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                                                                    EXHIBIT 10.1

                                                                [EXECUTION COPY]



                            PARADIGM GENETICS, INC.

          5,097,727 Shares of Common Stock, $0.01 par value per share

                           PLACEMENT AGENCY AGREEMENT
                           --------------------------

                                         October 16, 2001

J.P. Morgan Securities Inc.
As Placement Agent
One Bush Street
San Francisco, CA  94104

Dear Sir or Madam:

          Paradigm Genetics, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell 5,097,727 shares (the "Shares") of common stock, par
value $0.01 per share (the "Common Stock"), to certain investors (collectively,
the "Investors").  The Company desires to engage you as its placement agent (the
"Placement Agent") in connection with such issuance and sale.  The Shares are
more fully described in the Registration Statement (as hereinafter defined).

          The Company hereby confirms as follows its agreements with the
Placement Agent.

          1. Agreement to Act as Placement Agent. On the basis of the
             -----------------------------------
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement, the Placement Agent
agrees to act as the Company's exclusive placement agent in connection with the
issuance and sale, on a best efforts basis, by the Company of the Shares to the
Investors. The Company shall pay to the Placement Agent 4.75% of the proceeds
received by the Company from the sale of the Shares as set forth on the cover
page of the Prospectus (as hereinafter defined).

          2. Delivery and Payment. Concurrently with the execution and delivery
             --------------------
of this Agreement, the Company, the Placement Agent, and Citibank N.A., as
escrow agent (the "Escrow Agent"), shall enter into an Escrow Agreement
substantially in the form of Exhibit A attached hereto (the "Escrow Agreement"),
pursuant to which an escrow account will be established, at the Company's
expense, for the benefit of the Investors (the "Escrow Account"). Prior to the
Closing Date (defined below), (i) each of the Investors will deposit an amount
equal to the price per Share as shown on the cover page of the Prospectus (as
hereinafter defined) multiplied by the number of Shares purchased by it in the
Escrow Account, and (ii) the Escrow Agent will notify the Company and the
Placement Agent in writing whether the Investors have deposited in the Escrow
Account funds in the amount equal to the proceeds of the sale of all of the
Shares offered hereby (the "Requisite Funds") into the Escrow Account. At 10:00
a.m., New York City time, on October 19, 2001, or at such other time on such
other date as may be agreed upon by the Company and the Placement Agent but in
no event prior to
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the date on which the Escrow Agent shall have received all of the Requisite
Funds (such date is hereinafter referred to as the "Closing Date"), the Escrow
Agent will release the Requisite Funds from the Escrow Account for collection by
the Company and the Placement Agent as provided in the Escrow Agreement and the
Company shall deliver the Shares to the Investors, which delivery may be made
through the facilities of the Depository Trust Company. The closing (the
"Closing") shall take place at the office of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038. All actions taken at the Closing shall be
deemed to have occurred simultaneously.

          Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the Placement
Agent shall request by written notice to the Company.  The closing will be done
on a full-FAST basis through the Depository Trust Company.

          3. Representations and Warranties of the Company. The Company
             ---------------------------------------------
represents and warrants and covenants to the Placement Agent that:

             (a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a "shelf" registration statement on Form S-3
(Registration No. 333-70534), which has become effective, relating to the Common
Stock and certain other securities of the Company, under the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (collectively
referred to as the "Rules and Regulations") of the Commission thereunder. The
Commission has not issued any order preventing or suspending the use of the
Prospectus or the Preliminary Prospectus (as defined below). The term
"Preliminary Prospectus" as used herein means a preliminary prospectus relating
to the Shares as contemplated by Rule 430 or Rule 430A ("Rule 430A") of the
Rules and Regulations included at any time as part of the registration
statement. Copies of such registration statement and amendments and of each
related Preliminary Prospectus have been delivered to the Placement Agent by
means of EDGAR. If such registration statement has become effective, a final
prospectus relating to the Shares containing information permitted to be omitted
at the time of effectiveness by Rule 430A will be filed by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations promptly
after execution and delivery of this Agreement. The term "Registration
Statement" means such registration statement, as amended, including the
Prospectus (which includes the prospectus supplement (the "Prospectus
Supplement") relating to the offering of the Shares), at the time it becomes or
became effective (the "Effective Date"), including all material incorporated by
reference therein and any information deemed to be included by Rule 430A. The
term "Prospectus" means the prospectus (including the Prospectus Supplement)
relating to the Shares as first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations or, if no such filing is required, the form
of final prospectus relating to the Shares included in the Registration
Statement on the date it became effective, in either case, including all
material, if any, incorporated by reference therein.

             (b) When the Registration Statement became effective, as of the
date hereof, and at all times subsequent thereto to and including the Closing
Date (as defined in Section 2), and during the thirty-day period following the
Closing Date, the Registration

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Statement (and any post-effective amendment thereto) and the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement to the Registration Statement or the Prospectus)
contained and will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations, complied and
will comply in all material respects with the Act and the Rules and Regulations,
and did not and will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein (in the light of the circumstances under which they were
made, in the case of the Prospectus) not misleading, and no event will have
occurred which should have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set forth in
such an amendment or supplement; each Preliminary Prospectus, as of the date
filed with the Commission, did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that no representation or
warranty is made in this Section 3(b) with respect to statements or omissions
made in reliance upon and in conformity with (i) written information furnished
to the Company expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, as stated in Section 7(b) hereof with respect to the Placement Agent or
any Investor by or on behalf of the Placement Agent or (ii) Schedule 13Ds or
Schedule 13Gs filed by any Investor. The Company has not distributed any
offering material in connection with the offering or sale of the Common Stock,
other than the Registration Statement, the Preliminary Prospectus and the
Prospectus.

             (c) The Company is, and at the Closing Date will be, duly
organized, validly existing and in good standing under the laws of Delaware. The
Company has no subsidiaries. The Company has, and at the Closing Date will have,
full power and authority to conduct all the activities conducted by it, to own
or lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus). The
Company is, and at the Closing Date will be, duly licensed or qualified to do
business and in good standing as a foreign organization in all jurisdictions in
which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified will not have a material
adverse effect on the ability of the Company to carry on its business as
presently conducted. Except as disclosed in the Registration Statement and on
Schedule 3(c) to this Agreement, the Company does not own, and at the Closing
Date will not own, directly or indirectly, any shares of stock or any other
equity or long-term debt securities of any corporation or have any equity
interest in any firm, partnership, joint venture, association or other entity,
other than any ordinary course investment by the Company of working capital.
Complete and correct copies of the articles or certificate of incorporation and
of the bylaws of the Company and all amendments thereto have been delivered to
the Placement Agent by EDGAR, and no changes therein will be made subsequent to
the date hereof and prior to the Closing Date.

             (d) The issued and outstanding shares of capital stock of the
Company have been validly issued, are fully paid and nonassessable and, other
than as set forth in the Registration Statement, are not subject to any
preemptive or similar rights. Except as set

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forth in the Registration Statement and the Prospectus such shares are not
subject to any preemptive or similar rights. The Company has an authorized,
issued and outstanding capitalization as set forth in the Prospectus as of the
dates referred to therein. The description of the securities of the Company in
the Registration Statement and the Prospectus is, and at the Closing Date will
be, complete and accurate in all respects. Except as set forth in the
Registration Statement and the Prospectus, as of the date referred to therein,
the Company did not have outstanding any options to purchase, or any rights or
warrants to subscribe for, or any securities or obligations convertible into, or
exchangeable for, or any contracts or commitments to issue or sell, any shares
of capital stock or other securities.

             (e) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized and validly executed and delivered by the
Company and is a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability. The Escrow
Agreement has been duly authorized and validly executed and delivered by the
Company and is a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability.

             (f) The issuance and sale of the Shares have been duly authorized
by the Company, and the Shares, when issued and paid for in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will not be subject to preemptive or similar rights. The holders of the Shares
will not be subject to personal liability by reason of being such holders. The
Shares, when issued, will conform in all material respects to the description
thereof set forth in the Prospectus.

             (g) The financial statements and the related notes included in the
Registration Statement and the Prospectus present fairly, in all material
respects, the financial condition of the Company as of the dates thereof and the
results of its operations and cash flows at the dates and for the periods
covered thereby in conformity with generally accepted accounting principles
("GAAP") (subject, in the case of unaudited financial statements, to the absence
of footnotes and normal year-end adjustments). No other financial statements or
schedules of the Company or any other entity are required by the Act or the
Rules and Regulations to be included in the Registration Statement or the
Prospectus. PricewaterhouseCoopers LLP (the "Accountants"), who have reported on
such financial statements and schedules, are independent accountants with
respect to the Company as required by the Act and the Rules and Regulations. The
financial statements of the Company and the related notes and schedules included
in the Registration Statement and the Prospectus have been prepared in
conformity with the requirements of the Act and the Rules and Regulations and
present fairly in all material respects the information shown therein.

             (h) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to

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permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

             (i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company other than non-material changes in the ordinary
course of business, or any material adverse change in the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company arising for any reason whatsoever (except for ongoing losses in
connection with operations), (ii) the Company has not incurred nor will it incur
any material liabilities or obligations, direct or contingent, nor has the
Company entered into nor will it enter into any material transactions other than
pursuant to this Agreement, the Registration Statement and the transactions
referred to herein and therein and (iii) the Company has not and will not have
paid or declared any dividends or other distributions of any kind on any class
of its capital stock.

             (j) Any real property and buildings held under lease to the Company
are held or leased by the Company under valid, binding and enforceable leases
conforming to the description thereof set forth in or incorporated by reference
into the Registration Statement and the Prospectus, with such exceptions as do
not materially interfere with the use made and proposed to be made of such
property and buildings by the Company.

             (k) The Company is not, nor upon completion of the transactions
contemplated herein will it be, an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act").

             (l) Except as set forth or referred to in the Registration
Statement and the Prospectus, there are no actions, suits or proceedings
pending, or to the Company's knowledge, threatened against or affecting the
Company or any of its officers in their capacity as such, before or by any
Federal or state court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, which is reasonably expected by
management of the Company to materially adversely affect the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company.

             (m) The Company has, and at the Closing Date will have, (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as presently conducted except
where the failure to have such governmental licenses, permits, consents, orders,
approvals and other authorizations would not have a material adverse effect on
the business, properties, prospects, condition (financial or otherwise) or
results of operation of the Company, (ii) complied with all laws, regulations
and orders applicable to either it or its business, except where the failure to
so comply would not

                                       5
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have a material adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company, and (iii)
performed all its obligations required to be performed, and is not, and at the
Closing Date will not be, to the Company's best knowledge, in default, under any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement, lease, contract or other agreement or
instrument (collectively, a "contract or other agreement") to which it is a
party or by which its property is bound or affected, except as otherwise set
forth in the Registration Statement and the Prospectus and except where such
default would not have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company, and, to the Company's best knowledge, no other party under any material
contract or other agreement to which it is a party is in default in any respect
thereunder. The Company is not in violation of any provision of its
organizational or governing documents.

             (n) The Company has all corporate power and authority to enter into
this Agreement and the Escrow Agreement, and to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations, approvals and
orders required in connection herewith and therewith have been obtained, except
such as have been obtained, such as may be required under state securities or
Blue Sky Laws or the by-laws and rules of the National Association of Securities
Dealers, Inc. (the "NASD").

             (o) Neither (i) the issuance, offering and sale of the Shares
pursuant hereto, nor (ii) the compliance by the Company with the other
provisions hereof require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under state securities or Blue Sky laws or the
bylaws and rules of the NASD and, if the Registration Statement is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act.

             (p) Neither the execution of this Agreement or the Escrow
Agreement, nor the issuance, offering or sale of the Shares, nor the
consummation of any of the transactions contemplated herein or in the Escrow
Agreement, nor the compliance by the Company with the terms and provisions
hereof or thereof will conflict with, or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance, except for such liens as would not individually or in the
aggregate have a material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operation of the Company upon
any property or assets of the Company pursuant to the terms of any contract or
other agreement to which the Company may be bound or to which any of the
property or assets of the Company is subject, except such conflicts, breaches or
defaults as may have been waived; nor will such action result in any violation
of the provisions of the Company's organizational or governing documents, or any
statute or any order, rule or regulation applicable to the Company or of any
court or of any federal, state or other regulatory authority or other government
body having jurisdiction over the Company.

             (q) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the

                                       6
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Registration Statement that is not described or filed as required. All such
contracts to which the Company is a party have been duly authorized, executed
and delivered by the Company, constitute valid and binding agreements of the
Company, and are enforceable against the Company in accordance with the terms
thereof, subject to the effect of applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and equitable principles of general
applicability.

             (r) No statement, representation or warranty made by the Company in
this Agreement or made in any certificate or document required by this Agreement
or the Escrow Agreement to be delivered to the Placement Agent, the Investors or
the Escrow Agent was or will be, when made, inaccurate, untrue or incorrect in
any material respect.

             (s) The Company and its directors, officers or, to the knowledge of
the Company, controlling persons have not taken, directly or indirectly, any
action intended, or which might reasonably be expected, to cause or result,
under the Act or otherwise, in, or which has constituted, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Stock.

             (t) No holder of securities of the Company has rights to the
registration of any securities of the Company as a result of the filing of the
Registration Statement, other than rights which are not exercisable due to the
Placement Agent's determination to include only securities sold directly from
the Company, except for such rights as have been waived or those other rights
which have been disclosed to the Placement Agent.

             (u)  The Common Stock is currently listed on the Nasdaq National
Market (the "NNM").

             (v)  The Company is not involved in any material labor dispute nor
is any such dispute known by the Company to be threatened.

             (w) Except as set forth in the Registration Statement and the
Prospectus, the business and operations of the Company have been and are being
conducted in material compliance with all applicable laws, ordinances, rules,
regulations, licenses, permits, approvals, plans, authorizations or requirements
relating to occupational safety and health, or pollution, or protection of
health or the environment (including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic substances, materials or wastes into ambient
air, surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of chemical substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, gaseous or liquid in nature) of
any governmental department, commission, board, bureau, agency or
instrumentality of the United States, any state or political subdivision
thereof, or any foreign jurisdiction, and all applicable judicial or
administrative agency or regulatory decrees, awards, judgments and orders
relating thereto, except where the failure to be in such compliance will not,
individually or in the aggregate, have a material adverse effect on the ability
of the Company to carry on its business as presently conducted; and the Company
has not received any notice from any governmental instrumentality or any third
party alleging any material violation thereof or liability thereunder

                                       7
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(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to natural
resources).

             (x) Except as disclosed in or specifically contemplated by the
Registration Statement, (i) the Company owns or has obtained valid and
enforceable licenses or options for the material inventions, patent
applications, patents, trademarks (both registered and unregistered),
tradenames, copyrights and trade secrets necessary for the conduct of the
Company's business as currently conducted and as the Registration Statement
indicates the Company contemplates conducting (collectively, the "Intellectual
Property"); and (ii) to the Company's knowledge (for each of the following
subsections (a) through (e)): (a) there are no third parties who have any
ownership rights to any Intellectual Property that is owned by, or has been
licensed to, the Company for the products and services described in the
Registration Statement that would preclude the Company from conducting its
businesses as currently conducted and as the Registration Statement indicates
the Company contemplates conducting, except for the ownership rights of the
owners of the Intellectual Property licensed or optioned by the Company; (b)
there are currently no sales of any products that would constitute an
infringement by third parties of any Intellectual Property owned, licensed or
optioned by the Company; (c) there is no pending or threatened action, suit,
proceeding or claim by others challenging the rights of the Company in or to any
Intellectual Property owned, licensed or optioned by the Company; (d) there is
no pending or threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Intellectual Property owned, licensed or optioned
by the Company, other than non-material claims; and (e) there is no pending or
threatened action, suit, proceeding or claim by others that the Company infringe
or otherwise violate any patent, trademark, copyright, trade secret or other
proprietary right of others, other than non-material claims.

             (y) The Company has filed all necessary federal, state and foreign
income and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of any tax deficiency which has been
or might be asserted or threatened against it which could have a material
adverse effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company.

             (z) On the Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the sale and
transfer of the Shares to be sold hereunder will be, or will have been, fully
paid or provided for by the Company and all laws imposing such taxes will be or
will have been fully complied with.

             (aa) The Company maintains insurance of the types and in the
amounts that the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.

             (bb) The Company has not at any time since its incorporation,
directly or indirectly, (i) made any unlawful contribution to any candidate for
public office, or failed to disclose fully any contribution in violation of law,
or (ii) made any payment to any federal or

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state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof.

          4. Agreements of the Company. The Company covenants and agrees with
             -------------------------
the Placement Agent as follows:

             (a) The Company will not, during such period as the Prospectus
would be required by law to be delivered in connection with sales of the Shares
by an underwriter or dealer in connection with the offering contemplated by this
Agreement, file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Placement Agent within a reasonable period of time prior to the filing thereof
and the Placement Agent shall not have objected thereto in good faith.

             (b) The Company will notify the Placement Agent promptly, and will
confirm such advice in writing, (1) when any post-effective amendment to the
Registration Statement becomes effective, but only during the period mentioned
in Section 4(a), (2) of any request by the securities or other governmental
authority (including, without limitation, the Commission) of any jurisdiction
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, but only during the period mentioned in Section
4(a), (3) of the issuance by any securities or other governmental authority
(including, without limitation, the Commission) of any jurisdiction of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, but only
during the period mentioned in Section 4(a), (4) of the happening of any event
during the period mentioned in Section 4(a) that in the judgment of the Company
makes any statement made in the Registration Statement or the Prospectus untrue
or that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading and (5) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the securities or other governmental authority (including,
without limitation, the Commission) of any jurisdiction relating to any of the
Registration Statement, any Preliminary Prospectus or the Prospectus in
connection with the offering contemplated hereby. If at any time any securities
or other governmental authority (including, without limitation, the Commission)
of any jurisdiction shall issue any order suspending the effectiveness of the
Registration Statement in connection with the offering contemplated hereby, the
Company will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible moment. If the Company has omitted any information from
the Registration Statement, pursuant to Rule 430A, it will use its best efforts
to comply with the provisions of and make all requisite filings with the
Commission pursuant to said Rule 430A and to notify the Placement Agent promptly
of all such filings.

             (c) If, at any time when a Prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would, in the reasonable
judgment of counsel to the Company or counsel to the Placement Agent, include
any untrue statement of a material fact or omit to

                                       9
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state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or the
Registration Statement, as then amended or supplemented, would, in the
reasonable judgment of counsel to the Company or counsel to the Placement Agent,
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, or if for any other
reason it is necessary, in the reasonable judgment of counsel to the Company or
counsel to the Placement Agent, at any time to amend or supplement the
Prospectus or the Registration Statement to comply with the Act or the Rules and
Regulations, the Company will promptly notify the Placement Agent and, subject
to Section 4(a) hereof, will promptly prepare and file with the Commission, at
the Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance and will deliver to the Placement Agent,
without charge, such number of copies thereof as the Placement Agent may
reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the Placement Agent.

             (d) The Company will furnish to the Placement Agent and its
counsel, without charge, (i) one signed copy of the registration statement
described in Section 3(a) hereof, including financial statements and schedules,
and all exhibits thereto and (ii) so long as a prospectus relating to the Shares
is required to be delivered under the Act, as many copies of each Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto as the
Placement Agent may reasonably request.

             (e)  The Company will comply with all the undertakings contained
in the Registration Statement.

             (f) Prior to the sale of the Shares to the Investors, the Company
will cooperate with the Placement Agent and its counsel in connection with the
registration or qualification of the Shares for offer and sale under the state
securities or Blue Sky laws of such jurisdictions as the Placement Agent may
request; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.

             (g) The Company will make generally available to holders of its
securities, as soon as may be practicable, but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the Effective Date falls, a consolidated earnings statement (which need not be
audited but shall be in reasonable detail) for a period of 12 months ended
commencing after the Effective Date, and satisfying the provisions of Section
11(a) of the Act (including Rule 158 of the Rules and Regulations).

             (h) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the Shares to
facilitate the sale or resale of any of the Shares.

                                       10
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             (i) The Company will apply the net proceeds from the offering and
sale of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."

          5. Expenses. Whether or not the transactions contemplated by this
             --------
Agreement are consummated or this Agreement is terminated, the Company will pay
all costs and expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to costs and expenses of
or relating to (1) the preparation, printing and filing of the Registration
Statement (including each pre- and post-effective amendment thereto) and
exhibits thereto, each Preliminary Prospectus, the Prospectus and any amendment
or supplement to the Prospectus, including all fees, disbursements and other
charges of counsel to the Company, (2) the preparation and delivery of
certificates representing the Shares, (3) furnishing (including costs of
shipping and mailing) such copies of the Registration Statement (including all
pre- and post-effective amendments thereto), the Prospectus and any Preliminary
Prospectus, and all amendments and supplements to the Prospectus, as may be
requested for use in connection with the direct placement of the Shares, (4) the
listing of the Common Stock on the NMS, (5) any filings required to be made by
the Placement Agent with the NASD, and the fees, disbursements and other charges
of counsel for the Placement Agent in connection therewith, (6) the registration
or qualification of the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions designated pursuant to Section 4(f), including
the reasonable fees, disbursements and other charges of counsel to the Placement
Agent in connection therewith and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (7) fees, disbursements and other
charges of counsel to the Company and (8) the fees of the Escrow Agent. The
Company shall reimburse the Placement Agent, upon request for all reasonable
out-of-pocket costs and expenses.

          6. Conditions of the Obligations of the Placement Agent. The
             ----------------------------------------------------
obligations of the Placement Agent hereunder are subject to the following
conditions:

             (a) Notification that the Registration Statement has become
effective shall be received by the Placement Agent not later than 5:00 p.m., New
York City time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by the Placement Agent and all filings required
by Rule 424 of the Rules and Regulations and Rule 430A shall have been made.

             (b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall be pending or threatened by any securities or other governmental
authority (including, without limitation, the Commission), (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by any securities or other
governmental authority (including, without limitation, the Commission), (iii)
any request for additional information on the part of the staff of any
securities or other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the staff of
the Commission

                                       11
<PAGE>

or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Placement Agent and the Placement Agent did
not object thereto in good faith, and the Placement Agent shall have received
certificates of the Company, dated the Closing Date and signed by the President
and Chief Executive Officer or the Chairman of the Board of Directors of the
Company, and the Chief Financial Officer of the Company, to the effect of
clauses (i), (ii) and (iii).

             (c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and other than
ongoing losses in connection with operations, and (ii) the Company shall not
have sustained any material loss or interference with its business or properties
from fire, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and the Prospectus, if in the judgment of the Placement Agent any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares to Investors at the public offering price.

             (d) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers or directors in their capacities as such, before or by any Federal,
state or local court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, which litigation or proceeding is
reasonably expected by management to materially and adversely affect the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company.

             (e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date, as if made on such date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with in all
material respects.

             (f) The Placement Agent shall have received an opinion, dated the
Closing Date (or such other date as may be set forth in a representation or
warranty), of Mintz Levin, Cohn, Ferris, Glovsky and Popeo, P.C., as counsel to
the Company, in form and substance reasonably satisfactory to the Placement
Agent.

             (g) The Placement Agent shall have received an opinion, dated the
Closing Date, of the Company's general counsel, in form and substance
satisfactory to the

                                       12
<PAGE>

Placement Agent as to certain intellectual property matters referenced in the
Registration Statement.

             (h) Concurrently with the execution and delivery of this Agreement,
or, if the Company elects to rely on Rule 430A, on the date of the Prospectus,
the Accountants shall have furnished to the Placement Agent a letter, dated the
date of its delivery (the "Original Letter"), addressed to the Placement Agent
and in form and substance satisfactory to the Placement Agent and
PricewaterhouseCoopers LLC, confirming that (i) they are independent public
accountants with respect to the Company within the meaning of the Act and the
Rules and Regulations; (ii) in their opinion, the financial statements and any
supplementary financial information included in the Registration Statement and
examined by them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations; (iii) on the
basis of procedures, not constituting an examination in accordance with
generally accepted auditing standards, set forth in detail in the Original
Letter, a reading of the latest available interim financial statements of the
Company, inspections of the minute books of the Company since the latest audited
financial statements included in the Prospectus, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in the Original Letter to a date
not more than five days prior to the date of the Original Letter, nothing came
to their attention that caused them to believe that: (A) as of a specified date
not more than five days prior to the date of the Original Letter, there have
been any changes in the capital stock of the Company or any increase in the
long-term debt of the Company, or any decreases in net current assets or net
assets or other items specified by the Placement Agent, or any increases in any
items specified by the Placement Agent, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in the Original Letter; and (B) for
the period from the date of the latest financial statements included in the
Prospectus to the specified date referred to in Clause (A), there were any
decreases in revenues or the total or per share amounts of net income or other
items specified by the Placement Agent, or any increases in any items specified
by the Placement Agent, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length specified
by the Placement Agent, except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are described in the
Original Letter; and (iv) in addition to the examination referred to in their
reports included in the Prospectus and the procedures referred to in clause
(iii) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Placement Agent, which are derived from the general
accounting, financial or other records of the Company, as the case may be, which
appear in the Prospectus or in Part II of, or in exhibits or schedules to, the
Registration Statement, and have compared such amounts, percentages and
financial information with such accounting, financial and other records and have
found them to be in agreement. At the Closing Date, the Accountants shall have
furnished to the Placement Agent a letter, dated the date of its delivery, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the Original Letter, that nothing has come to their attention during
the period from the date of the Original Letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior

                                       13
<PAGE>

to the Closing Date which would require any change in the Original Letter if it
were required to be dated and delivered at the Closing Date.

             (i) At the Closing Date, there shall be furnished to the Placement
Agent a certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, in form and
substance satisfactory to the Placement Agent to the effect that to each of such
person's knowledge:

                (i) Each signer of such certificate has carefully examined the
     Registration Statement and the Prospectus and (A) as of the date of such
     certificate, (x) the Registration Statement does not contain any untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary in order to make the statements therein not
     misleading and (y) the Prospectus does not contain any untrue statement of
     a material fact or omit 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 and (B) since
     the Effective Date no event has occurred as a result of which it is
     necessary to amend or supplement the Prospectus in order to make the
     statements therein not untrue or misleading in any material respect.

                (ii) Each of the representations and warranties of the Company
     contained in this Agreement were, when originally made, and are, at the
     time such certificate is delivered, true and correct in all material
     respects.

                (iii) Each of the covenants (not waived by the Placement Agent)
     required herein to be performed by the Company on or prior to the date of
     such certificate has been duly, timely and fully performed and each
     condition herein required to be complied with by the Company on or prior to
     the delivery of such certificate has been duly, timely and fully complied
     with.

                (iv) No stop order suspending the effectiveness of the
     Registration Statement or of any part thereof has been issued and no
     proceedings for that purpose have been instituted or are contemplated by
     the Commission.

                (v) Subsequent to the date of the most recent financial
     statements in the Prospectus, there has been no material adverse change in
     the financial position or results of operations of the Company, except as
     set forth in or contemplated by the Prospectus and except for ongoing
     losses in connection with ongoing operations.

             (j) The Shares shall be qualified for sale in such states as the
Placement Agent may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing
Date; provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to taxation or general service of process in any
jurisdiction where it is not now so subject.

             (k) The Company shall have furnished to the Placement Agent such
certificates, in addition to those specifically mentioned herein, as the
Placement Agent may

                                       14
<PAGE>

have reasonably requested as to the accuracy and completeness at the Closing
Date of any statement in the Registration Statement or the Prospectus, as to the
accuracy at the Closing Date of the representations and warranties of the
Company as to the performance by the Company of its obligations hereunder, or as
to the fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Placement Agent.

          7.  Indemnification.
              ---------------

             (a) The Company shall indemnify and hold harmless the Placement
Agent, the directors, officers, employees and agents of the Placement Agent and
each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all losses, claims,
liabilities, expenses and damages, joint or several, (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which it, or any of them, may become subject under the Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on (i) any untrue statement or alleged untrue
statement made by the Company in Section 3 of this Agreement, (ii) any untrue
statement or alleged untrue statement of any material fact contained in (A) any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus and (B)
any application or other document, or any amendment or supplement thereto,
executed by the Company based upon written information furnished by or on behalf
of the Company filed in any jurisdiction in order to qualify the Shares under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an "Application") or (iii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any supplement to the Registration
Statement or the Prospectus or any Application a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Shares in the public offering to
any person and is based solely (i) on an untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to the Placement Agent furnished in writing to the Company
by the Placement Agent expressly for inclusion in the Registration Statement,
any Preliminary Prospectus or the Prospectus or (ii) statements included in a
Schedule 13D or Schedule 13G filed by a third party, and provided further, that
such indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Placement Agent (or any person controlling such Placement Agent)
from whom the person asserting any such loss, claim, damage, liability or action
purchased Shares which are the subject thereof to the extent that any such loss,
claim, damage or liability (i) results from the fact that such Placement Agent
failed to send or give a copy of the Prospectus (as amended or supplemented) to
such person at or prior to the confirmation of the sale of such Shares to such
person in any case where such delivery is required by the Act and (ii) arises
out of or is based upon an untrue statement or omission of a material fact
contained in such Preliminary Prospectus that was corrected in the Prospectus
(or any amendment or supplement thereto), unless such failure to deliver the
Prospectus (as amended or

                                       15
<PAGE>

supplemented) was the result of noncompliance by the Company with Section 4(c).
This indemnity agreement will be in addition to any liability that the Company
may otherwise have. The Company will not, without the prior written consent of
the Placement Agent (which will not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not such Placement Agent or any person who controls
such Placement Agent within the meaning of Section 15 of the Act or Section 20
of the Exchange Act is a party to each claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of the Placement Agent and each such controlling person from all liability
arising out of such claim, action, suit or proceeding.

             (b) The Placement Agent will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to the Placement
Agent, but only insofar as losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent expressly for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus. This indemnity agreement will be in addition to
any liability that the Placement Agent might otherwise have. The Company
acknowledges that, for all purposes under this Agreement, the statements set
forth (i) under the heading "Plan of Distribution", (ii) on the cover page and
(iii) on the back cover in any Preliminary Prospectus and the Prospectus
constitute the only information relating to the Placement Agent furnished in
writing to the Company by the Placement Agent expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus.

            (c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 7 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own

                                       16
<PAGE>

counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that a conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party that would prevent the counsel selected by the indemnifying party from
representing the indemnified party (in which case the indemnifying party will
not have the right to direct the defense of such action on behalf of the
indemnified party) or (3) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. The indemnifying party will reimburse all such fees, disbursements and
other charges promptly as they are incurred. The Company will not, without the
prior written consent of the Placement Agent (which consent will not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification has been sought hereunder (whether or not the
Placement Agent or any person who controls the Placement Agent within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to
such claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Placement Agent and each such
controlling person from all liability arising out of such claim, action, suit or
proceeding. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).

             (d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Placement Agent,
the Company and the Placement Agent will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Placement Agent such as persons who control the Company within the meaning of
the Act or the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for contribution)
to which the Company and the Placement Agent may be subject in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
on the one hand and the Placement Agent on the other. The relative benefits
received by the Company on the one hand and the Placement Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting Company expenses) received by the Company as set
forth in the table on the cover page of the Prospectus bear to the fee received
by the Placement Agent hereunder. If, but only if, the allocation provided by
the foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only

                                       17
<PAGE>

the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Placement Agent on the
other, with respect to the statements or omissions which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Placement
Agent, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Placement Agent agree that it would not be just and
equitable if contributions pursuant to this Section 7(d) were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above in this
Section 7(d) shall be deemed to include, for purpose of this Section 7(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), the Placement Agent shall
not be required to contribute any amount in excess of the fee received by it,
and no person found guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) will be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7(d), any person who controls a party to this Agreement within the
meaning of the Act or the Exchange Act will have the same rights to contribution
as that party, and each officer of the Company who signed the Registration
Statement will have the same rights to contribution as the Company, subject in
each case to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of commencement of any action against such party in
respect of which a claim for contribution may be made under this Section 7(d),
will notify any such party or parties from whom contribution may be sought, but
the omission so to notify will not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have under
this Section 7(d). No party will be liable for contribution with respect to any
action or claim settled without its written consent (which consent will not be
unreasonably withheld).

          8.  Termination.
              -----------

             (a) The obligations of the Placement Agent under this Agreement may
be terminated at any time prior to the Closing Date, by notice to the Company
from the Placement Agent, without liability on the part of the Placement Agent
to the Company if, prior to delivery and payment for the Shares, in the sole
judgment of the Placement Agent (i) trading in the Common Stock of the Company
shall have been suspended by the Commission or by the NNM, (ii) trading in
securities generally on the NNM shall have been suspended or limited or minimum
or maximum prices shall have been generally established on any of such
exchanges, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by any of such exchanges or by order of the Commission or any court or
other governmental authority, (iii) a general banking moratorium shall have been
declared by Federal or New York State authorities, or (iv) any material adverse
change in the financial or securities markets in the United States or any
outbreak or material escalation of hostilities or declaration by the United
States of a national

                                       18
<PAGE>

emergency or war or other calamity or crisis shall have occurred, the effect of
any of which is such as to make it, in the sole judgment of the Placement Agent,
impracticable or inadvisable to market the Shares on the terms and in the manner
contemplated by the Prospectus.

             (b) The obligations of the parties under this Agreement shall be
automatically terminated in the event that notice is given to the Escrow Agent
as determination prior to the close of business on the date scheduled for
receipt of the Requisite Funds, that the Requisite Funds have not been deposited
by the Investors into the Escrow Account by the close of business on the Closing
Date.

             (c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 8(b) and other than a
termination of the Placement Agent's Engagement pursuant to Section 9(a), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Placement Agent set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by you, reimburse you for all reasonable out-of-
pocket expenses incurred in connection herewith.

          9.  Engagement Period.
              -----------------

             (a) Pursuant to a letter dated September 24, 2001 (the "Letter"),
the Company agreed to engage (the "Engagement") the Placement Agent as placement
agent in the event that the Company decided to proceed with certain types of
financings, including one such as the offering contemplated hereby. The Letter
provides that upon termination of the Engagement, the Placement Agent shall
provide the Company with a written list of persons contacted during the
Engagement with which the Placement Agent has had meaningful discussions about
the offering. Such list shall exclude (i) investors who have previously invested
in private placements of the Company (and affiliates of such investors), (ii)
investors with whom the Company has entered into, or in the future enters into,
collaborations or other strategic transactions (and affiliates of such
investors), and (iii) parties purchasing stock pursuant to the exercise of
options or currently outstanding warrants. The Letter further provides that if
any person so listed and contacted by the Placement Agent during the terms of
the Engagement purchases from the Company securities during the six month period
following termination of the Engagement, the Company shall pay the Placement
Agent, upon the closing of each such sale, a cash fee equal to the amount that
would have been payable had the Engagement not been terminated. The Company and
the Placement Agent hereby agree that if the Closing occurs, the Engagement will
terminate pursuant to Section 6 of the Letter immediately after the Closing. By
way of clarification, the "tail" provided for in this Section 9(a) restates and
is not in addition to the "tail" provided for in the Letter, and the fees and
expenses provided for in this Agreement are in accordance with and not in
addition to those provided for in the Letter.

             (b) In connection with the offering contemplated hereby, the
Placement Agent, for the benefit of the Company, has obtained oral agreements
from each investor it has contacted in connection with the contemplated offering
to the effect that such

                                       19
<PAGE>

investor agreed to keep confidential all information concerning a possible
offering. The Placement Agent understands that the federal securities laws
impose restrictions on trading based on information regarding this offering.

          10. Notices. Notice given pursuant to any of the provisions of this
              -------
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 104 Alexandria
Drive, Research Triangle Park, NC 27709, Attention: Chief Executive Officer and
General Counsel or (b) if to the Placement Agent, at the office of J.P. Morgan
Securities Inc., One Bush Street, San Francisco, CA 94104, Attention: Jim Zanze.
Any such notice shall be effective only upon receipt. Any notice under Section 7
may be made by facsimile or telephone, but if so made shall be subsequently
confirmed in writing.

          11. Survival. The respective representations, warranties, agreements,
              --------
covenants, indemnities and other statements of the Company and the Placement
Agent set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect, regardless of
(i) any investigation made by or on behalf of the Company, any of its officers
or directors, the Placement Agent or any controlling person referred to in
Section 7 hereof and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections 5,
7 and 9 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.

          12. Successors. This Agreement shall inure to the benefit of and shall
              ----------
be binding upon the Placement Agent, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
indemnification and contribution contained in Sections 7(a) and (d) of this
Agreement shall also be for the benefit of the directors, officers, employees
and agents of the Placement Agent and any person or persons who control the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnification and contribution contained in Sections
7(b) and (d) of this Agreement shall also be for the benefit of the directors of
the Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No Investor shall be
deemed a successor because of such purchase.

          13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATIONS OF THIS
              --------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.

                                       20
<PAGE>

          14. Counterparts. This Agreement may be executed in two or more
              ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          15. Entire Agreement. This Agreement constitutes the entire
              ----------------
understanding between the parties hereto as to the matters covered hereby and
supersedes all prior understandings, written or oral, relating to such subject
matter.

                                       21
<PAGE>

          Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Placement Agent.

                                     Very truly yours,

                                     PARADIGM GENETICS, INC.

                                     By:
                                        -------------------------
                                        Name:
                                        Title:


Confirmed as of the date first
above mentioned:

J.P. MORGAN SECURITIES INC.

By:
   ---------------------------
   Name:
   Title:

                                       22
<PAGE>

                                   EXHIBIT A

                                ESCROW AGREEMENT

                                       23