<PAGE>

                 SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

         THIS SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE ("Agreement") is
made and entered into as of the date last written below (the "Effective Date"),
by and between, CORVAS INTERNATIONAL, INC. ("Corvas"), a Delaware corporation,
on the one side, and, VASCULAR GENOMICS INC. ("VGI") a Delaware corporation, and
its stockholders, Jan Schnitzer, Harry Gruber, Dennis Berman, Bruce Jacobson and
Isaac Willis (the "VGI Stockholders"), on the other side. (Corvas, VGI and the
VGI Stockholders are collectively referred to as the "Parties.")

                                    RECITALS

         WHEREAS, the Parties entered into that certain Option Agreement, dated
June 29, 1997, pursuant to which Corvas obtained an option to acquire VGI (the
"Option Agreement");

         WHEREAS, the Parties also entered into that certain Research and
Development Agreement, dated June 29, 1997, pursuant to which VGI retained
Corvas to conduct certain research and development and granted to Corvas an
exclusive worldwide license to practice certain of VGI's proprietary technology
and to grant sublicenses with VGI's approval (the "Research and Development
Agreement");

         WHEREAS, VGI has raised certain issues and asserted certain claims
relating to Corvas' performance under the Option Agreement and the Research and
Development Agreement, including, but not limited to, the assertion in a demand
for arbitration filed with the American Arbitration Association on or about
March 16, 1999, that Corvas is in breach of Section 2.2 of the Research and
Development Agreement (the "Arbitration Demand");

         WHEREAS, Corvas disputes any and all issues raised and claims asserted
by VGI;

         WHEREAS, the Parties to this Agreement desire to fully and finally
settle, resolve and discharge any and all claims, controversies, demands,
actions or causes of action, arising from or in any way related to the Option
Agreement and the Research and Development Agreement, including, but not limited
to, the termination of the Option Agreement and the Research and Development
Agreement, whether known or unknown, on the terms and conditions set forth
below.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the aforementioned recitals and the
mutual promises, covenants and agreements contained herein, and as a matter of
compromise only, and for consideration of the Parties not taking any further
legal action against each other, the Parties hereto covenant and agree as
follows:

1.      In consideration of the termination of the Research and Development
Agreement, termination of the Option Agreement, including the termination of the
Put Right (as that term is defined in the Option Agreement) and all other rights
surviving termination thereof, Corvas' acquisition of Common Stock of VGI and
the settlement of all claims, Corvas shall provide the following consideration
to the VGI Stockholders:

<PAGE>

         1.1 Corvas shall pay the VGI Stockholders the aggregate total sum of
One Million and Two Hundred Thousand Dollars ($1,200,000), payable as follows:

             1.1.1 Corvas shall pay the VGI Stockholders the aggregate amount of
One Hundred Thousand Dollars ($100,000) within 5 days of Corvas' receipt of a
fully executed original of this Agreement; and

             1.1.2 Corvas shall pay the VGI Stockholders the aggregate amount of
One Million and One Hundred Thousand Dollars ($1,100,000) on or before July 30,
1999.

             1.1.3 The above payments shall be paid by corporate checks made
payable to "Duckor Spradling & Metzger, Client Trust Account" and shall be
delivered to the VGI Stockholders' counsel, Duckor Spradling & Metzger.

         1.2 Concurrent with the execution of this Agreement, Corvas shall
deliver to the VGI Stockholders' counsel, Duckor Spradling & Metzger, Two
Hundred and Fifty Thousand (250,000) shares of Corvas Common Stock pursuant to
the terms of Exhibit C to this Agreement, which is incorporated herein as though
set forth in full and thereby made a part of this Agreement.

2.       Within 14 days of receipt by Corvas of a fully executed original of
this Agreement, Corvas shall deliver to VGI, and, to the extent not restricted
by agreements with third parties or otherwise, VGI shall acquire and Corvas
hereby quitclaims to VGI all of Corvas' right, title and interest to that
certain equipment and software described in Exhibit A to this Agreement, which
is incorporated herein as though set forth in full and thereby made a part of
this Agreement. Corvas also shall deliver to VGI a bill of sale for the
equipment delivered to VGI pursuant to this Section. Corvas represents, to the
best of its knowledge, the items set forth on Exhibit A are free and clear of
all claims, liens and encumbrances.

3.       Within 14 days of receipt by Corvas of a fully executed original of
this Agreement, Corvas, to the extent it is not restricted by agreements with
third parties and otherwise has the right to do so, shall assign and deliver to
VGI all samples, documents, information, and other materials which embody or
disclose Patent Rights or Improvements (as those terms are defined in the
Research and Development Agreement), including but not limited to, all
information, data and know-how, which were received or developed by Corvas in
connection with Corvas' activities under the Research and Development Agreement.
Corvas represents, to the best of its knowledge, that all such items are set
forth on Exhibit B to this Agreement and no Proprietary Assets (as that term is
defined in the Research and Development Agreement) owned by, or licensed to,
Corvas are necessary for practice of the Patent Rights or Improvements. Corvas
covenants to promptly notify VGI of any items which should have been set forth
on Exhibit B, but were not because they were discovered after the Effective
Date, and to promptly assign and deliver such items to VGI.

4.       Concurrent with the execution of this Agreement, VGI, on behalf of the
Stockholders, shall deliver to Corvas shares of VGI non-voting common stock
equal to Six and One-Half Percent (6.5%) of the then outstanding common stock of
VGI on a fully diluted basis pursuant to the terms of Exhibit C to this
Agreement, which is incorporated herein as though set forth in full and thereby
made a part of this Agreement.

<PAGE>

5.       Neither VGI nor its stockholders, officers, employees or agents shall
directly, or indirectly, solicit any current employee or officer of Corvas for
employment or collaboration with, or as a consultant to, VGI or any of its
stockholders, officers, employees or agents; provided, however, that upon the
sooner of completion of the deliveries set forth in Sections 2 and 3, above, or
14 days from receipt of Corvas of a fully executed original of this Agreement,
VGI or its Stockholders may solicit Tony Stevens and/or John Kumer for
employment.

6.       Upon receipt by VGI of the items described in Sections 1.1, 1.2, and 2,
above, VGI shall immediately withdraw the Arbitration Demand.

7.       The Parties hereby agree that the Option Agreement and the Research and
Development Agreement, and all the obligations, rights and licenses thereunder
(including, but not limited to, the rights granted to Corvas by VGI pursuant to
Article 3 of the Research and Development Agreement, the rights and obligations
to VGI assumed by Corvas with respect to the UC License and the BI License held
by VGI as described and defined in Section 4.2 of the Research and Development
Agreement and Exhibit A-1 thereto), are hereby terminated including all rights,
covenants and obligations that survive termination under the Option Agreement
and the Research and Development Agreement as of the Effective Date.
Notwithstanding the foregoing, the Parties shall: (a) cooperate reasonably in
any such litigation maintained by, or assigned to, one of the parties, including
participating as a necessary party, supplying documentary evidence and making
witnesses available who are under the respective parties' control; and (b)
execute such assignments, grants, agreements, licenses, sublicenses or other
documents reasonably necessary to vest VGI with all right, title and interest to
the Patent Rights and Improvements.

8.       The Parties hereby agree that for a period of five years after the
Effective Date: (a) Corvas will maintain the confidentiality of any
"Confidential Information" acquired by Corvas from VGI pursuant to the Research
and Development Agreement or acquired or developed by Corvas pursuant to the
Research and Development Agreement; and (b) VGI shall not disclose Corvas'
"Confidential Information" relating to the Improvements except pursuant to an
obligation undertaken by the party to whom it discloses such information to
preserve and not use such Confidential Information, including but not limited
to, an undertaking contained in a sublicense relating to the Improvements issued
by VGI. During the five years after the Effective Date, each party may disclose
the Confidential Information to the extent such disclosure is reasonably
necessary in filing or prosecuting patent applications, prosecuting or defending
litigation or complying with applicable governmental regulations, provided that
if such party is required to make any such disclosure of the Confidential
Information it will to the extent practicable give reasonable advance notice to
the other party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its best efforts to
secure confidential treatment of such information required to be disclosed.

         The term "Confidential Information" as used herein shall mean: any
confidential or proprietary information, and any other information relating to
any research project, work in process, future development, scientific,
engineering, manufacturing, marketing, business plan, financial or personnel
matter relating to either party, its present or future products, sales,
suppliers, customers, employees, investors or business, whether in oral,
written, graphic or electronic form, that is disclosed by a disclosing party to
a receiving party. Confidential Information shall not include any information
which:

<PAGE>

              (a) was already known to the receiving party other than by
disclosure of the disclosing party, at the time of disclosure by the other
party;

              (b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other party;

              (c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;

              (d) was independently developed by the receiving party separate
from the efforts contemplated by the Research and Development Agreement as
supported by competent written proof; or

              (e) was disclosed to the receiving party by a third party who had
no obligation to the other party not to disclose such information to others.

9.       The Parties hereby agree that Corvas is not obligated to make the
Option Payment, as defined under Section 1.2 of the Option Agreement, due June
1, 1999 or any subsequent Option Payments due on or before the Effective Date,
and Corvas hereby irrevocably waives its right to seek a license from VGI
pursuant to Section 4(b) of the Option Agreement. The Parties also agree that
VGI is not obligated to make any payments under the Research and Development
Agreement due June 1, 1999 or any subsequent payments due on or before the
Effective Date.

10.      In exchange for the promises and covenants set forth herein, and in
consideration thereof, the Parties hereby release, acquit and further discharge
each other, and, as applicable, their officers, directors, agents, servants,
employees, stockholders, partners, successors, parent corporations, subsidiary
corporations, assigns, attorneys, affiliates, insurers, customers, vendors,
clients, representatives, and all others, of and from any and all liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, at law, in equity or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed.

11.      It is understood and agreed that this is a compromise settlement of
disputed claims and that nothing herein shall be construed to be an admission of
any liability or obligation whatsoever by any party to any other party or to any
other person whomsoever.

12.      In giving this release, which includes claims which may be unknown at
present, the Parties represent, warrant and agree that they have been fully
advised by their respective attorneys of the contents of section 1542 of the
Civil Code of the State of California. The Parties expressly waive and
relinquish all rights and benefits under that section and any similar statute or
common law principle of similar effect of any state or territory of the United
States with respect to the claims released hereby. Section 1542 reads as
follows:

<PAGE>

         GENERAL RELEASE - CLAIMS EXTINGUISHED. "A general release does not
         extend to claims which the creditor does not know or suspect to exist
         in his favor at the time of executing the release, which if known by
         him must have materially affected his settlement with the debtor."

13.      The Parties warrant and represent that there are no liens or claims of
lien or assignments at law, in equity or otherwise, of or against any of the
claims or causes of action released herein and, further that they are fully
entitled and duly authorized to give this complete and final general release and
discharge.

14.      The Parties hereby agree and acknowledge that they will keep the terms
and amounts of this Agreement completely confidential, and that neither party
will hereafter disclose or publicize such terms or amounts of the Agreement in
any manner whatsoever; provided however that: (a) the Parties may disclose this
Agreement, in confidence, to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (b) the Parties may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (c) the Parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law.

15.      The Parties shall execute and cause to be delivered to each other party
hereto such instruments and other documents, and shall take such other actions,
as reasonably necessary for the purpose of carrying out or evidencing any of the
transactions contemplated by this Agreement.

16.      This Agreement contains the entire agreement between the Parties and
constitutes the complete, final and exclusive embodiment of their agreement with
respect to the subject matter hereof, and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written, are
merged into and superseded by this Agreement. This Agreement may not be modified
except in a writing signed by the Parties. Each party acknowledges and agrees
that they have carefully read this Agreement, and have been afforded the
opportunity to be advised of its meaning and consequences by their respective
attorneys, and signed the same of their free will.

17.      Each party to this Agreement will bear its own costs, expenses, and
attorneys' fees, whether taxable or otherwise, incurred in or arising out of or
in any way related to the matters released herein, except that VGI will bear the
shipping costs associated with the deliveries to be made by Corvas pursuant to
Section 2 and 3 herein, including all insurance costs associated therewith.

18.      This Agreement shall be deemed to be entered into and shall be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely in California; it shall
be interpreted and construed mutually in accordance with the plain meaning of
the language contained herein and shall not be preemptively construed against
the drafters.

<PAGE>

19.      If any term or provision of this Agreement is held by any court to be
void, invalid or unenforceable, in whole or in part, then the remaining terms
and provisions shall nevertheless remain in full force and effect.

20.      Venue for any action to enforce or interpret this Agreement or
otherwise arising out of or in any way related to this Agreement shall be the
California Superior Court, County of San Diego.

21.      In the event that any party to this Agreement brings an action to
enforce any of the terms of this Agreement, the prevailing party in such action
shall be entitled to an award of attorneys' fees and costs incurred in
connection therewith.

22.      Whenever the text hereof requires, the use of the singular shall
include the plural and vice-versa.

23.      Any statements, communications or notices to be provided pursuant to
this Agreement shall be sent in writing to the attention of the persons
indicated below, until such time as notice of any change of person to be
notified or change of address is forwarded in writing to all Parties:

                  If to Corvas:

                  Cooley Godward LLP
                  Attention: Michael G. Rhodes
                  4365 Executive Drive, Suite 1100
                  San Diego, CA  92122

                  Telephone: (858) 550-6000
                  Facsimile: (858) 453-3555

                  If to VGI:

                  Duckor Spradling & Metzger
                  Attention: Kevin M. Bagley
                  401 West A Street, Suite 2400
                  San Diego, CA  92101

                  Telephone: (619) 231-3666
                  Facsimile: (619) 231-6629

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

         IN WITNESS WHEREOF the Parties have duly authorized and caused this
Agreement to be executed on the date set forth below.



                            [Signatures on next page]



<PAGE>


CORVAS INTERNATIONAL, INC.:


By:   /S/ RANDALL E. WOODS                      Date: JULY 23, 1999
      ----------------------------                   --------------------------
      Randall E. Woods
      Chief Executive Officer





VASCULAR GENOMICS INC.:


By:   /S/ HARRY GRUBER                          Date: 7/23/99
      ----------------------------                   --------------------------
      Harry Gruber, President


VGI STOCKHOLDERS:


By:   /S/ JAN SCHNITZER                         Date: 7/23/99
      ----------------------------                   --------------------------
      Jan Schnitzer

By:   /S/ HARRY GRUBER                          Date: 7/23/99
      ----------------------------                   --------------------------
      Harry Gruber

By:   /S/ DENNIS BERMAN                         Date: 7/25/99
      ----------------------------                   --------------------------
      Dennis Berman

By:   /S/ BRUCE JACOBSON                        Date: 7-26-99
      ----------------------------                   --------------------------
      Bruce Jacobson

By:   /S/ ISAAC WILLIS                          Date: 26 JULY 1999
      ----------------------------                   --------------------------
      Isaac Willis










                       [Signatures continued on next page]


<PAGE>


         APPROVED AS TO FORM:


COOLEY GODWARD LLP

By:   /S/ MICHAEL G. RHODES                     Date: JULY 23, 1999
      ----------------------------                   --------------------------
      Michael G. Rhodes
      Counsel for Corvas International, Inc.



DUCKOR SPRADLING & METZGER


By:   /S/ KEVIN M. BAGLEY                       Date: 7-26-99
      ----------------------------                   --------------------------
      Kevin M. Bagley
      Counsel for Vascular Genomics Inc.
      and VGI Stockholders




<PAGE>



                                    EXHIBIT C


                           CORVAS INTERNATIONAL, INC.


                               STOCK EXCHANGE AND
                          REGISTRATION RIGHTS AGREEMENT


                                  JULY 23, 1999



<PAGE>


                           CORVAS INTERNATIONAL, INC.
                               STOCK EXCHANGE AND
                          REGISTRATION RIGHTS AGREEMENT


         THIS STOCK EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT")
is entered into as of the 23rd day of July, 1999, between CORVAS INTERNATIONAL,
INC., a Delaware corporation (the "COMPANY"), Vascular Genomics Inc., a Delaware
corporation ("VGI") and the Stockholders of VGI as set forth on Exhibit A hereto
(the "VGI STOCKHOLDERS"). The Company, VGI and the VGI Stockholders are referred
to as the "Parties".


                                    RECITALS

         WHEREAS, pursuant to the terms of the Settlement Agreement and Mutual
General Release of even date herewith entered into between the Company, VGI and
the VGI Stockholders (the "SETTLEMENT AGREEMENT"), the Company proposes to issue
an aggregate of two hundred and fifty thousand (250,000) shares of its Common
Stock (the "Shares") to the VGI Stockholders;

         WHEREAS, pursuant to the terms of the Settlement Agreement, the VGI
Stockholders propose to issue an aggregate of sixty-six thousand three hundred
and twenty six (66,326) shares of their non-voting Common Stock (the "VGI
SHARES") to the Company; and

         WHEREAS, as a condition of entering into this Agreement and the
Settlement Agreement, the VGI Stockholders have requested that the Company
register the Shares for resale.

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties mutually agree as follows:


         GENERAL

         1.1      DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:

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

                  "FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

                  "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

                                       1.
<PAGE>

                  "REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued to the VGI Stockholders; and (b) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public pursuant to Rule 144 or sold in a
private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned.

                  "REGISTRATION EXPENSES" means all expenses incurred by the
Company in complying with Section 5.2 hereof, including, without limitation, all
fees and expenses incurred by it incident to the performance of or compliance
with this Agreement by the Company including, without limitation, (i) all
Securities Act and Securities Exchange Act, stock exchange registration and
filing fees, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws, and (iii) all expenses in preparing or
assisting in preparing, printing any Registration Statement, any prospectus, any
amendments or supplements thereto, other documents relating to the Company's
performance of and compliance with this Agreement, including the Company's legal
and accounting fees, edgarizing the Registration Statement, photo copying and
supplying the VGI Stockholders with photocopies of the Registration Statement.
Such Registration Expenses shall not include expenses, fees and disbursements of
any legal counsel to the VGI Stockholders, any printing costs incurred at the
election of each VGI Stockholder, Selling Expenses and all other expenses, fees
and disbursements incident to any registration either initiated or effected
pursuant to this Agreement which are not explicitly included as Registration
Expenses.

                  "SEC" means the Securities and Exchange Commission.

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

                  "SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the sale.

                  "SHARES" means the 250,000 shares of the Company's Common
Stock (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) to be issued to the
VGI Stockholders and their permitted assignees pursuant to this Agreement and
the Settlement Agreement.

                  "VGI SHARES" means 66,326 shares of VGI's non-voting Common
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) to be transferred by the VGI
Stockholders to the Company or its permitted assigns pursuant to this Agreement
and the Settlement Agreement.

                  "VGI STOCKHOLDERS" means the VGI Stockholders of all the
capital stock of VGI and as set forth on EXHIBIT A hereto.

         AGREEMENT TO ISSUE SECURITIES

         1.2      AUTHORIZATION OF SHARES AND VGI SHARES. On or prior to the
execution of this Agreement, the Company shall have authorized the issuance and

                                       2.
<PAGE>

sale to the VGI Stockholders of the Shares. The Shares shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Incorporation of the Company, in the form attached hereto as EXHIBIT B (the
"COMPANY CERTIFICATE OF INCORPORATION"). On or prior to the execution of this
Agreement, VGI shall have approved the sale to the Company of the VGI Shares.
The VGI Shares shall have the rights, preferences, privileges and restrictions
set forth in the Certificate of Incorporation of VGI, in the form attached
hereto as EXHIBIT C (the "VGI CERTIFICATE OF INCORPORATION").

         1.3      ISSUANCE AND SALE OF SHARES. Subject to the terms and
conditions hereof and the Settlement Agreement, upon execution of this
Agreement, (a) the Company shall issue to the VGI Stockholders pro rata based
upon each of the VGI Stockholder's percentage ownership of VGI prior to the
issuance of the VGI Shares an aggregate of 250,000 Shares and (b) the VGI
Stockholders shall convey, transfer and assign to the Company 66,326 VGI Shares,
representing 6.5% percentage of the outstanding capital stock of VGI (such
percentage calculated prior to the issuance of 66,326 shares of non-voting stock
to the VGI Stockholders for the sole purpose of transferring such shares to the
Company).

         REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         Except as set forth on a Schedule of Exceptions delivered by the
Company to the VGI Stockholders upon execution of this Agreement, the Company
hereby represents and warrants to the VGI Stockholders as of the date of this
Agreement as follows:

         1.4      ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares, and to carry out the provisions of
this Agreement and to carry on its business as presently conducted and as
presently proposed to be conducted.

         1.5      CAPITALIZATION.

                  (a) Immediately prior to the issuance of the Shares, the
authorized capital stock of the Company shall consist of (a) 10,000,000 shares
of Preferred Stock, $.001 par value, of which 1,000,000 shares have been
designated Series A Preferred Stock, $.001 par value, all of which are issued
and outstanding and 250,000 shares have been designated Series B Preferred
Stock, $.001 par value, all of which are issued and outstanding, and 500,000
shares of Series C Junior Participating Preferred Stock, none of which is issued
and outstanding (b) 50,000,000 shares of Common Stock, $.001 par value,
15,230,677 shares of which are issued and outstanding, (c) 1,699,466 shares of
Common Stock reserved for issuance under the Company's stock option plan and
under non-plan options, and (d) 1,983,715 shares reserved for issuance under
outstanding warrants to acquire Common Stock of the Company. As of the date
hereof, all of the outstanding shares of the Company's capital stock have been
duly authorized and validly issued, and are fully paid and nonassessable, except
to the extent that such shares may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein or as otherwise
required by such law at the time a transfer is proposed. The sale of the Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with.

                                       3.
<PAGE>

         1.6      AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and VGI Stockholders necessary
for the authorization of this Agreement and the Settlement Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, sale, issuance and delivery of the Shares pursuant hereto has
been taken. The Agreement and the Settlement Agreement, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) general principles of equity
that restrict the availability of equitable remedies, and (c) to the extent that
the enforceability of the indemnification provisions in this Agreement or the
Settlement Agreement may be limited by applicable laws.

         1.7      COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of the Company Certificate of Incorporation or
Bylaws, or of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order, writ. The execution, delivery, and performance of and
compliance with this Agreement, and the issuance and sale of the Shares pursuant
hereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.

         1.8      GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of the Agreement, or the offer, sale or issuance of the
Shares or the consummation of any other transaction contemplated thereby, except
such filings as may be determined by counsel to the Company to be necessary to
secure an exemption from registration under the Securities Act which filing, if
required, will be accomplished in a timely manner prior to or promptly upon
completion of the issuance of the Shares.

         1.9      OFFERING. Subject to the accuracy of the representations set
forth in Section 4 hereof, the offer, sale and issuance of the Shares pursuant
to this Agreement (i) constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act and (ii) is in compliance with
all applicable state securities laws.

         1.10     NO DEFAULTS. The Company has, in all material respects,
performed all material obligations required to be performed by it to date and is
not in default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a material
adverse effect on the Company's business, and no event or condition has occurred
which, with the lapse of time or the giving of notice, or both, would constitute
such a default.

                                       4.
<PAGE>

         1.11     BROKERS OR FINDERS. The Company has not incurred, and will not
incur, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.

         1.12     INVESTMENT REPRESENTATIONS. The Company understands that the
VGI Shares have not been registered under the Securities Act. The Company also
understands that the VGI Shares are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
the Company's representations contained in this Agreement. The Company hereby
represents and warrants as follows:

                  (a) THE COMPANY BEARS ECONOMIC RISK. The Company has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to VGI so that it is capable of
evaluating the merits and risks of its investment in VGI and has the capacity to
protect its own interests. The Company must bear the economic risk of this
investment indefinitely unless the VGI Shares are registered pursuant to the
Securities Act, or an exemption from registration is available. The Company
understands that VGI has no present intention of registering the VGI Shares, or
any shares of its Common Stock. The Company also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow the Company
to transfer all or any portion of the VGI Shares under the circumstances, in the
amounts or at the times the Company might propose.

                  (b) ACQUISITION FOR OWN ACCOUNT. The Company is acquiring the
VGI Shares for its own account for investment only, and not with a view towards
their distribution.

                  (c) THE COMPANY CAN PROTECT ITS INTEREST. The Company
represents that by reason of its, or of its management's, business or financial
experience, the Company has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement. Further, the
Company is aware of no publication of any advertisement in connection with the
transactions contemplated in this Agreement.

                  (d) ACCREDITED INVESTOR. The Company represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.

                  (e) VGI INFORMATION. The Company has received and read the
business plan and has had an opportunity to discuss VGI's business, management
and financial affairs with directors, officers and management of VGI and has had
the opportunity to review VGI's operations and facilities. The Company has also
had the opportunity to ask questions of and receive answers from, VGI and its
management regarding the terms and conditions of this investment.

                  (f) RULE 144. The Company acknowledges and agrees that the VGI
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Company has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act as in effect from time to time, which permits limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about VGI, the resale occurring following the
required holding period under Rule 144 and the number of shares being sold
during any three-month period not exceeding specified limitations.

                                       5.
<PAGE>

                  (g) RESIDENCE. The office or offices of the Company in which
its investment decision was made is located at the address or addresses of the
Company set forth on EXHIBIT A.

         1.13     TRANSFER RESTRICTIONS. The Company acknowledges and agrees
that the VGI Shares are subject to restrictions on transfer as set forth in this
Agreement.

         REPRESENTATIONS AND WARRANTIES OF VGI AND THE VGI STOCKHOLDERS

         Except as set forth on a Schedule of Exceptions delivered by VGI and
the VGI Stockholders to the Company, VGI and each of the VGI Stockholders hereby
represent and warrant to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):

         1.14     ORGANIZATION, GOOD STANDING AND QUALIFICATION. VGI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. VGI has all requisite corporate power and authority to
own and operate its properties and assets, to execute and deliver this
Agreement, to approve the sale of the VGI Shares, and to carry out the
provisions of this Agreement and to carry on its business as presently conducted
and as presently proposed to be conducted.

         1.15     CAPITALIZATION. Immediately prior to the sale of the VGI
Shares, the authorized capital stock of VGI shall consist of (a) 3,000,000
shares of voting and non-voting Common Stock, $.001 par value, 1,020,408 voting
shares of which are issued and outstanding, (b) 66,326 shares of non-voting
stock (held by the VGI Stockholders for the sole purpose of transferring such
shares to the Company), (c) no options and other rights to acquire Common Stock
under any VGI stock option plan (whether currently outstanding or granted in the
future) any (d) no currently outstanding warrants to acquire Common Stock of
VGI. As of the date hereof, all of the outstanding shares of VGI's capital stock
have been duly authorized and validly issued, and are fully paid and
nonassessable, except to the extent that such shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such law at the time a transfer is proposed.
The sale of the VGI Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.

         1.16     AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of VGI, its officers, directors and the VGI Stockholders necessary for
the authorization of this Agreement and the Settlement Agreement and the
performance of all obligations of VGI and the VGI Stockholders hereunder has
been taken. The Agreement and the Settlement Agreement, when executed and
delivered, will be valid and binding obligations of VGI and the VGI Stockholders
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions in this
Agreement or the Settlement Agreement may be limited by applicable laws.

                                       6.
<PAGE>

         1.17     COMPLIANCE WITH OTHER INSTRUMENTS. VGI is not in violation or
default of any term of the VGI Certificate of Incorporation or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ. The execution, delivery, and performance of and compliance
with this Agreement, and the issuance and sale of the Shares pursuant hereto,
will not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of VGI or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to VGI, its business or operations
or any of its assets or properties.

         1.18     GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of VGI or the VGI Stockholders is required in connection
with the valid execution and delivery of this Agreement, or the offer and sale
of the VGI Shares by the VGI Stockholders or the consummation of any other
transaction contemplated thereby.

         1.19     SALE. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer and sale of the VGI Shares pursuant to this
Agreement (i) constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act and (ii) is in compliance with all applicable
state securities laws.

         1.20     OWNERSHIP. The VGI Stockholders are the sole beneficial and
record owners of the VGI Shares, free and clear of any lien, pledge, charge,
security interest, encumbrance, title retention agreement, adverse claim,
option, right of first refusal or right of co-sale and, upon the exchange under
this Agreement and the execution of the Settlement Agreement, the Company will
acquire good and valid title thereto, free and clear of any lien, pledge,
security interest, encumbrance, title retention agreement, adverse claim,
option, right of first refusal or co-sale. The VGI Stockholders further
represent and warrant to the Company that the VGI Shares are fully paid and
non-assessable with no personal liability attached to the ownership thereof.

         1.21     NO DEFAULTS. VGI has, in all material respects, performed all
material obligations required to be performed by it to date and is not in
default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.

         1.22     BROKERS OR FINDERS. VGI and the VGI Stockholders have not
incurred, and will not incur, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreement.

                                       7.
<PAGE>

         1.23     INVESTMENT REPRESENTATIONS. Each VGI Stockholder understands
that the Shares have not been registered under the Securities Act. Each VGI
Stockholder also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon his or her representations contained in this Agreement. Each VGI
Stockholder hereby represents and warrants as follows:

                  (a) THE VGI STOCKHOLDER BEARS ECONOMIC RISK. The VGI
Stockholder has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The VGI Stockholder
must bear the economic risk of this investment indefinitely unless the Shares
are registered pursuant to the Securities Act, or an exemption from registration
is available. The VGI Stockholder understands that the Company has no present
intention of registering the Shares, or any shares of its Common Stock. The VGI
Stockholder also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the VGI Stockholder to transfer all or
any portion of the Shares under the circumstances, in the amounts or at the
times the VGI Stockholder might propose.

                  (b) ACQUISITION FOR OWN ACCOUNT. The VGI Stockholder is
acquiring the Shares for the VGI Stockholder's own account for investment only,
and not with a view towards their distribution.

                  (c) THE VGI STOCKHOLDER CAN PROTECT ITS INTEREST. The VGI
Stockholder represents that by reason of its, or of its management's, business
or financial experience, the VGI Stockholder has the capacity to protect his or
her own interests in connection with the transactions contemplated in this
Agreement. Further, the VGI Stockholder is aware of no publication of any
advertisement in connection with the transactions contemplated in this
Agreement.

                  (d) ACCREDITED INVESTOR. The VGI Stockholder represents that
he or she is an accredited investor within the meaning of Regulation D under the
Securities Act.

                  (e) COMPANY INFORMATION. The VGI Stockholder has received and
read the Company's Annual Report on Form 10-K for the period ended December 31,
1998 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
and a description of the capital stock of the Company and has had an opportunity
to discuss the Company's business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity to
review the Company's operations and facilities. The VGI Stockholder has also had
the opportunity to ask questions of and receive answers from, the Company and
its management regarding the terms and conditions of this investment.

                  (f) RULE 144. The VGI Stockholder acknowledges and agrees that
the Shares must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
The VGI Stockholder has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which

                                       8.
<PAGE>

permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.

                  (g) RESIDENCE. The VGI Stockholder resides in the state or
province identified in the address of such VGI Stockholder set forth on EXHIBIT
A.

                  (h) TRANSFER RESTRICTIONS. Each VGI Stockholder acknowledges
and agrees that the Shares are subject to restrictions on transfer as set forth
in this Agreement.

         COMPANY REGISTRATION; RESTRICTIONS ON TRANSFER

         1.24     RESTRICTIONS ON TRANSFER.

                  (a) Each VGI Stockholder agrees not to make any disposition of
all or any portion of the Shares or Registrable Securities unless and until:

                      (i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

                      (ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such VGI Stockholder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such VGI Stockholder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Securities Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.

                  (b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
                  MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
                  PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
                  ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
                  SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
                  REGISTRATION IS NOT REQUIRED.

                  (c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any VGI Stockholder thereof if the VGI
Stockholder shall have obtained an opinion of counsel (which counsel may be

                                       9.
<PAGE>

counsel to the Company) reasonably acceptable to the Company to the effect that
the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.

                  (d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.

        1.25      FORM S-3 REGISTRATION. Within 30 days after the effective date
of the Settlement Agreement, the Company will file a registration on Form S-3
(or any successor to Form S-3) or any similar short-form registration statement
and any related qualification or compliance under the Securities Act (the
"Registration Statement") with respect to all of the Registrable Securities
owned by the VGI Stockholders. The Company agrees to use its reasonable best
efforts to cause the Registration Statement to be declared effective by the SEC
as soon as practicable following filing thereof and thereafter to maintain the
effectiveness of the Registration Statement until the earlier of (i) all
Registrable Securities have been sold pursuant to the Registration Statement or
(ii) one (1) year from the effective date of the Registration Statement.

         1.26     EXPENSES OF REGISTRATION.  The Company shall pay all
Registration Expenses.

         1.27     OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

                  (a) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement for the period set forth in
Section 5.2 above.

                  (b) Furnish to the VGI Stockholders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

                  (c) Use its reasonable best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the VGI Stockholders; PROVIDED that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.

                  (d) Notify each VGI Stockholder of Registrable Securities
covered by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.

                                      10.
<PAGE>

         1.28     INFORMATION AND LIMITATIONS ON DISTRIBUTIONS. As a condition
to effecting the registration of any Registrable Securities pursuant to Section
5.2 and maintaining its effectiveness, the Company may require each selling VGI
Stockholder of Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such securities as the Company may from time to time reasonably request in
writing. Notwithstanding any other provision of this Agreement, prior to and
following the effectiveness of any Registration Statement filed pursuant to
Section 5.2 hereunder, the Company may, at any time, suspend the filing of or
the effectiveness of such Registration Statement for up to no longer than
forty-five (45) days, as appropriate (a "SUSPENSION PERIOD"), by delivering a
signed certificate of the Company's Chairman of the Board to the VGI Stockholder
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its Stockholders to disclose
any previously undisclosed material corporate development that would be required
to be disclosed if the Registration Statement is not suspended. The Company will
use its best efforts to minimize the length of any Suspension Period. The VGI
Stockholder agrees that, upon the receipt of any notice from the Company of a
Suspension Period, the VGI Stockholder will not sell any Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until (i) the VGI Stockholder is advised in writing by the Company that the use
of the applicable prospectus may be resumed, (ii) the VGI Stockholder has
received copies of any additional, supplemental or amended prospectus, if
applicable, and (iii) the VGI Stockholder has received copies of any additional
or supplemental filings which are incorporated or deemed to be incorporated by
reference in such prospectus.

         1.29     INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under Section 5.2:

                  (a) To the extent permitted by law, the Company will indemnify
and hold harmless each VGI Stockholder, the partners, officers and directors of
each VGI Stockholder, any underwriter (as defined in the Securities Act) for
such VGI Stockholder and each person, if any, who controls such VGI Stockholder
or underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION") by the Company:
(i) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such Registration
Statement; and the Company will pay as incurred to each such VGI Stockholder,
partner, officer, director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED HOWEVER,
that the indemnity agreement contained in this Section 5.6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action

                                      11.
<PAGE>

if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such VGI Stockholder, partner, officer, director,
underwriter or controlling person of such VGI Stockholder.

                  (b) To the extent permitted by law, each VGI Stockholder will,
if Registrable Securities held by such VGI Stockholder are included in the
securities as to which such registration qualifications or compliance is being
effected, indemnify and hold harmless the Company, each of its directors, its
officers and each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other VGI Stockholder selling
securities under such Registration Statement or any of such other VGI
Stockholder's partners, directors or officers or any person who controls such
VGI Stockholder, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or other such VGI Stockholder, or partner, director, officer or
controlling person of such other VGI Stockholder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such VGI Stockholder under an instrument duly
executed by such VGI Stockholder and stated to be specifically for use in
connection with such registration; and each such VGI Stockholder will pay as
incurred any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other VGI
Stockholder, or partner, officer, director or controlling person of such other
VGI Stockholder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there was
such a Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in
this Section 5.6(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the VGI Stockholder, which consent shall not be unreasonably
withheld; PROVIDED FURTHER, that in no event shall any indemnity under this
Section 5.6 exceed the net proceeds from the offering received by such VGI
Stockholder.

                  (c) Promptly after receipt by an indemnified party under this
Section 5.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to

                                      12.
<PAGE>

the indemnified party under this Section 5.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 5.6.

                  (d) If the indemnification provided for in this Section 5.6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED, that in no event shall any contribution by a
VGI Stockholder hereunder exceed the net proceeds from the offering received by
such VGI Stockholder.

                  (e) The obligations of the Company and VGI Stockholders under
this Section 5.6 shall survive completion of any offering of Registrable
Securities in a Registration Statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

         1.30     COVENANT REGARDING SALE OF SECURITIES. Each VGI Stockholder
hereby acknowledges and agrees that the disorderly resale of the Shares in the
public market may adversely effect the market price of the Company's Common
Stock. In consideration of the covenants set forth in this Agreement and the
payments made under the Settlement Agreement, each of the VGI Stockholders
hereby covenants that neither such VGI Stockholder nor any combination of VGI
Stockholders shall sell, within any three month period, a total number of the
Shares and other shares of Company's Common Stock owned or controlled by such
VGI Stockholders in excess of the greater of (i) one percent of the total
outstanding shares of Common Stock of the Company as shown by the most recent
report or statement published by the Company, or (ii) the average weekly
reported volume of trading in the Company's Common Stock on the Nasdaq National
Market or such exchange or market in which the Company's Common Stock is then
traded or quoted during the four calendar weeks preceding the proposed sale. All
shares of Company Common Stock sold by any of the VGI Stockholders during any
period of three months shall be aggregated for the purpose of determining the
limitation on the amount of securities sold.

                                      13.
<PAGE>

         1.31     RULE 144 REPORTING. With a view to making available to the VGI
Stockholders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:

                  (a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

                  (b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and

                  (c) So long as a VGI Stockholder owns any Registrable
Securities, furnish to such VGI Stockholder forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the Exchange Act (at any time after
it has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as a VGI Stockholder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.

         VGI REGISTRATION; RESTRICTIONS ON TRANSFER

         1.32     REGISTRATION RIGHTS. VGI agrees to grant to the Company on a
pari passu basis any current or future registration rights that have been
granted or shall be granted in the future to the VGI Stockholders with respect
to capital stock of VGI owned by the VGI Stockholders as. of the date of this
Agreement. VGI shall take all necessary steps to include the Company as a party
to any such existing agreement and further agreeing to include the Company as a
party to any agreement in the future that shall grant to the VGI Stockholders
any registration rights.

         1.33     RESTRICTIONS ON TRANSFER.

                  (a) The Company agrees not to make any disposition of all or
any portion of the VGI Shares unless and until:

                      (i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or

                      (ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) the Company shall have notified VGI of the
proposed disposition and shall have furnished VGI with a detailed statement of
the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by VGI, the Company shall have furnished VGI with an opinion of
counsel, reasonably satisfactory to VGI, that such disposition will not require
registration of such shares under the Securities Act. It is agreed that VGI will
not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.

                      (iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Company which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a

                                      14.
<PAGE>

corporation to its stockholders in accordance with their interest in the
corporation, or (C) a limited liability company to its members or former members
in accordance with their interest in the limited liability company; PROVIDED
that in each case the transferee will be subject to the terms of this Agreement
to the same extent as if he were an original party hereunder.

                      (b) Each certificate representing the VGI Shares shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
                  MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
                  PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
                  ACT OR UNLESS VASCULAR GENOMICS, INC. (THE "COMPANY") HAS
                  RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
                  ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

                      (c) VGI shall be obligated to reissue promptly unlegended
certificates at the request of the Company if the Company shall have obtained an
opinion of counsel (which counsel may be counsel to VGI) reasonably acceptable
to VGI to the effect that the securities proposed to be disposed of may lawfully
be so disposed of without registration, qualification or legend.

                      (d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by VGI of an order of the
appropriate blue sky authority authorizing such removal.

         MISCELLANEOUS

         1.34     GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.

         1.35     SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by the Company, VGI
or the VGI Stockholders and the closing of the transactions contemplated hereby.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company or VGI pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company or VGI hereunder solely as of the
date of such certificate or instrument.

         1.36     NO ASSIGNMENT.  The VGI Stockholders may not assign their
registration rights under this Agreement.

                                      15.
<PAGE>

         1.37     ENTIRE AGREEMENT. The Settlement Agreement, this Agreement,
the Exhibits and Schedules hereto and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.

         1.38     SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

         1.39     AMENDMENT AND WAIVER.

                  (a) Except as otherwise expressly provided, this Agreement
(other than Section 5) may be amended or modified only upon the written consent
of the Company, VGI and VGI Stockholders holding at least 50% of the outstanding
voting stock of VGI; PROVIDED, HOWEVER, Section 5 of this Agreement may be
amended or modified upon the written consent of the Company and holders of 50%
of the Registrable Securities.

                  (b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the VGI Stockholders under this Agreement (other
than Section 5) may be waived only with the written consent of the Company, VGI
and VGI Stockholders holding at least 50% of the outstanding voting stock of
VGI; PROVIDED, HOWEVER, Section 5 of this Agreement may be waived only upon the
written consent of the Company and holders of at least 50% of the Registrable
Securities.

         1.40     DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any VGI Stockholder, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval of
any kind or character on any VGI Stockholder part of any breach, default or
noncompliance under the Agreement or any waiver on such VGI Stockholder's part
of any provisions or conditions of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to VGI
Stockholders, shall be cumulative and not alternative.

         1.41     NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
at the addresses set forth on EXHIBIT A or at such other address as such party
may designate by ten (10) days advance written notice to the other parties
hereto.

                                      16.
<PAGE>

         1.42     ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.

         1.43     TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

         1.44     COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]




                                      17.
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this STOCK
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.


                                      COMPANY:

                                      CORVAS INTERNATIONAL, INC.

                                      /S/ RANDALL E. WOODS
                                      ------------------------------------------
                                      By:  Randall E. Woods
                                      Its: President and Chief Executive Officer


                                      VGI:

                                      VASCULAR GENOMICS INC.

                                      ------------------------------------------

                                      By:  /s/ HARRY GRUBER
                                           -------------------------------------
                                      Its:
                                           -------------------------------------


                                      VGI STOCKHOLDERS:

                                      /s/ JAN SCHNITZER
                                      ------------------------------------------
                                      Jan Schnitzer

                                      /s/ HARRY GRUBER
                                      ------------------------------------------
                                      Harry Gruber

                                      /S/ DENNIS BERMAN
                                      ------------------------------------------
                                      Dennis Berman

                                      /s/ BRUCE JACOBSON
                                      ------------------------------------------
                                      Bruce Jacobson

                                      /s/ ISAAC WILLIS
                                      ------------------------------------------
                                      Isaac Willis

      [SIGNATURE PAGE TO STOCK EXCHANGE AND REGISTRATION RIGHTS AGREEMENT]







<PAGE>
<TABLE>

                                TABLE OF CONTENTS
<CAPTION>

                                                                                                               PAGE

<S>      <C>      <C>                                                                                           <C>
1.       General.................................................................................................1
         1.1      Definitions....................................................................................1
2.       Agreement To Issue Securities...........................................................................2
         2.1      Authorization of Shares and VGI Shares.........................................................2
         2.2      Issuance of Shares.............................................................................3
3.       Representations And Warranties Of The Company...........................................................3
         3.1      Organization, Good Standing and Qualification..................................................3
         3.2      Capitalization.................................................................................3
         3.3      Authorization; Binding Obligations.............................................................4
         3.4      Compliance with Other Instruments..............................................................4
         3.5      Governmental Consent, etc......................................................................4
         3.6      Offering.......................................................................................4
         3.7      No Defaults....................................................................................4
         3.8      Brokers or Finders.............................................................................5
         3.9      Investment Representations.....................................................................5
         3.10     Transfer Restrictions..........................................................................6
4.       Representations And Warranties Of The VGI Stockholders..................................................6
         4.1      Organization, Good Standing and Qualification..................................................6
         4.2      Capitalization.................................................................................6
         4.3      Authorization; Binding Obligations.............................................................6
         4.4      Compliance with Other Instruments..............................................................7
         4.5      Governmental Consent, etc......................................................................7
         4.6      Offering.......................................................................................7
         4.7      No Defaults....................................................................................7
         4.8      Brokers or Finders.............................................................................7
         4.9      Investment Representations.....................................................................7
5.       Company Registration; Restrictions On Transfer..........................................................9
         5.1      Restrictions on Transfer.......................................................................9
         5.2      Form S-3 Registration.........................................................................10
         5.3      Expenses of Registration......................................................................10
         5.4      Obligations of the Company....................................................................10
         5.5      Information and Limitations on Distributions..................................................10
         5.6      Indemnification...............................................................................11
         5.7      Covenant Regarding Sale of Securities.........................................................13
         5.8      Rule 144 Reporting............................................................................13
6.       VGI Registration; Restrictions On Transfer.............................................................14
         6.1      Registration Rights...........................................................................14
         6.2      Restrictions on Transfer......................................................................14
7.       Miscellaneous..........................................................................................15
         7.1      Governing Law.................................................................................15
         7.2      Survival......................................................................................15
         7.3      No Assignment.................................................................................15
         7.4      Entire Agreement..............................................................................15


                                       i.

<PAGE>
                               TABLE OF CONTENTS
                                  (CONTINUED)
                                                                                                               PAGE


         7.5      Severability..................................................................................16
         7.6      Amendment and Waiver..........................................................................16
         7.7      Delays or Omissions...........................................................................16
         7.8      Notices.......................................................................................16
         7.9      Attorneys' Fees...............................................................................16
         7.10     Titles and Subtitles..........................................................................17
         7.11     Counterparts..................................................................................17

</TABLE>

                                      ii.