VIMRx Pharmaceuticals Inc.
                              2751 Centerville Road
                           Suite 210, Little Falls II
                           Wilmington, Delaware 19808


                                                           October 30, 1996



Mr. Richard L. Dunning
909 Cecil Road
Westover Hills
Wilmington, DE  19807

Dear Dick:

         This letter agreement amends,  modifies,  clarifies and restates in all
respects   the   agreement   dated  March  27,   1996   between  you  and  VIMRx
Pharmaceuticals Inc. ("VIMRx") as to the terms and conditions of your employment
by VIMRx.


         1. In your capacity as President and Chief Executive  Officer of VIMRx,
you will  report to  VIMRx's  Board of  Directors.  VIMRx has  caused  you to be
elected to its Board of  Directors,  as well as to the Board of Directors of one
or more  subsidiaries of VIMRx,  and, at the option of the Board of Directors of
VIMRx,  you agree to serve,  for no  additional  compensation,  as a Director of
VIMRx  and as a  Director  and/or  officer  of  any  or all of its  subsidiaries
throughout the term of your employment.


         2. The term of your  employment  commenced on March 27, 1996, and shall
continue until  terminated  under the provisions of Paragraph 6 below. You are a
full-time  employee of VIMRx and agree to devote your business and  professional
time,  energy and skills to the  affairs  of VIMRx and its  subsidiaries  and to
serve VIMRx faithfully and to the best of your ability.

         3.  (a)  As  compensation  for  the  services  to be  rendered  by  you
hereunder,  VIMRx will pay you (i) a signing  bonus of  $40,000  payable on your
execution  and  delivery  of this  letter  agreement,  and (ii) a base salary of
$200,000 per annum,  payable in  installments in accordance with VIMRx's regular
payroll practices, and (iii) an annual cash bonus to be determined in accordance
with the provisions of subparagraph 3(d).

             (b) As  additional  compensation,  VIMRx has awarded you  Incentive
Stock Options to purchase  156,064 shares of VIMRx Common Stock pursuant to that
certain  Incentive  Stock  Option  Agreement  dated  March  28,  1996  (the "ISO
Agreement"), and Non-Incentive Stock Options to purchase 643,936 Shares of VIMRx
Common Stock pursuant to that certain Non-Incentive Stock Option Agreement dated
March 28, 1996 (the  "Non-ISO  Agreement").  Subject to approval by the Board of
Directors,  VIMRx will amend your Non-ISO Agreement to include  provisions as to
the following matters:

                        (i) The shares  subject to the  Non-ISO  agreement  will
become exercisable as follows:

                           March 28, 1997                     214,649 shares
                           March 28, 1998                     214,649 shares
                           March 28, 1999                     214,648 shares

                        (ii) Subject to the provisions of the Non-ISO  Agreement
regarding  termination of employment,  the exercisability of all options subject
to the Non-ISO Agreement shall expire on March 27, 2006.

                        (iii) In the event  your  employment  is  terminated  by
VIMRx (except for "cause" (as hereinafter defined), but including "constructive"
termination  pursuant to Paragraph 6(f) of this letter agreement and termination
on account of permanent disability (as hereinafter  defined)) on or before March
27, 1997, options to purchase 214,649 shares will immediately become exercisable
and may be exercised at any time during the  three-month  period  following  the
effective  date of such  termination,  and the  exercisability  of the remaining
shares  subject to the Non-ISO  Agreement  will  lapse.  In the event you are so
terminated  after March 27, 1997, all options  subject to the Non-ISO  Agreement
will immediately  become exercisable and may be exercised at any time during the
three-month  period  following the effective date of such  termination but in no
event subsequent to March 27, 2006;

                        (iv) In the event you die on or before  March 27,  1997,
options to purchase 214,649 shares will immediately  become  exercisable and the
exercisability  of the remaining  shares  subject to the Non-ISO  Agreement will
lapse.  In the event you die  thereafter,  all  options  subject to the  Non-ISO
Agreement  will  become  exercisable.  In  either  event,  such  options  may be
exercised by your heirs, personal  representatives or distributees within twelve
months of the date of your death but in no event after March 27, 2006.

                        (v) All  shares  subject  to the ISO  Agreement  and the
Non-ISO  Agreement will be registered on Form S-8 as soon as  practicable  after
the Board of Directors approves such registration.

                        (vi) In the  event (i) a sale of  substantially  all the
assets of VIMRx, to a Person (as hereinafter  defined) other than an "Affiliate"
(as hereinafter defined) of VIMRx, is consummated,  or (ii) any Person, or group
of Persons  acting in concert,  directly or indirectly,  by purchase,  merger or
otherwise,  acquires beneficial  ownership of stock representing more than fifty
percent (50%) of the voting power of the then outstanding stock of VIMRx (or any
successor of VIMRx by merger or consolidation),  or (iii) a single  transaction,
or a series  of  related  transactions,  is  consummated  pursuant  to which the
beneficial  ownership  of more than fifty  percent  (50%) of the voting stock of
VIMRx changes,  all stock options  theretofore  granted to you under the Non-ISO
Agreement will  accelerate and become  exercisable as of the date of such event.
For purposes of this  subparagraph  3(b):  "Person"  shall mean any  individual,
company,  limited liability company,  partnership,  association,  trust or other
entity; an "Affiliate" of a Person shall mean any Person controlling, controlled
by or under common  control with such Person;  and open market  transactions  by
unaffiliated  Persons  not  acting  in  concert  shall  not be  deemed  "related
transactions."

             (c) You will be eligible to participate in VIMRx's medical, dental,
life and long-term  disability  insurance and other benefit programs,  including
any 401(k) or other  retirement  plans,  from time to time in effect for VIMRx's
senior executives, your participation in any such plans to be in accordance with
their  respective  terms and  conditions.  In lieu of  participation  in VIMRx's
medical  and  dental  plans  (if any) you may elect to  receive  a $500  monthly
allowance therefor.

             (d) Your performance will be reviewed  annually by VIMRx's Board of
Directors,  in  connection  with  which  your  annual  cash  bonus and  possible
increases in your base  compensation for the future will be discussed,  it being
understood  that any such  decisions  shall be within the  discretion of VIMRx's
Board of Directors and/or its Compensation Committee (or other similar committee
duly appointed by VIMRx's Board of Directors). However, it is further understood
that  the  annual  cash  bonus is  initially  targeted  at at least  33% of base
compensation, assuming satisfactory performance.

         4. You will be  entitled  to take up to an  aggregate  of four weeks of
vacation each calendar year as business  conditions  permit, it being understood
that no more than one week of unused vacation per year of service with VIMRx may
be carried over to the succeeding  year.  VIMRx shall not be required to provide
any additional compensation to you for vacation time not utilized by you.

         5. VIMRx will reimburse you for all reasonable and documented  business
expenses  incurred by you on behalf of VIMRx during the term of your  employment
hereunder  consistent with VIMRx's expense  reporting policy (as the same may be
modified from time to time).  Notwithstanding  anything  herein to the contrary,
the  provisions  of  this  Paragraph  5  shall  survive  the  effective  date of
termination of this Agreement for a period of six months.

         6. (a) Your employment hereunder may be terminated at any time by VIMRx
for cause (as such term is hereinafter defined) or, upon at least 60 days' prior
written notice by you or by VIMRx, without cause.

            (b) In the event your  employment  is  terminated  by VIMRx  without
cause,  this  Agreement  shall  terminate  immediately  on the effective date of
termination of your employment; provided, however, that:

                        (i)  you  will  be  paid  six  months'  base  salary  as
severance in monthly  installments  (in arrears)  beginning the first full month
following the cessation of your employment with VIMRx; and

                        (ii) you will be  entitled  to receive  any  accrued but
unpaid salary earned by you through the effective date of such termination.

             (c) No severance  shall be paid or payable to you in the event your
employment  is  terminated  for  cause,  or you  voluntarily  resign  from  your
employment   with  VIMRx,   in  which  events  this  Agreement  shall  terminate
immediately  upon the effective date of  termination of your  employment or upon
the effective date of your resignation,  respectively;  provided,  however, that
VIMRx shall  nonetheless  be obligated to pay you any accrued but unpaid  salary
earned by you through the date of such termination.

             (d) For purposes of this  Agreement,  termination for "cause" shall
mean  termination  due to any or more of the following:  (i) if you are indicted
for committing a felony or a decision or  determination is rendered by any court
or  governmental  authority  that you have  committed any act  involving  fraud,
willful misconduct,  dishonesty, breach of trust or moral turpitude; (ii) if you
willfully  breach  your  duty of  loyalty  to,  or  commit  an act of  fraud  or
dishonesty  upon,  VIMRx;  (iii) if you demonstrate  gross negligence or willful
misconduct in connection with your employment;  (iv) if, in the reasonable, good
faith  opinion of a majority  of VIMRx's  whole  Board of  Directors  (excluding
yourself,  if you shall then be a director  of  VIMRx),  you engage in  personal
misconduct of such a material nature as to render your presence as President and
Chief Executive  Officer  detrimental to VIMRx or its reputation and you fail to
cure the same within five days after notice  thereof  from VIMRx;  or (v) if you
commit a material breach of or a default under any of the terms or conditions of
this Agreement and you fail to cure such breach or default within ten days after
prior written notice thereof from VIMRx.

             (e) Your employment hereunder shall terminate immediately upon your
death or "permanent disability" (as such term is hereinafter defined). In either
such event,  this Agreement  shall terminate  immediately  upon the cessation of
your employment;  provided,  however, you (or your legal representative,  as the
case may be) will be entitled to receive any accrued but unpaid salary earned by
you through the date of such termination, plus severance in monthly installments
(in  arrears),  beginning  the  first  full  month  following  the  date of such
termination,  in an aggregate amount equal to the positive  difference,  if any,
between (x) the base salary you would have received hereunder for the six months
immediately  following such termination  date had your employment  continued for
such six month  period,  and (y) the total  monies  paid or  payable to you with
respect to such six month period under the long-term disability insurance policy
or policies  maintained by VIMRx for your benefit,  if any. For purposes of this
Agreement,  the term "permanent  disability" shall have the meaning set forth in
the long-term  disability  insurance policy or policies then maintained by VIMRx
for the benefit of its employees,  or if no such policy shall then be in effect,
or if more  than one such  policy  shall  then be in  effect  in which  the term
"permanent  disability" shall be assigned different  definitions,  then the term
"permanent disability" shall be defined for purposes hereof to mean any physical
or  mental  disability  or  incapacity  which  renders  you  incapable  of fully
performing  the services  required of you in  accordance  with your  obligations
hereunder for a period aggregating 120 days during any twelve-month period.

             (f) In the event of occurrence of any of the following events,  you
shall  have the right to  terminate  your  employment  with VIMRx on at least 60
days' notice.  Subject to the foregoing  provisions of this  Paragraph 6, in the
event  such  notice  is given by you  within  30 days of any one or more of such
events,  such  termination  of employment  shall be deemed  termination  of your
employment by VIMRx without "cause" within the meaning of this Paragraph 6:

                        (i) a material breach of or default under this Agreement
by VIMRx  which is not cured by VIMRx  within ten (10) days after its receipt of
written notice thereof from you;

                        (ii) a material  reduction  in your duties or a material
interference  with the exercise of your  authority by VIMRx's Board of Directors
(not arising from any physical or mental disability you may sustain) which would
be inconsistent  with the position of President and Chief  Executive  Officer of
VIMRx and the same shall not have been  alleviated by VIMRx's Board of Directors
within ten (10) days after its receipt of written notice thereof from you;

                        (iii) relocation of VIMRx's principal  executive offices
to a location  whose  distance  is at least fifty (50) miles  farther  from your
current  residence in  Wilmington,  Delaware than the distance  between  VIMRx's
offices in the Wilmington,  Delaware, area and such residence address,  provided
that you shall not have approved the decision to effect such relocation.

             (g)  Notwithstanding  anything in Paragraphs  6(b) or 6(c) above to
the contrary:

                        (i) you  shall  not  have  any  obligation  to  VIMRx to
mitigate any  termination  of your  employment  whereby you would be required by
VIMRx promptly to seek, procure or commence substitute employment; and

                        (ii) in the event you do seek,  procure or commence such
substitute  employment,  none of the  income  derived  or to be  derived  by you
therefrom  shall be  setoff  by  VIMRx  against  the  balance  of any  severance
payments, if any, owing to you by VIMRx under this Agreement.

         7. You hereby agree that you shall not, directly or indirectly,  during
the term of your employment hereunder and until the expiration of one year after
you cease to be so employed by VIMRx,  own, manage,  operate,  join,  control or
become  employed by, or render any services of an advisory  nature or otherwise,
or  participate  in the  ownership,  management,  operation  or  control  of, or
otherwise be connected in any manner  with,  any business  competitive  with the
business of VIMRx without VIMRx's prior written consent.

         8. (a) You further  hereby  covenant and agree that you will not at any
time during,  or (a) for a period of three (3) years  following the  termination
of, your employment with VIMRx,  reveal,  divulge or make known to any person or
entity any  secrets or  confidential  information  (whether  oral,  written,  or
electronically  encoded)  whatsoever,  of or concerning VIMRx or its business or
anything connected  therewith,  all of which is and shall remain the property of
VIMRx and shall be returned by you to VIMRx  (including all copies)  immediately
upon any termination of your employment (or earlier,  if requested by VIMRx), or
(b) for a period of three (3) years following the termination of your employment
with VIMRx,  directly or indirectly entice away from VIMRx's employment,  retain
or otherwise engage, any employee of VIMRx.

             (b) For purposes hereof, confidential information shall not include
any information which: (i) is or becomes generally available to the public other
than as a result of a wrongful disclosure by you or your  representatives;  (ii)
was known by you on a  non-confidential  basis prior to its disclosure to you by
VIMRx or its representatives; (iii) becomes available to you from a source other
than VIMRx or its  representatives,  provided that such source is not bound by a
confidentiality  agreement with VIMRx or its representatives and otherwise has a
right  to  disclose  the  same;  or  (iv) is  required  to be  disclosed  by any
governmental or judicial authority,  provided,  in such case, that you shall use
your best efforts to notify VIMRx  immediately  of any such  requirement so that
VIMRx shall have an opportunity to contest it.

         9. In the event of any breach or threatened breach by you of any one or
more of the  provisions  of  Paragraphs  7 (relating  to  non-competition)  or 8
(relating to non-disclosure  and  non-enticement of employees) above, VIMRx will
be entitled,  in addition to any remedy hereunder or under any applicable law or
in equity, to an injunction restraining the breach of such provisions hereof.

         10. You agree that VIMRx may, in its discretion, apply for and take out
in its name and at its own  expense,  and solely for its  benefit,  key man life
insurance  on you in any  amount  deemed  advisable  by  VIMRx  to  protect  its
interests, and you agree that you shall have no right, title or interest therein
and further agree to submit to any medical or other  examination  and to execute
and deliver any application or other instruments in writing reasonably necessary
to effectuate such insurance.

         11. You  represent  and warrant that you are not under any  obligation,
restriction or limitation,  contractual or otherwise, to any other individual or
entity  which  would  prohibit  or impede you from  performing  your  duties and
responsibilities  hereunder, and that you are free to enter into and perform the
terms and provisions of this Agreement.

         12. Notwithstanding  anything herein to the contrary, the provisions of
Paragraphs  7, 8, 9 and 11 hereof  shall  expressly  survive the  expiration  or
termination  of this  Agreement  regardless  of the reason for, or cause of, any
such termination.

         13. All notices,  requests,  demands, and other communications provided
for by this  Agreement  shall  be in  writing  and  shall be  either  personally
delivered  (including by couriers  such as FedEx) or sent by pre-paid  certified
mail,  return  receipt  requested,  addressed to the address stated below of the
party to which  notice is given,  or to such  changed  address as such party may
have fixed by notice given in accordance with the terms hereof:
                           TO VIMRx:

                                    VIMRx Pharmaceuticals Inc.
                                    c/o Donald G. Drapkin, Chairman
                                    MacAndrews & Forbes Holdings, Inc.
                                    35 East 62nd Street
                                    New York, New York  10021

                           WITH A COPY TO:

                                    Lowell S. Lifschultz
                                    Epstein Becker & Green, P.C.
                                    250 Park Avenue
                                    New York, New York  10177-0077

                           TO RICHARD L. DUNNING:

                                    Richard L. Dunning
                                    909 Cecil Road
                                    Westover Hills
                                    Wilmington, Delaware  19807


Any notice,  sent as provided  above,  shall be deemed given upon receipt at the
address provided for above (or, in the event delivery is refused, the first date
on which delivery was tendered).

         14. This  Agreement  contains the entire  agreement  and  understanding
between the parties relating to the subject matter hereof and supersedes any and
all prior  understandings,  agreements  and  representations,  written  or oral,
expressed or implied, with respect thereto.

         15.  This  Agreement  may  not  be  amended,  modified,  altered  or
terminated (other than pursuant to its terms) except by an instrument in writing
signed by the parties.

         16. This  Agreement  shall be binding upon the parties hereto and their
heirs, distributees, successors and assigns.

         17. In case any one or more of the provisions of this  Agreement  shall
be invalid, illegal or unenforceable in any respect, the validity,  legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected thereby.

         18. This  Agreement  shall be governed  by,  construed  and enforced in
accordance  with the laws of the State of  Connecticut  applicable  to contracts
made and to be performed entirely therein (without giving effect to the conflict
of law rules thereof).

         Kindly indicate your agreement with the foregoing by countersigning the
enclosed  duplicate  copy of this letter  agreement  and  returning  it to me on
behalf of VIMRx.

         On behalf of VIMRx,  we look forward to a long and  mutually  rewarding
relationship.

                                              Sincerely,

                                              VIMRx PHARMACEUTICALS INC.


                                              By:  /s/ Donald G. Drapkin
                                                       Donald G. Drapkin
                                                       Chairman

ACCEPTED AND AGREED TO THIS

30th DAY OF October, 1996:


 /s/ Richard L. Dunning
         Richard L. Dunning