific
                date), and such Buyer shall have performed, satisfied and
                complied in all material respects with the covenants, agreements
                and conditions required by this Agreement to be performed,
                satisfied or complied with by such Buyer at or prior to the
                Closing Date.

        C.      There shall not be in effect any law, rule or regulation
                prohibiting or restricting the transactions contemplated hereby,
                or requiring any consent or approval which shall not have been
                obtained.

VI.     CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

        The obligation of each Buyer hereunder to purchase the Common Stock and
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:

        A.      The Company shall have executed each of the Transaction
                Documents to which it is a party and delivered the same to the
                Closing Agent.

        B.      The Company's common stock shall be authorized for quotation on
                Nasdaq and trading in Common Stock shall not have been suspended
                by the SEC or Nasdaq.

        C.      The representations and warranties of the Company shall be true
                and correct as of the date when made and as of the Closing Date
                as though made at that time (except for representations and
                warranties that speak as of a specific date) and the Company
                shall have performed, satisfied and complied with the covenants,
                agreements and conditions required by the Transaction Documents
                to be performed, satisfied or complied with by the Company at or
                prior to the Closing Date.


                                      -18-
<PAGE>


        D.      The Company shall have delivered to the Closing Agent the
                opinion of the Company's outside legal counsel, dated as of the
                Closing Date, in substantially the form of Exhibit C attached
                hereto.

        E.      The Company shall have made all filings, other than those
                contemplated by the Registration Rights Agreement, under all
                applicable federal and state securities laws necessary to
                consummate the issuance of the Securities pursuant to this
                Agreement in compliance with such laws.

        F.      The Company shall have executed and delivered to the Closing
                Agent (i) the shares of Common Stock being purchased by such
                Buyer at the Closing and (ii) the Warrants being purchased by
                such Buyer at the Closing.

        G.      The Company shall have made all filings under all applicable
                federal and state securities laws necessary to consummate the
                issuance of the Securities pursuant to this Agreement in
                compliance with such laws.

        H.      As of the Closing Date, the Company shall have reserved out of
                its authorized and unissued Common Stock, solely for the purpose
                of effecting the exercise of the Warrants, no less than 100% of
                the number of shares of Common Stock needed to provide for the
                issuance of the shares of Common Stock upon exercise of all
                outstanding Warrants.

        I.      The Company shall have delivered to the Closing Agent the
                following:

                1.      A certificate, executed by the Chief Executive Officer
                        of the Company, dated as of the Closing Date, confirming
                        that the representations and warranties described in
                        Section 6(c) were true and correct as of the date when
                        made and as of the Closing Date.

                2.      A certificate evidencing the incorporation and good
                        standing of the Company and TheraMed, Inc. in each such
                        corporation's state of incorporation issued by the
                        Secretary of State of such state of incorporation as of
                        a date within 10 days of the Closing Date;

                3.      A certified copy of the Certificate of Incorporation as
                        certified by the Secretary of State of the State of
                        Delaware within 10 days of the Closing Date; and

                4.      A secretary's certificate, dated as the Closing Date, as
                        to (A) resolutions of the Board of Directors and/or a
                        committee of the Board of Directors of the Company
                        consistent with Section 3(b)(ii) of this Agreement, (B)
                        the Certificate of Incorporation and (C) the Bylaws,
                        each as in effect at the Closing.


                                      -19-
<PAGE>


        J.      The Company shall have delivered to the Buyer such other
                documents relating to the transactions contemplated by this
                Agreement as the Buyer may reasonably request.

        K.      There shall not be in effect any law, rule or regulation
                prohibiting or restricting the transactions contemplated hereby,
                or requiring any consent or approval which shall not have been
                obtained.

        L.      Trading in securities generally on Nasdaq shall not have been
                suspended or limited, nor shall there be any major outbreak or
                escalation of hostilities involving the United States that in
                either case in the reasonable judgment of the Buyers makes it
                impracticable to purchase the Common Stock and Warrants.

        M.      The Company shall have reimbursed Cranshire Capital, L.P. and
                Vertical International for each such Buyer's out-of-pocket costs
                and expenses, including, without limitation, such Buyers'
                attorneys' fees and expenses, incurred by them in connection
                with the due diligence review of the transactions contemplated
                by this Agreement and of the Company, and the negotiation and
                preparation of the Transaction Documents and the consummation of
                the transactions contemplated thereby. Notwithstanding anything
                to the contrary contained in this Agreement, in no event shall
                the Company be required to reimburse such Buyers for
                out-of-pocket expenses to the extent that the aggregate
                out-of-pocket expenses of both such Buyers shall exceed $55,000.
                Subject to the maximum reimbursement provided for in the
                immediately preceding sentence, Cranshire Capital, L.P. and
                Vertical International may effect the reimbursement provided for
                in this Section 6(m) by reducing such Buyer's Committed Amount
                by up to one-half of the aggregate out-of-pocket costs and
                expenses incurred by such Buyers.

VII.    INDEMNIFICATION.

                In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in


                                      -20-
<PAGE>


the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

VIII.   LIQUIDATED DAMAGES.

                The Company agrees that Buyers will suffer damages if the
Company (a) violates any material provision of or fails to fulfill any of its
material obligations or duties pursuant to the Transaction Documents (other than
the Registration Rights Agreement) and such violation or failure, directly or
indirectly, restricts the Buyers from selling, transferring or disposing of its
Shares or (b) violates the Company's covenants set forth in Section 4(d) (Use of
Proceeds), 4(e) (Right of First Refusal) or 4(i) (Limitation on Filing
Registration Statements) (a "COMPANY VIOLATION"), and that it would be difficult
to ascertain the extent of such damages. Accordingly, in the event of such
Company Violation, the Company hereby agrees to pay liquidated damages
("LIQUIDATED DAMAGES") to each Buyer, in cash, (x) upon the occurrence of a
Company Violation, an amount equal to one percent (1%) of the aggregate Price
Per Unit of the Units then held by such Buyer, and (y) if the Company Violation
has not been cured by the first month anniversary following the date of the
Company Violation, an amount equal to one percent (1%) of the Price Per Unit of
the Units then held by such Buyer and (z) on each monthly anniversary thereafter
until the Company Violation has been cured, an amount equal to one percent (1%)
of the aggregate Price Per Unit of the Units then held by such Buyer; provided,
however, that all periods referred to in clauses (y) and (z) above shall be
tolled during delays caused by the action or inaction of any Buyer, and the
Company shall have no liability in respect of any such delay. The Liquidated
Damages payable pursuant hereto shall be payable within five (5) business days
following the date of the Company Violation or the monthly anniversary thereof,
as the case may be. Notwithstanding anything to the contrary contained herein,
(x) Liquidated Damages shall not be payable under this Section 8 for more than
one Company Violation occurring or existing at any one time, (y) no Liquidated
Damages shall be payable under this Section 8 in respect of any Company
Violation which also constitutes a Registration Default under the Registration
Rights Agreement or is an exception from the definition of Registration Default
contained in the Registration Rights Agreement and (z) the Company shall have no
liability to any Buyer for any Liquidated Damages under this Section 8 at the
occurrence of a Company Violation or thereafter if the Company's violation of
any such material provision or failure to fulfill such material obligations is
caused by or results from any action or inaction of any such Buyer or any other
Buyer.

IX.     GOVERNING LAW; MISCELLANEOUS.


                                      -21-
<PAGE>


        A.      Governing Law; Jurisdiction; Jury Trial. This Agreement shall be
                governed by and construed in all respects by the internal laws
                of the State of New York (except for the proper application of
                the United States federal securities laws), without giving
                effect to any choice of law or conflict of law provision or rule
                (whether of the State of New York or any other jurisdictions)
                that would cause the application of the laws of any
                jurisdictions other than the State of New York. Each party
                hereby irrevocably submits to the exclusive jurisdiction of the
                state and federal courts sitting in the City of New York. EACH
                PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
                AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
                DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF
                THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. In any
                suit or action to enforce the provisions of this Agreement, the
                prevailing party shall be entitled to be reimbursed for all
                reasonable legal fees and expenses incurred by such party in
                connection with such suit or action.

        B.      Counterparts. This Agreement may be executed in two or more
                identical counterparts, all of which shall be considered one and
                the same agreement and shall become effective when counterparts
                have been signed by each party and delivered to the other party;
                provided that a facsimile signature shall be considered due
                execution and shall be binding upon the signatory thereto with
                the same force and effect as if the signature were an original,
                not a facsimile, signature.

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

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

        E.      Entire Agreement; Amendments. This Agreement supersedes all
                other prior oral or written agreements between the Buyers, the
                Company, their affiliates and persons acting on their behalf
                with respect to the matters discussed herein, and 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 any Buyer makes any
                representation, warranty, covenant or undertaking with respect
                to such matters. No provision of this Agreement may be amended
                other than by an instrument in writing signed by the Company and
                holders of at least


                                      -22-
<PAGE>


                two-thirds (2/3) of the shares of Common Stock purchased
                pursuant to this Agreement and then outstanding, and, except as
                otherwise provided herein, no provision hereof may be waived
                other than by an instrument in writing signed by the party
                against whom enforcement is sought.

        F.      Notices. Any notices, consents, waivers or other communications
                required or permitted to be given under the terms of this
                Agreement must be in writing and will be deemed to have been
                delivered: (i) upon receipt, when delivered personally; (ii)
                upon receipt, when sent by facsimile (provided confirmation of
                transmission is mechanically or electronically generated and
                kept on file by the sending party); or (iii) one business day
                after deposit with a nationally recognized overnight delivery
                service, in each case properly addressed to the party to receive
                the same. The addresses and facsimile numbers for such
                communications shall be:

                If to the Company:

                        EntreMed, Inc.
                        9640 Medical Center Drive
                        Rockville, MD 20850
                        Telephone: (301) 217-9858
                        Facsimile: (301) 217-9594
                        Attention: John W. Holaday, Ph.D.

                With a copy to:

                        Arnold & Porter
                        1600 Tysons Boulevard, Ste. 900
                        McLean, VA 22102
                        Telephone: (703) 720-7005
                        Facsimile: (703) 720-7399
                        Attention: Robert B. Ott, Esq.

If to a Buyer, to it at the address and facsimile number set forth on Schedule 1
with copies to such Buyer's legal representative as set forth on Schedule 1, or
at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.

        G.      Successors and Assigns. This Agreement shall be binding upon and
                inure to the benefit of the parties and their respective
                successors and assigns, including any purchasers of the Common
                Stock. A Buyer may assign some or all of its rights hereunder
                without the consent of the Company; provided, however, that any
                such assignment shall not release such Buyer from its
                obligations hereunder unless such obligations are assumed by
                such assignee and the Company has consented to such assignment
                and assumption.


                                      -23-
<PAGE>


        H.      No Third Party Beneficiaries. This Agreement is intended for the
                benefit of the parties hereto and their respective permitted
                successors and assigns, and is not for the benefit of, nor may
                any provision hereof be enforced by, any other person.

        I.      Survival. Unless this Agreement is terminated under Section
                9(l), the representations and warranties of the Company and the
                agreements and covenants set forth in Sections 3, 4 and 9, the
                indemnification provisions set forth in Section 7, and the
                liquidated damages provisions in Section 8 shall survive the
                Closing. Each Buyer shall be responsible only for its own
                representations, warranties, agreements and covenants hereunder.

        J.      Publicity. The Company and each Buyer shall have the right to
                approve before issuance any press releases or any other public
                statements with respect to the transactions contemplated hereby;
                provided, however, that the Company shall be entitled, without
                the prior approval of any Buyer, to make any press release or
                other public disclosure with respect to such transactions as is
                required by applicable law and regulations. Notwithstanding the
                foregoing sentence, Cranshire Capital, L.P. and Vertical
                Ventures, L.L.C. shall be consulted by the Company in connection
                with the preparation of the Form 8-K required to be filed
                pursuant to Section 4(m) and in no event shall the press release
                filed as an exhibit to such 8-K identify any particular Buyer
                hereunder without the Company first having received the written
                consent of such Buyer.

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

        L.      Termination. In the event that the Closing shall not have
                occurred with respect to a Buyer on or before three (3) business
                days from the date hereof due to the Company's or such Buyer's
                failure to satisfy the conditions set forth in Sections 5 and 6
                above (and the nonbreaching party's failure to waive such
                unsatisfied condition(s)), the nonbreaching party shall have the
                option to terminate this Agreement with respect to such
                breaching party at the close of business on such date without
                liability of any party to any other party.

        M.      Placement Agent. The Company acknowledges that it has engaged
                Pali Capital LLC as placement agent in connection with the sale
                of the Shares and Warrants. The Company shall be responsible for
                the payment of any placement agent's fees or broker's
                commissions relating to or arising out of the transactions
                contemplated hereby. The Company shall pay, and hold each Buyer
                harmless against, any liability, loss or expense (including,


                                      -24-
<PAGE>


                without limitation, attorneys' fees and out of pocket expenses)
                arising in connection with any such claim.

        N.      No Strict Construction. 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.

        O.      Remedies. Each Buyer and each holder of the Securities shall
                have all rights and remedies set forth in the Transaction
                Documents and all rights and remedies which such holders have
                been granted at any time under any other agreement or contract
                and all of the rights which such holders have under any law. Any
                person having any rights under any provision of this Agreement
                shall be entitled to enforce such rights specifically (without
                posting a bond or other security), to recover damages by reason
                of any breach of any provision of this Agreement and to exercise
                all other rights granted by law.

        P.      Payment Set Aside. To the extent that the Company makes a
                payment or payments to the Buyers hereunder or pursuant to the
                Transaction Documents or the Buyers enforce or exercise their
                rights hereunder or 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 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.

        Q.      Non-Public Information. The Company confirms that as long as any
                Buyer owns Securities, neither the Company nor any other person
                acting on its behalf will provide any of such Buyer or its
                agents or counsel with any information that constitutes or might
                constitute material non-public information, unless such Buyer
                shall have agreed to execute a written agreement regarding the
                confidentiality and use of such information. The Company
                understands and confirms that the Buyers shall be relying on the
                foregoing representations in effecting transactions in
                securities of the Company.


                            [Signature Pages Follow]


                                      -25-
<PAGE>


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


                                            COMPANY:

                                            ENTREMED, INC.


                                            By:    /s/ John W. Holaday, PhD
                                               ---------------------------------
                                            Name:  John W. Holaday, PhD
                                            Title: Chairman and CEO


                         [COUNTERPART SIGNATURE PAGE TO
                         SECURITIES PURCHASE AGREEMENT]
<PAGE>


                                            BUYER:

                                            CRANSHIRE CAPITAL, L.P.


                                            By:    Downsview Capital, Inc.,
                                                   the General Partner

                                                   By:    /s/ Mitchell P. Kopin
                                                      --------------------------
                                                   Name:  Mitchell P. Kopin
                                                   Title: President


                                            BUYER:

                                            EURAM CAP STRAT "A" FUND LIMITED

                                            By:    JMJ Capital, Inc., the
                                                   Investment Manager


                                                   By:    /s/ Mitchell P. Kopin
                                                      --------------------------
                                                   Name:  Mitchell P. Kopin
                                                   Title: President


                                            BUYER:

                                            CLEVELAND OVERSEAS LTD.

                                            By: Primeway S.A., Director

                                            By:    /s/ Beat Kunz
                                               -----------------
                                            Name:      Beat Kunz


                                            BUYER:

                                            WINCHESTER GLOBAL TRUST
                                            COMPANY LIMITED AS TRUSTEE FOR
                                            CADUCEUS CAPITAL TRUST



                                            By:    /s/ Samuel D. Isaly
                                               ---------------------------------
                                            Name:  Samuel D. Isaly
                                            Title: Managing Partner,
                                                   OriMed Advisors LLC


                                            BUYER:

                                            CADUCEUS CAPITAL II, L.P.



                                            By:    /s/ Samuel D. Isaly
                                               ---------------------------------
                                            Name:  Samuel D. Isaly
                                            Title: Managing Partner,
                                                   OriMed Advisors LLC

<PAGE>


                                            BUYER:

                                            PW EUCALYPTUS FUND, L.L.C.



                                            By:    /s/ Samuel D. Isaly
                                               ---------------------------------
                                            Name:  Samuel D. Isaly
                                            Title: Managing Partner,
                                                   OriMed Advisors LLC


                                            BUYER:

                                            PW EUCALYPTUS FUND, LTD.


                                            By:    /s/ Samuel D. Isaly
                                               ---------------------------------
                                            Name:  Samuel D. Isaly
                                            Title: Managing Partner,
                                                   OriMed Advisors LLC

                                            BUYER:

                                            DMG LEGACY FUND LLC
                                            By: DMG Advisors LLC, Managing
                                                Member


                                            By:    /s/ Andrew Wilder
                                               ---------------------------------
                                            Name:  Andrew Wilder
                                            Title: Chief Financial Officer


                                            BUYER:

                                            DMG LEGACY INSTITUTIONAL FUND LLC
                                            By: DMG Advisors LLC, Managing
                                                Member


                                            By:    /s/ Andrew Wilder
                                               ---------------------------------
                                            Name:  Andrew Wilder
                                            Title: Chief Financial Officer


                                            BUYER:

                                            DMG LEGACY INTERNATIONAL LTD.
                                            By: DMG Advisors LLC, Investment
                                                Advisor


                                            By:    /s/ Andrew Wilder
                                               ---------------------------------
                                            Name:  Andrew Wilder
                                            Title: Chief Financial Officer


<PAGE>


                                            BUYER:

                                            EDJ Limited



                                            By:    /s/ Jeffrey Porter
                                               ---------------------------------
                                            Name:  Jeffrey Porter
                                            Title: Trading Advisor


                                            BUYER:

                                            Arnold S. Gumowitz


                                            By:    /s/ Arnold S. Gumowitz
                                               ---------------------------------
                                            Name:  Arnold S. Gumowitz


                                            BUYER:

                                            MAPLE BANK GMBH-MILAN BRANCH

                                            By:    /s/ Myles Marmion
                                               ---------------------------------
                                            Name:  M.C. Marmion
                                            Title: Authorized Signatory


                                            BUYER:

                                            PORTER PARTNERS, L.P.

                                            By:    /s/ Jeffrey Porter
                                               ---------------------------------
                                            Name:  Jeffrey Porter
                                            Title: General Partners


                                            BUYER:

                                            S.A.C. CAPITAL ASSOCIATES, LLC
                                            BY: S.A.C. Capital Advisors, LLC

                                            By:    /s/ Peter Nussbaum
                                               ---------------------------------
                                            Name:  Peter Nussbaum
                                            Title: General Counsel

<PAGE>


                                            BUYER:

                                            THOMAS SERVICE


                                            By:    /s/ Thomas Service
                                               ---------------------------------
                                            Name:  Thomas Service


                                            BUYER:

                                            STEELHEAD INVESTMENTS, LTD.


                                            By:    /s/ Kevin O'Neal
                                               ---------------------------------
                                            Name:  Kevin O'Neal
                                            Title: Authorized Signatory


                                            BUYER:

                                            VERTICAL INTERNATIONAL LTD.


                                            By:    /s/ Kenneth Henderson
                                               ---------------------------------
                                            Name:  Kenneth Henderson
                                            Title: Authorized Signatory


                                            BUYER:

                                            ZLP MASTER FUND, LTD


                                            By:    /s/ Stuart J. Zimmer
                                               ---------------------------------
                                            Name:  Stuart J. Zimmer
                                            Title: Director