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                          SECURITIES PURCHASE AGREEMENT

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                              SUNPHARM CORPORATION



        200,000 shares of Series B Redeemable Convertible Preferred Stock

                                       and

                         550,000 shares of Common Stock

                             issued in exchange for

                                 an aggregate of

         $1,500,000 and up to 366,667 Warrants to purchase Common Stock



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                           Dated as of March 31, 1999

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<PAGE>


                          SECURITIES PURCHASE AGREEMENT



         THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of this
31st  day of  March,  1999,  by  and  among  SunPharm  Corporation,  a  Delaware
corporation  (the  "Company"),  and the  Persons  listed on  SCHEDULE A attached
hereto (individually, a "Purchaser" and, collectively, the "Purchasers").

         WHEREAS,  certain  of the  Purchasers  entered  into  a  Unit  Purchase
Agreement with the Company dated March 28, 1997 (the "Unit Purchase Agreement"),
pursuant to which the Purchasers  purchased  units,  each unit consisting of one
share of the  Company's  Common  Stock (as  defined  below) and one  Warrant (as
defined below) to purchase one share of the Company's Common Stock;

         WHEREAS,  the Company desires to issue and sell to the Purchasers,  and
the Purchasers  desire to acquire on the terms and subject to the conditions set
forth  herein,  up to an  aggregate  of  200,000  shares of Series B  Redeemable
Convertible  Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock"), and up to an aggregate of 550,000 shares of Common Stock;

         NOW,  therefore,  in  consideration  of the  premises  and  the  mutual
covenants contained in this Agreement, the parties agree as follows:


                                    ARTICLE I

                                   DEFINITIONS


         SECTION 1.01  DEFINITIONS.  As used in this  Agreement,  references  to
either gender shall include the other gender, and the following terms shall have
the  following  meanings  (such  meanings to be equally  applicable  to both the
singular and plural forms of the terms defined):


                  "Affiliate"  shall have the meaning given to such term in Rule
         12b-2 of the Rules and Regulations under the Exchange Act.

                  "Agreement"  means  this  Securities  Purchase  Agreement,  as
         amended, modified or supplemented from time to time.

                  "Business Day" means any day on which commercial banks are not
         authorized or required by law to close in New York, New York.

                  "Commission"  means the United States  Securities and Exchange
Commission, or any other agency successor thereto.

<PAGE>


                  "Common Shares" means shares of Common Stock.

                  "Conversion   Shares"  means  those  shares  of  Common  Stock
         issuable upon the conversion of the Series B Preferred Stock.

                  "Common  Stock" shall mean the Common Stock,  par value $.0001
         per share, of the Company,  and shall include any stock into which such
         Common  Stock shall have been changed or any stock  resulting  from any
         reclassification  of such Common Stock and all other stock of any class
         or classes  (however  designated)  of the  Company the holders of which
         have the right, without limitation as to amount,  either to all or to a
         share of the balance of current  dividends  and  liquidating  dividends
         after the payment of dividends and distributions on any shares entitled
         to preference.

                  "Company"  means and shall  include  SunPharm  Corporation,  a
         Delaware corporation, and its successors and permitted assigns.

                  "Exchange  Act" means the  Securities  Exchange Act of 1934 or
         any successor  Federal  statute,  and the rules and  regulations of the
         Commission thereunder, all as the same shall be in effect at the time.

                  "Guarantee"   shall  mean  any   obligation,   contingent   or
         otherwise,  of any Person guaranteeing or having the economic effect of
         guaranteeing  any  Indebtedness  of any  other  Person  in any  manner,
         whether directly or indirectly, and including,  without limitation, any
         obligation of such Person,  direct or indirect,  (i) to purchase or pay
         (or  advance  or supply  funds for the  purchase  or  payment  of) such
         Indebtedness  or to  purchase  (or to advance  or supply  funds for the
         purchase of) any security for the payment of such Indebtedness, (ii) to
         purchase  property,  securities or services for the purpose of assuring
         the owner of such Indebtedness of the payment of such Indebtedness,  or
         (iii) to maintain  working  capital,  equity capital or other financial
         statement  condition of the primary obligor so as to enable the primary
         obligor  to pay such  Indebtedness;  provided,  however,  that the term
         "Guarantee"  shall not include  endorsements for collection or deposit,
         in either case, in the ordinary course of business.

                  "Indebtedness" shall mean, with respect to any Person, (i) all
         obligations  of such  Person for  borrowed  money,  or with  respect to
         deposits or advances  of any kind  (other  than  deposits,  advances or
         excess payments  accepted in connection with the sale by such Person of
         products or  services in the  ordinary  course of  business),  (ii) all
         obligations  of such Person  evidenced by bonds,  debentures,  notes or
         similar  instruments,  (iii) all  obligations of such Person upon which
         interest charges are customarily paid (other than obligations  accepted
         in connection  with the purchase by such Person of products or services
         in the  ordinary  course of  business),  (iv) all  obligations  of such
         Person  under  conditional  sale or other  title  retention  agreements
         relating to property  purchased by such Person,  (v) all obligations of
         such  Person  issued  or  assumed  as the  deferred  purchase  price of
         property or services (other than accounts payable to suppliers incurred
         in the  ordinary  course  of  business  and paid  when  due),  (vi) all
         Indebtedness  of others  secured  

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<PAGE>


         by (or for which the holder of such Indebtedness has an existing right,
         contingent  or  otherwise,  to be  secured  by) any  Lien  or  security
         interest  on property  owned or acquired by such Person  whether or not
         the  obligations   secured   thereby  have  been  assumed,   (vii)  all
         obligations of such Person under leases required to be accounted for as
         capital leases under  generally  accepted  accounting  principles,  and
         (viii) all Guarantees of such Person.

                  "Lien" shall mean: (i) any interest in property (whether real,
         personal or mixed and whether tangible or intangible)  which secures an
         obligation  owed to,  or a claim by, a Person  other  than the owner of
         such  property,  whether  such  interest  is based on the  common  law,
         statute or contract,  including,  without limitation, any such interest
         arising from a lease,  mortgage,  charge,  pledge,  security agreement,
         conditional  sale, trust receipt or deposit in trust, or arising from a
         consignment of bailment given for security purposes (other than a trust
         receipt or deposit given in the ordinary  course of business which does
         not secure any obligation  for borrowed  money),  (ii) any  encumbrance
         upon such property which does not secure such an obligation,  and (iii)
         any  exception  to or defect in the title to or  ownership  interest in
         such property, including, without limitation,  reservations,  rights of
         entry, possibilities of reverter,  encroachments,  easements, rights of
         way,  restrictive  covenants,  licenses  and  PROFITS  A  PRENDRE.  For
         purposes of this Agreement,  any Person shall be deemed to be the owner
         of the  leasehold  or  other  interest  in any  property  which  it has
         acquired  or holds  subject  to a lease and the  owner of any  property
         which it has acquired or holds subject to a conditional  sale agreement
         or other  similar  arrangement  pursuant to which title to the property
         has been  retained  by or  vested in some  other  Person  for  security
         purposes.

                  "Person"  means  an  individual,   corporation,   partnership,
         association, joint venture, trust, or unincorporated organization, or a
         government or any agency or political subdivision thereof.

                  "Preferred Shares" means shares of Series B Preferred Stock.

                  "Purchaser" has the meaning  specified in the  introduction to
         this Agreement, and its successors and permitted assigns.

                  "Recapitalization  Event"  means  any  stock  dividend,  stock
         split, combination, reorganization, recapitalization, reclassification,
         consolidation,  merger  or  similar  event  involving  a change  in the
         Company's corporate structure.

                  "Registrable Shares" means (i) the Shares, (ii) the Conversion
         Shares,  (iii) any shares of Common Stock issued to the Purchasers upon
         a redemption of the Series B Preferred  Stock and (iv) any other shares
         of Common Stock issued to the  Purchasers  in respect of the  foregoing
         Shares because of any Recapitalization Event.

                  "Securities  Act"  means  the  Securities  Act of  1933 or any
         successor  Federal  statute,  and  the  rules  and  regulations  of the
         Commission thereunder, all as the same shall be in effect at the time.

                                       3
<PAGE>


                  "Shares"  or  "Securities"  means the  Common  Shares  and the
         Preferred Shares, collectively.

                  "Subsidiary"  or  "Subsidiaries"  shall mean any  corporation,
         partnership,  trust or other entity of which the Company  and/or any of
         its  other  Subsidiaries  directly  or  indirectly  owns at the  time a
         majority of the  outstanding  shares of any class of equity security of
         such corporation, partnership, trust or other entity.

                  "Warrants"  shall  mean the  stock  purchase  warrants  issued
         pursuant to the Warrant  Agreement dated as of March 28, 1997 entitling
         the record  holders  thereof to  purchase  from the  Company  shares of
         Common  Stock,  subject  to  adjustment  as  provided  in  the  Warrant
         Agreement; individually, a "Warrant".

                  "Warrant  Agreement" shall mean the Warrant Agreement dated as
         of  March  28,  1997 by and  between  the  Company  and the  Purchasers
         identified therein, pursuant to which the Warrants have been issued and
         have been exercisable at the Exercise Price (as defined therein) at any
         time after each respective  Closing Date and before 5:00 P.M., New York
         time, on the Expiration Date (as defined therein), as amended, modified
         or supplemented from time to time.


                                   ARTICLE II

                       PURCHASE AND SALE OF THE SECURITIES

         SECTION 2.01  AUTHORIZATION  OF THE SHARES.  The Company has authorized
the issuance and sale of 200,000  shares of Series B Preferred  Stock having the
rights, restrictions and privileges and preferences set forth in the Certificate
of  Designation  attached  hereto as  EXHIBIT A (the  "Series B  Certificate  of
Designation") and an aggregate of 550,000 shares of Common Stock.

         SECTION 2.02  CLOSING.   The  initial   closing  of  the   transactions
contemplated  by this  Agreement  (the  "INITIAL  CLOSING")  and any  subsequent
closings (each, a "SUBSEQUENT CLOSING";  the Initial Closing and each Subsequent
Closing,  are each herein referred to as a "Closing") for the sale of additional
shares of Series B  Preferred  Stock and Common  Stock  pursuant to the terms of
this Agreement shall take place at the offices of Mintz,  Levin,  Cohn,  Ferris,
Glovsky and Popeo,  P.C. at 5:00 p.m. on March 31, 1999,  or at such other place
or on such other date as the Company and the  Purchasers set forth on SCHEDULE A
(as  amended  from  time to time by the  Company  and the  Purchasers  set forth
therein)  shall agree.  At the Initial  Closing and at any  Subsequent  Closing,
subject to the terms and  conditions  set forth in this  Agreement,  the Company
agrees to issue and sell to the  Purchasers  set forth on SCHEDULE A (as amended
from time to time)  and the  Purchasers,  severally  but not  jointly,  agree to
purchase  from the  Company,  (i) that  number  of  Preferred  Shares  set forth
opposite  their  respective  names on  SCHEDULE A under the  caption  "Number of
Preferred Shares Purchased at Closing" at a purchase price equal to Four Dollars
and Zero  Cents  ($4.00)  per  share of Series B  Preferred  Stock and (ii) that
number of Common Shares set forth opposite their respective names on

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<PAGE>


SCHEDULE A under the caption "Number of Common Shares  Purchased at Closing" (A)
at a purchase price equal to One Dollar and Two Hundred Seventy-Three Thousandth
cents  ($1.273)  per share of Common  Stock or (B)  represented  by the Warrants
surrendered  by  the  Purchasers,  such  number  as  set  forth  opposite  their
respective names on SCHEDULE A under the caption "Number of Warrants Surrendered
at Closing." At each Closing, the Company will, subject to Article V, deliver to
each Purchaser certificates for the number of Preferred Shares and Common Shares
being purchased by such Purchaser  registered in such  Purchaser's  name (or its
nominee),  against (i) delivery of a check or checks payable to the order of the
Company,  or a transfer of funds to the account of the Company by wire transfer,
representing  the purchase  price paid by such  Purchaser for shares of Series B
Preferred  Stock and either (A) the purchase  price paid by Purchaser for shares
of Common Stock as set forth on SCHEDULE A or (B) surrender by such Purchaser of
the number of Warrants set forth  opposite  such  Purchaser's  name,  if any, on
SCHEDULE  A under the  caption  "Number of  Warrants  Surrendered  at  Closing,"
representing  the purchase price for shares of Common Stock.  At each Closing or
as soon as  practicable  after such  Closing,  each  Purchaser  with Warrants to
surrender  as  set  forth  on  SCHEDULE  A  shall  surrender  such   Purchaser's
certificates  representing  such  Purchaser's  Warrants to the Company  (acting,
until such time as all certificates  representing  such Warrants shall have been
exchanged in accordance  herewith,  as Exchange  Agent  hereunder (the "Exchange
Agent")) in exchange  for  certificates  representing  such  Purchaser's  Common
Shares;  PROVIDED that,  notwithstanding the foregoing,  on the Closing Date, by
virtue  of the  Closing  and  without  any  further  action  on the  part of the
Purchasers,  the Company or any other Person,  (i) the Preferred  Shares and the
Common Shares being  purchased by the Purchasers  shall be issued by the Company
and shall be deemed issued and outstanding  capital stock of the Company for all
intents and purposes and (ii) any Warrants  being  surrendered by the Purchasers
shall be deemed to be surrendered and canceled by the Purchasers, whether or not
the certificates  representing such Warrants have been physically surrendered or
delivered to the Company or its agent.


                                   ARTICLE III

                     COMPANY REPRESENTATIONS AND WARRANTIES

         In order to induce the  Purchasers to enter into this  Agreement and to
consummate the transactions  contemplated  hereby, the Company hereby represents
and warrants to the Purchasers as follows:


         SECTION  3.01.  ORGANIZATION  AND  GOOD  STANDING.  The  Company  is  a
corporation duly organized, validly existing and in good standing under the laws
of the State of  Delaware.  The Company has the  requisite  corporate  power and
authority  to own and  operate  its  properties  and  assets and to carry on its
business as currently conducted.  The Company is qualified to do business in the
State of  Florida.  The  Company is not  qualified  to do  business as a foreign
corporation  in any  other  jurisdiction  and  such  qualification  is  not  now
required,  

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<PAGE>


except to the extent  that the  failure to so qualify  would not have a material
adverse effect on the Company's business as currently conducted.

         SECTION 3.02.  CORPORATE POWER AND  AUTHORIZATION.  The Company has the
corporate  power and authority to execute and deliver this  Agreement,  to issue
and sell the Shares  hereunder  and to issue and deliver the  Conversion  Shares
upon conversion of the Preferred  Shares,  and to perform its obligations  under
the terms of this  Agreement.  All corporate  action on the part of the Company,
its  directors and  stockholders  necessary  for the  authorization,  execution,
delivery and performance by the Company of this Agreement and the authorization,
sale,  issuance  and delivery of the Shares and the  Conversion  Shares has been
taken or will be taken prior to Closing.  This Agreement  constitutes  the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other laws relating to or affecting  creditors'  rights generally and by general
equitable  principles.  The Shares have been and the  Conversion  Shares will be
duly  authorized  and,  when issued in  compliance  with the  provisions of this
Agreement, will be validly issued, fully paid and nonassessable;  and the Shares
and the Conversion Shares when issued and delivered in accordance with the terms
of this  Agreement  and (in the  case of the  Conversion  Shares)  the  Series B
Certificate of Designation, will be free of any Liens or encumbrances created by
the Company; PROVIDED, HOWEVER, that the Shares and the Conversion Shares may be
subject to  restrictions  on transfer under state or federal  securities laws as
set forth herein.

         SECTION  3.03.  CAPITALIZATION.  The  authorized  capital  stock of the
Company consists of 27,500,000 shares,  divided into 25,000,000 shares of Common
Stock,  par value $0.0001 per share,  of which  6,731,395  shares are issued and
outstanding,  and 2,500,000 shares of undesignated  blank check preferred stock,
par value $0.001 per share  ("Preferred  Stock"),  of which 300,000  shares have
been designated as Series A Redeemable Convertible Preferred Stock and of which,
200,000  shares shall be  designated  as Series B Preferred  Stock in accordance
with the Series B Certificate of Designation  prior to the Initial Closing.  All
of the outstanding  shares of Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable.  The Company has reserved (i) up to
200,000  shares of Common Stock for issuance  upon exercise or conversion of the
Preferred Shares,  (ii) up to 2,962,676 shares of Common Stock for issuance upon
exercise  of  warrants  issued by the  Company  (including  any  Warrants  being
surrendered  pursuant  hereto) and (iii) up to 1,075,723  shares of Common Stock
for issuance upon the exercise of options to purchase Common Stock issued by the
Company. SCHEDULE 3.03 sets forth the outstanding  capitalization of the Company
as of the date hereof,  including the material terms (expiration date,  exercise
price,  etc.) of such  outstanding  options and  warrants  and,  except for such
outstanding options and warrants, there are no other options,  warrants or other
rights outstanding to purchase or acquire,  or any securities  convertible into,
nor has the  Company  agreed to issue or  reissue,  other than  pursuant to this
Agreement, any of the Company's authorized and unissued capital stock. Except as
set forth in the Certificate of Designations, Preferences and Rights of Series A
Redeemable   Convertible   Preferred   Stock,   there  are  no   agreements   or
understandings  that affect or relate to the voting or giving of written consent
with  respect  to any of the  Company's  outstanding  securities.  There  are no
preemptive  rights with respect to the issuance or sale of 

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<PAGE>


the Company's  capital stock,  and there are no  restrictions on the transfer of
the  Company's  capital  stock other than those  arising  from federal and state
securities laws.

         SECTION 3.04. SEC REPORTS;  FINANCIAL STATEMENTS. The Company has filed
with the Commission all forms,  reports and documents required to be filed by it
pursuant to the Exchange Act, all of which, when filed, complied in all material
respects with all  applicable  requirements  of the Exchange Act. The Purchasers
have been  provided  true and correct  copies (not  including  exhibits)  of the
Company's  (i) Annual  Report on Form 10-KSB for the fiscal year ended  December
31, 1997, as filed with the  Commission,  (ii) Quarterly  Reports on Form 10-QSB
for the quarters  ended March 31, 1998 and June 30, 1998,  in each case as filed
with the Commission,  and (iii) proxy statements relating to all meetings of its
stockholders  (whether  annual or special)  since December 31, 1997 and prior to
the  date  hereof  (collectively,  the  "Company's  SEC  Reports").  As of their
respective  dates,  the  Company's  SEC Reports (not  including any exhibits and
schedules  thereto and  documents  incorporated  by  reference  therein) did 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 light of the  circumstances  under which they were made, not misleading.  The
audited financial  statements and unaudited interim financial  statements of the
Company  included in the  Company's  SEC Reports or  incorporated  by  reference
therein  were  prepared  in  accordance  with  generally   accepted   accounting
principles   ("GAAP")  (subject,   in  the  case  of  such  unaudited  financial
statements,  to the absence of complete footnotes) applied on a consistent basis
(except as indicated  therein or in the notes thereto) and fairly present in all
material respects the financial position of the Company at the dates thereof and
the results of its operations and cash flows for the periods then ended (subject
in the case of the unaudited  interim financial  statements,  to normal year-end
audit adjustments).

         SECTION 3.05. ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 1998,
there has been no change in the assets,  liabilities,  condition  (financial  or
otherwise),  operating  results,  business or prospects of the Company from that
reflected in the Company's SEC Reports, except changes in the ordinary course of
business  that  have not  been,  individually  or in the  aggregate,  materially
adverse to the assets, properties, condition (financial or otherwise), operating
results,  business or  prospects of the Company.  Since  December 31, 1998,  the
Company has not (i)  directly  or  indirectly  declared or paid any  dividend or
ordered or made any other  distribution on account of any shares of any class of
the  capital  stock  of the  Company,  (ii)  directly  or  indirectly  redeemed,
purchased or otherwise  acquired any such shares or agreed to do so or set aside
any sum or property for any such  purpose,  (iii) made any capital  expenditures
exceeding $100,000, or (iv) incurred any indebtedness exceeding $100,000.

         SECTION 3.06. COMPLIANCE WITH OTHER INSTRUMENTS.  The Company is not in
violation or default of any provision of its  Certificate  of  Incorporation  or
By-Laws or of any material mortgage, indenture, contract, agreement, instrument,
judgment or decree to which the Company is a party or by which it is bound.  The
execution,  delivery and  performance  by the Company of this  Agreement and the
consummation  of the  transactions  contemplated  hereby  will not result in any
violation of or conflict  with the Company's  Certificate  of  Incorporation

                                       7
<PAGE>


or  By-Laws,  and will not  result in any  violation  of or  conflict  with,  or
constitute  a  default  under,  any  material  mortgage,  indenture,   contract,
agreement,  instrument, judgment or decree to which the Company is a party or by
which it is bound or in the creation of any  material  mortgage,  pledge,  Lien,
encumbrance or charge upon any of the properties or assets of the Company.

         SECTION 3.07.   REGISTRATION  RIGHTS.  Except as set forth in  SCHEDULE
3.07 hereto, and the provisions of Article VII of this Agreement, the Company is
not under any contractual obligation to register under the Securities Act any of
its  currently  outstanding  securities  or  any  of its  securities  which  may
hereafter be issued.

          SECTION 3.08.  GOVERNMENTAL   CONSENT.   No   consent,   approval   or
authorization of or  registration,  qualification,  designation,  declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution,  delivery and performance of this Agreement
or the offer,  sale or issuance of the Shares and the  Conversion  Shares or the
consummation of any other transaction  contemplated  hereby,  except for filings
that may be  required  to comply with  applicable  federal and state  securities
laws.

          SECTION 3.09.  OFFERING.    Subject   to   the    accuracy    of   the
representations of the Purchasers in Article IV, the offer, sale and issuance of
the Shares as contemplated by this Agreement will constitute transactions exempt
from the registration requirements of Section 5 of the Securities Act.

          SECTION 3.10.  SUBSIDIARIES.  The Company has no subsidiaries and does
not otherwise own or control, directly or indirectly, any equity interest in any
corporation,  association,  partnership or business entity,  nor has the Company
made any commitment or subscribed for the purchase of any such equity interest.

          SECTION 3.11.  ABSENCE OF  UNDISCLOSED  LIABILITIES.  The Company does
not have any  liability  or  obligation,  absolute  or  contingent,  that is not
reflected in the  financial  statements  included in the  Company's SEC Reports,
other than  obligations  and  liabilities  which  taken  individually  or in the
aggregate  would not have a material  adverse  effect on the  Company's  assets,
liabilities,  condition (financial or otherwise), operating results, business or
prospects.

          SECTION 3.12.  TAXES.  The  Company  has  filed  all tax  returns  and
reports  required by law to be filed,  and has paid all taxes,  assessments  and
other  governmental  charges that are due and payable,  except for those matters
reasonably being contested by the Company and those matters which,  individually
and in the aggregate,  would not have a material adverse effect on the Company's
assets,  liabilities,  condition  (financial or otherwise),  operating  results,
business or  prospects.  The charges,  accruals and reserves on the books of the
Company in respect of taxes are  considered  adequate  by the  Company,  and the
Company knows of no assessment for additional taxes or any basis therefor.

         SECTION 3.13.   TITLE  TO  PROPERTIES:  LIENS  AND  ENCUMBRANCES.   The
Company has good title to all properties and assets which it owns or purports to
own, both real and personal,  tangible and intangible,  reflected on the balance
sheet included in the financial statements

                                       8
<PAGE>


included in the Company's SEC Reports or acquired after the date thereof (except
inventory  or other  personal  property  disposed of in the  ordinary  course of
business subsequent to the date thereof), and such properties and assets are not
subject to any mortgage, pledge, Lien, security interest,  encumbrance or charge
other than (i) Liens for current  taxes not yet due and payable,  (ii) Liens and
encumbrances  that do not  materially  detract  from the  value of the  property
subject  thereto or materially  impair the  operations of the Company,  or (iii)
Liens securing obligations reflected in such financial statements.  With respect
to properties or assets it leases, the Company is in compliance with such leases
(except for such  defaults or  breaches  that would not have a material  adverse
affect on the Company) and holds valid  leasehold  interests  free of any Liens,
claims or  encumbrances  except for those  described in subsections  (i) through
(iii) hereof.

         SECTION 3.14.  LITIGATION,   ETC.   There   are  no   actions,   suits,
proceedings  or  investigations  (i)  pending  or, to the  Company's  knowledge,
threatened against the Company or which otherwise involve the Company's business
or operations, or (ii) to the Company's knowledge, pending or threatened against
any of its officers,  directors or principal stockholders in their capacities as
officers, directors or stockholders.

          SECTION 3.15. EMPLOYEES.  To the Company's  knowledge,  no employee of
the Company is in violation of any term of any employment  contract or any other
contract  or  agreement  between  such  employee  and the  Company.  None of the
employees  of the Company is  represented  by any labor  union,  and there is no
strike or other labor  dispute  pending  or, to the  knowledge  of the  Company,
threatened, with respect to the Company.

         SECTION 3.16.  COMPLIANCE  WITH LAW.  The  Company  is  conducting  its
business and operations in material  compliance with all governmental  rules and
regulations  applicable thereto,  including without limitation those relating to
occupational safety, environmental,  health and employment practices, and is not
in  violation  or  default  in any  material  respect  under any  statute,  law,
ordinance,  rule,  regulation,   judgment,  order,  decree,  concession,  grant,
franchise, license or other governmental authorization or approval applicable to
it or any of its properties.

         SECTION 3.17.  PERMITS. The Company has all permits,  licenses,  orders
and approvals of any federal, state, local or foreign governmental or regulatory
body  (collectively,  the  "Permits")  that are  material to or necessary in the
conduct of its business as now conducted; all such Permits are in full force and
effect; no violations have been recorded in respect of any such Permits;  and no
proceeding is pending or, to the knowledge of the Company,  threatened to revoke
or limit any such Permits.

          SECTION 3.18. BROKERS OR FINDERS.  The Company  has not  retained  any
investment  banker,  broker  or  finder  in  connection  with  the  transactions
contemplated by this Agreement, and there are no brokerage commissions, finder's
fees or similar items of compensation  payable in connection  therewith based on
any arrangement or agreement made by or on behalf of the Company.

                                       9
<PAGE>


          SECTION 3.19. DISCLOSURE.  This  Agreement,  including  the  schedules
hereto,  was  prepared  in good faith by the  Company  and does not  contain any
untrue  statement of a material fact or omit a material  fact  necessary to make
the statements therein not misleading.

         SECTION 3.20.  INTELLECTUAL PROPERTY. The Company owns or possesses the
requisite  licenses or rights to all trademarks,  service marks,  service names,
trade  names,  patents  and patent  applications,  copyrights  and other  rights
(collectively the  "Intangibles")  described as owned or licensed by the Company
in the SEC  Reports.  There is no claim,  action  or  proceeding  by any  person
pending  or,  to  the  Company's  knowledge,  threatened  which  pertains  to or
challenges the validity,  enforceability  or exclusive right of the Company with
respect to any Intangibles used in the conduct of the Company's  business except
as described in the SEC  Reports.  To the  Company's  knowledge,  the  Company's
current products, services and processes do not infringe on any Intangibles held
by any third party.  Except as set forth in the agreements  disclosed in the SEC
Reports, the Company is not under any obligation to pay royalties or fees of any
kind  whatsoever to any third party with respect to technology it has developed,
uses, employs or intends to use or employ.

         SECTION 3.21.  MATERIAL CONTRACTS. All contracts, agreements (including
license   agreements  and  any  other  agreements   relative  to  the  Company's
technology),  leases  or  other  commitments,   written  or  oral,  absolute  or
contingent,  to which  the  Company  is a party  are  filed or  incorporated  by
reference as exhibits to the  Company's  SEC Reports,  other than (i)  contracts
entered into in the ordinary  course of business,  requiring the  expenditure by
the  Company or the  payment to the  Company of no more than  $100,000  and (ii)
contracts  terminable  by the  Company on no more than 30 days'  notice  without
material  cost  or  liability  to  the  Company.  Each  such  material  contract
(including,  without  limitation,  contracts between the Company and each of (i)
the University of Florida Research Foundation, (ii) Warner-Lambert Co. and (iii)
Raymond Bergeron) is valid and in full force and effect, and no event of default
(or event or circumstance  which, with the lapse of time or giving of notice, or
both,  would  constitute  an event of default)  exists  under any such  material
contract.  The Company is not in breach of any of the material provisions of any
such material  contract and, to the Company's  knowledge,  no other party to any
such material contract is in breach of any of the material provisions thereof.

         SECTION 3.22.  INTERESTED  PARTY  TRANSACTIONS.  The  Company  is not a
guarantor  or  indemnitor  of any  indebtedness  of any  other  person,  firm or
corporation.  Except as set  forth in  SCHEDULE  3.22  hereto,  no  stockholder,
executive officer or director of the Company, nor any immediate family member of
such person, is a party to any transaction with the Company which is or would be
required  to  disclose  in the  Company's  SEC  Reports  pursuant to Item 404 of
Regulation  S-K of the rules and  regulations  under the  Securities Act and the
Exchange Act.

         SECTION 3.23.  BOOKS  AND  RECORDS.  The  minute  books of the  Company
reflect,  in all material respects,  all meetings and other corporate actions of
the  stockholders  and Board of Directors  (and any  committees  thereof) of the
Company.

                                       10
<PAGE>


         SECTION 3.24.  ERISA. Each employee benefit plan (within the meaning of
Section 3(3) the Employment  Retirement  Income Security Act of 1974, as amended
("ERISA"))  which is subject to ERISA and/or the Internal  Revenue Code of 1986,
as amended (the "Code") conforms to, and its operation and administration are in
compliance  with,  all  applicable  requirements  of ERISA  and/or the Code,  as
applicable.  There are no actions,  suits or claims  pending (other than routine
claims for  benefits) or  threatened  against any  employee  plan or against the
assets of any employee plan. Each "Employee Welfare Benefit Plan" (as defined in
Section 3(1) of ERISA)  covering  any present or former  employee of the Company
subject to the  requirements  of COBRA has complied  with all  requirements  for
continuation coverage under group health benefit plans under COBRA and there are
no claims  against the  Company for a failure or alleged  failure to comply with
the  COBRA  continuation  requirements.  The  Company  does not and has not ever
contributed to a "multiemployer plan" (as defined in Section 3(37) of ERISA) and
no  amount  is  due  or  owing  on   account   of  any   withdrawal   therefrom.
Notwithstanding  anything  else set forth  herein,  the Company has  incurred no
liability  with  respect  to any  such  plan  under  ERISA  (including,  without
limitation  Title I or Title IV of ERISA,  other than liability for premiums due
to the Pension Benefit Guaranty Corporation),  the Code or other applicable law,
which  has not been  satisfied  in full,  and no event has  occurred,  and there
exists no condition or set of circumstances which could result in the imposition
of any liability under ERISA (including,  without limitation Title I or Title IV
of ERISA), the Code or other applicable law with respect to any such plan.

         SECTION. 3.25  ENVIRONMENTAL LAWS.

                  (a)   The  Company  is in  compliance  with  all  limitations,
restrictions,  conditions, standards, prohibitions,  requirements,  obligations,
schedules and timetables  contained in any Applicable  Environmental Laws, or in
any plan,  order,  decree,  judgment,  notice or demand letter issued,  entered,
promulgated or approved  thereunder.  For purposes of this  Agreement,  the term
"Applicable Environmental Laws" shall mean Comprehensive Environmental Response,
Compensation  and  Liability  Act of 1980,42  U.S.C.  9601 ET. SEQ.  ("CERCLA");
Resource Conservation and Recovery Act of 1976,42 U.S.C. 6901 ET. SEQ. ("RCRA");
Federal Water Pollution Control Act, 33 U.S.C. 1251 ET. SEQ.; and Clean Air Act,
42 U.S.C. 7401 ET. SEQ. and any similar  provisions of state or local law in any
jurisdictions  where  the  properties  of  the  Company  are  located,  and  the
regulations  thereunder,  and any  other  local,  state and or  federal  laws or
regulations, whether currently in existence or hereafter enacted that govern.

                  (b)   The  Company  is not  aware  of,  nor  has  the  Company
received   notice  of,  any  past   present   or  future   events,   conditions,
circumstances,  activities,  practices,  incidents,  actions or plans  which may
interfere with or prevent  continued  compliance,  or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim, action,
suit,  proceeding,  hearing  or  investigation,  based  on  or  related  to  the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport or handling, or the emission, discharge, release or threatened release
into the  environment,  of any  pollutant,  contaminant,  or  hazardous or toxic
material or waste.

                                       11
<PAGE>


                  (c)   No Hazardous Material has been incorporated in, used on,
stored on or under,  released  from,  treated  on,  transported  to or from,  or
disposed of on or from any  property  owned or leased by the Company  such that,
under  Applicable  Environmental  Laws (i) any such Hazardous  Material would be
required to be removed,  cleaned-up or remediated  before the property  could be
altered,  renovated,  demolished or transferred,  or (ii) the owner or lessee of
the  property  could be subjected  to  liability  for the  removal,  clean-up or
remediation  of such  Hazardous  Material;  and the Company has not received any
notification  from any  Governmental  Bodies or other third parties  relating to
Hazardous  Material on or affecting any property  owned or leased by the Company
or relating to any potential or known liability under  Applicable  Environmental
Laws arising from the ownership or leasing of any property. For purposes of this
Agreement, "Hazardous Material" shall mean any substance which as of the date of
this  Agreement  shall be  identified  as  "hazardous"  or "toxic" or  otherwise
regulated  under CERCLA or RCRA or which has been or shall be  determined at any
tine  by any  agency  or  court  to be a  hazardous  or  toxic  substance  under
Applicable  Environmental Law. The term "Hazardous Material" shall also include,
without  limitation,  raw materials,  building  components,  the products of any
manufacturing  or other  activities on the properties,  wastes,  petroleum,  and
source,  special nuclear or by-product  material as defined by the Atomic Energy
Act of 1954,42 U.S.C. ss.ss. 3011 ET. seq., as amended.


                                   ARTICLE IV

                    PURCHASER REPRESENTATIONS AND WARRANTIES

         SECTION 4.01   REPRESENTATIONS  AND WARRANTIES OF THE PURCHASERS.  Each
Purchaser represents and warrants to the Company as follows:

         (a)  INVESTMENT  INTENT.  Such  Purchaser  is  acquiring  the Shares as
indicated  on Schedule A for its own account for the purpose of  investment  and
not with a view to, or for sale in connection  with, the  distribution  thereof,
and that it has no present intention of distributing or selling such Shares.

         (b)  TRANSFER RESTRICTIONS.  Such Purchaser understands that the Shares
and the Conversion  Shares have not been registered under the Securities Act, or
the securities laws of any state or other jurisdiction, and hereby agrees not to
make any sale,  transfer or other  disposition of the same in the absence of (i)
an  effective   registration   statement  covering  such  securities  under  the
Securities  Act and  any  securities  laws  of any  applicable  state  or  other
jurisdiction  or  (ii) an  applicable  exemption  from  registration  under  the
Securities Act (including,  without  limitation,  pursuant to Rule 144 under the
Securities Act) and other applicable securities laws.

         (c)  OPPORTUNITY  TO  INVESTIGATE.  Such  Purchaser  (i)  has  had  the
opportunity  to  ask  questions  concerning  the  Company  (including,   without
limitation,  the Company's  prior  financings) and all such questions posed have
been  answered  to such  Purchaser's  satisfaction;  (ii)  has  been  given  the
opportunity  to obtain any additional  information it deems  necessary to verify
the accuracy of any information  obtained concerning the Company;  and (iii) has
such 

                                       12
<PAGE>


knowledge and experience in financial and business  matters that it is able
to  evaluate  the  merits  and risks of  purchasing  the  Shares  and to make an
informed investment decision relating thereto.

         (d)  ACCREDITED INVESTOR. Such Purchaser is an "accredited investor" as
such term is defined in Regulation D under the Securities Act.

         (e)  ORGANIZATION  AND  GOOD  STANDING.  If  such  Purchaser  is not an
individual,  such  Purchaser  is duly  organized,  validly  existing and in good
standing under the laws of the State or country of its formation.

         (f)  POWER AND  AUTHORIZATION.  If such Purchaser is not an individual,
such Purchaser has the power and authority to enter into this Agreement, and the
execution,  delivery and  performance  by such  Purchaser of this Agreement have
been duly  authorized by all necessary  corporate or  partnership  action.  This
Agreement  constitutes  the  valid and  binding  obligation  of such  Purchaser,
enforceable in accordance with its terms,  except as the enforceability  thereof
may be limited by bankruptcy,  insolvency or other laws relating to or affecting
creditors' rights generally and by general equitable principles.

         (g)  BROKERS OR  FINDERS.  There are,  and there will be, no  brokerage
commissions,  finder's  fees or  similar  items of  compensation  payable by the
Company in  connection  with any broker's or finder's  arrangement  or agreement
made by or on behalf of such Purchaser,  and such Purchaser  hereby  indemnifies
the Company against the same.


                                    ARTICLE V

                             CONDITIONS TO CLOSINGS

         SECTION 5.01.  CONDITIONS   TO  THE   PURCHASERS'   OBLIGATIONS.   Each
Purchaser's obligation to purchase and pay for the Securities to be purchased by
it at the Closing is subject to the complete  satisfaction by the Company, on or
before such Closing, of the following conditions:

         (a)  OPINION OF COMPANY'S  COUNSEL.  The Purchasers shall have received
from counsel for the Company, an opinion, dated the date of the Closing Date for
each Closing,  an opinion dated the date of such Closing,  in the form set forth
in EXHIBIT B hereto with respect to the Closing.

         (b)  REPRESENTATIONS  AND  WARRANTIES;   OFFICER'S   CERTIFICATE.   The
Company's  representations and warranties contained in Article III shall be true
and  correct on and as of the date of each  Closing  with the same  effect as if
made on and as of the date of such Closing.  All agreements and conditions to be
performed or  satisfied  by the Company  hereunder on or before the date of such
Closing  shall have been duly  performed or  satisfied.  The Company  shall have
delivered to the  Purchasers a  certificate,  dated the date of each Closing and
signed by the President of the Company, to such effect.

                                       13
<PAGE>


         (c)  CONSENTS AND  APPROVALS.  The Company shall have  delivered to the
Purchasers  a  certificate,  dated  the  date  of  Initial  Closing  and for any
Subsequent Closing, dated as of the Subsequent Closing,  signed by the President
of the  Company,  listing  any  consents,  waivers,  approvals,  authorizations,
registrations, filings and notifications (including, without limitation those of
the character  referred to in Section 3.08) which are necessary,  to which shall
be attached  evidence,  satisfactory to the Purchasers,  that the same have been
obtained or made and are in full force and effect,  including the consent of the
two-thirds of the holders of Series A Redeemable Convertible Preferred Stock.

         (d)  CHARTER OF THE COMPANY.  The Purchasers shall have received a copy
of the Company's Certificate of Incorporation thereof,  certified as of a recent
date by the Delaware Secretary of State.

         (e)  CLOSING   DOCUMENTS.   The  Purchasers  shall  have  received  (i)
certificates  representing the Shares registered in the names of the Purchasers,
(ii) such  certificates as to the good standing of the Company and  certificates
of officers of the Company as counsel to the Purchasers may reasonably request.

         (f)  SUFFICIENCY OF PROCEEDS.  The  Purchasers  shall be satisfied that
the net proceeds  from the issuance and sale of the Shares will be sufficient to
fund the  Company's  operations  for a period of not less than  three (3) months
following the Closing.

         (g)  PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
all documents  incident to the  transactions  contemplated by this Agreement and
the other  agreements  contemplated  hereby  shall be  satisfactory  in form and
substance  to the  Purchasers  and their  counsel,  and the  Purchasers  and the
counsel  shall  have  received  copies of all  documents  and  records  relating
thereto.  In addition,  all financial,  legal and other due diligence shall have
been completed to the reasonable satisfaction of the Purchasers.

         (h)  OTHER PURCHASERS. Each other Purchaser purchasing more than 10,000
Preferred Shares shall have tendered the purchase price and accepted delivery of
the Shares to be issued to them at the Closing as set forth in SCHEDULE A.

         (i)  PAYMENT OF FEES AND  DISBURSEMENTS OF PURCHASERS.  The costs, fees
and expenses of counsel to the Purchasers  identified in Section 9.14 shall have
been paid in full.

         (j)  BOARD OF  DIRECTORS.  Upon the  Closing,  the  Company  shall have
caused  to be  appointed  or  elected  to the  Company's  Board of  Directors  a
designated representative of the holders of the Series B Preferred Stock.

         SECTION 5.02.  CONDITIONS TO THE COMPANY'S  OBLIGATIONS.  The Company's
obligation to issue the  Securities to the  Purchasers at the Closing is subject
to the satisfaction of the following conditions:

         (a)  REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each Purchaser contained in Article IV shall be true, correct and complete in
all material respects 

                                       14
<PAGE>


on and as of the date of the  Closing  with the same force and effect as if they
had been made on and as of the date of the Closing.

         (b)  PAYMENT OF PURCHASE PRICE.  Each Purchaser shall have delivered to
the  Company  and the Company  shall have  received  payment in full of the cash
portion  of the  purchase  price  relating  to the  number of  Securities  to be
purchased by such Purchaser at the Closing.

         (d)  PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
all documents  incident to the  transactions  contemplated by this Agreement and
the other  agreements  contemplated  hereby  shall be  satisfactory  in form and
substance to the Company and its counsel,  and the Company and its counsel shall
have received copies of all documents and records relating thereto.

                                       15

<PAGE>


                                   ARTICLE VI

                            COVENANTS OF THE COMPANY

         SECTION 6.01    AFFIRMATIVE COVENANTS. The Company covenants and agrees
that,  from the date of the Closing and  thereafter  so long as Fifteen  Percent
(15%)  of  the  number  of  Preferred  Shares  originally  issued  shall  remain
outstanding,  it shall,  unless it has  received  the prior  written  consent or
written waiver of at least 66-2/3% of the holders of such outstanding  Preferred
Shares,  perform and observe the following  covenants and provisions,  and shall
cause each  Subsidiary,  if and when such  Subsidiary  exists,  to  perform  and
observe the following covenants and provisions as applicable to such Subsidiary:

         (a)  FINANCIAL   STATEMENTS;   OTHER  REPORTS.  The  Company  and  each
Subsidiary  will maintain proper books of account and records in accordance with
GAAP applied on a consistent  basis, and will deliver to each holder of Series B
Preferred Stock (or Affiliate transferee thereof) owning at least fifty thousand
Preferred Shares (each, a "Rights Holder"):

              (i)    as soon as  available  and in any event  within  forty-five
         (45) days  after the end of each of the first  three  quarters  of each
         fiscal year of the Company, a copy of the Company's quarterly Report on
         Form 10-Q or Form 10-QSB, prepared in accordance with GAAP consistently
         applied (subject to year-end audit adjustments),  and duly certified by
         the Chief Financial Officer of the Company;

              (ii)   as soon as available  and in any event  within  ninety (90)
         days  after  the end of each  fiscal  year  of the  Company,  a copy of
         Company's  Annual  report  on Form  10-K or Form  10-KSB,  prepared  in
         accordance  with GAAP  consistently  applied,  together with the annual
         audit report for such year by one of the "big six"  independent  public
         accountants of recognized standing;

              (iii)  promptly after  sending,  making  available,  or filing the
         same, such other reports and financial  statements as the Company shall
         send or make available to the stockholders of the Company; and

              (iv)   in the event that the Company  ceases to become  subject to
         the  provisions of Section 13 or 15(d) of the Exchange Act, all reports
         and other  documents  that would be required to be filed by the Company
         under the  Securities Act and the Exchange Act if the Company were then
         subject to the  provisions  of Section 13 or 15(d) of the Exchange Act,
         at the times and in the manner that such reports and documents would be
         required to be so filed.

         Neither the foregoing  provisions of this Section 6.01(a) nor any other
provision  of this  Agreement  shall  be in  limitation  of any  rights  which a
Purchaser  may have with respect to the books and records of the Company and its
Subsidiaries,  or to inspect their properties or discuss their affairs, finances
and  accounts,   under  the  laws  of  the   jurisdictions  in  which  they  are
incorporated.

                                       16
<PAGE>


         (b)  BOARD OBSERVATION; INSPECTION. Each Rights Holder and such agents,
advisors and counsel as such Rights Holder may  designate,  may, at its expense,
(i) attend and observe  each meeting  (whether  physical or  telephonic)  of the
Company's Board of Directors or any committee thereof (and with respect to which
the Company  covenants and agrees to provide each Rights Holder with  reasonable
advance  notice) or (ii) visit and inspect any of the  properties of the Company
and each  Subsidiary,  examine  the books of  account  of the  Company  and each
Subsidiary,  take  extracts  therefrom  and discuss the  affairs,  finances  and
accounts of the Company and each  Subsidiary with its officers and employees and
public accountants (and by this provision the Company and each Subsidiary hereby
authorizes said  accountants to discuss with such Rights Holder and such persons
its finances and accounts), at reasonable times and with reasonable prior notice
during normal business hours. All such visits and inspections shall be conducted
in a manner  which will not  unreasonably  interfere  with the  normal  business
operations of the Company and each Subsidiary.

         (c)  PRESERVATION  OF  CORPORATE   EXISTENCE.   The  Company  and  each
Subsidiary  will  preserve  and  maintain  its  corporate   existence,   rights,
franchises and privileges in the jurisdiction of its incorporation,  and qualify
and remain  qualified,  as a foreign  corporation in each  jurisdiction in which
such  qualification  is  necessary  or  desirable  in view of its  business  and
operations or the ownership of its  properties.  The Company and each Subsidiary
shall  preserve  and  maintain  all  licenses  and other  rights to use patents,
processes, licenses,  trademarks, trade names, inventions,  copyrights and other
Intangibles  owned  or  possessed  by it and  necessary  to the  conduct  of its
business.

         (d)  COMPLIANCE  WITH LAWS. The Company will comply,  and cause each of
its  Subsidiaries to comply,  with all applicable laws,  rules,  regulations and
orders of any governmental authority,  noncompliance with which could materially
adversely affect its business or condition, financial or otherwise.

         (e)  BOARD  OF  DIRECTORS.  The  Company  shall at all  times  maintain
provisions  in its By-laws or  certificate  of  incorporation  indemnifying  all
directors against liability and providing for the advancement of expenses to the
maximum  extent   permitted   under  the  laws  of  the   jurisdiction   of  its
incorporation.

         (f)  AVAILABILITY  OF COMMON  STOCK.  The Company  shall,  from time to
time, in accordance with the laws of the state of its incorporation increase the
authorized  amount of Common Stock if at any time the number of shares of Common
Stock  remaining  unissued and available for issuance shall be  insufficient  to
permit the conversion of all the then outstanding Preferred Shares.

         (g)  USE OF PROCEEDS.  The Company  shall use the net proceeds from the
issuance and sale of the Shares  solely to fund ordinary  operating  expenses of
the Company.

         (h)  CERTAIN PATENT MATTERS. The Company represents that certain of its
intellectual  property is licensed to it by the  University of Florida  Research
Foundation (the "UFRF"). The Company agrees to comply with its royalty and other
contractual  obligations  

                                       17
<PAGE>


to UFRF in order to maintain its rights to the intellectual property licensed by
UFRF, in each case to the extent it is  commercially  reasonable for the Company
to do so.

         (i)  INDEMNIFICATION. The Company shall indemnify, defend and hold each
Purchaser and its officers,  directors,  partners, employees and agents and each
other  Person which  controls  (within the meaning of the  Securities  Act) such
Purchaser or any of its partners harmless against all liability, loss or damage,
together with all reasonable costs and expenses related thereto (including legal
and accounting fees and expenses),  arising from, relating to, or connected with
(i) the untruth,  inaccuracy  or breach of any  representations,  warranties  or
covenants  contained  herein  or (ii) the  use,  generation,  storage,  release,
threatened release,  discharge,  disposal or presence of Hazardous Materials (as
defined below) on, under or about any properties  owned or leased by the Company
by any Person  during the period  that the  Company  was the legal or  equitable
owner of any  properties  owned or leased by the Company or which occurred prior
to such time and was otherwise  actually known by, or should have been known by,
the Company.  The  obligation of the Company to indemnify each Purchaser and its
officers, directors,  partners, employees and agents and each other Person which
controls (within the meaning of the Securities Act) such Purchaser or any of its
partners shall specifically cover and include, without limitation, all fines and
penalties imposed by federal,  state or local authorities,  costs of removing or
neutralizing  the  Hazardous  Materials,  injury to the property  adjoining  any
properties  owned or leased by the Company,  injury to persons living or working
on or about any  properties  owned or  leased by the  Company  or  adjoining  or
otherwise  affecting property,  and all other indirect or consequential  damages
incurred by each Purchaser and its officers, directors,  partners, employees and
agents  and  each  other  Person  which  controls  (within  the  meaning  of the
Securities Act) such Purchaser or any of its partners.

         SECTION 6.02    CERTAIN NEGATIVE COVENANTS.  Without limiting any other
covenants or provisions  hereof,  the Company  covenants and agrees that it will
comply with and observe the following  negative  covenants and  provisions,  and
will cause each  Subsidiary  to comply  with and observe  such of the  following
covenants and provisions as are applicable to such Subsidiary,  if and when such
Subsidiary exists, and will not without the written consent or written waiver of
the holders of at least 66-2/3% of the holders of the Series B Preferred  Stock,
do any of the actions set forth in the  following  covenants  and  provisions so
long as any Series B Preferred Stock remains outstanding:

         (a)  NO   AVOIDANCE.   The  Company  will  not,  by  amendment  of  its
Certificate   of   Incorporation   or   through   any   consolidation,   merger,
reorganization,  transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the  terms  of  this  Agreement  or the  certificates  evidencing  the
issuance of the  Conversion  Shares.  Without  limiting  the  generality  of the
foregoing,  the Company (i) will not permit the par value or the  determined  or
stated value of any shares of the  Company's  Common Stock  receivable  upon the
conversion of the Preferred  Shares to exceed the amount  payable  therefor upon
such exercise, (ii) will take all such action as may be necessary or appropriate
in  order  that the  Company  may  validly  and  legally  issue  fully  paid and
non-assessable  shares of the Company's Common Stock, upon the conversion of the
Preferred Shares 

                                       18
<PAGE>


from time to time  outstanding,  including,  without  limitation,  amending  its
Certificate of  Incorporation to reduce or eliminate the par value of the Common
Stock and (iii) will not take any action which  results in an  adjustment in the
number of  Conversion  Shares  obtainable  upon the  conversion of the Preferred
Shares if the total  number of shares of the  Company's  Common  Stock (or other
securities) issuable after such action upon the exercise or conversion of all of
the then-outstanding Preferred Shares would exceed the total number of shares of
the  Company's  Common  Stock  (or  other  securities)  then  authorized  by the
Company's  Certificate  of  Incorporation  and available for purpose of issuance
upon such exercise.

         (b)  PROTECTIVE PROVISIONS.  The Company shall not engage in any of the
actions specified in Section 5 of the Series B Certificate of Designation.

         (c)  TRANSACTIONS  WITH  RELATED  PARTIES.  Other than in the  ordinary
course of business of the Company,  neither the Company nor any Subsidiary  will
engage in any transaction  with, or enter into any contract,  agreement or other
arrangement  providing for, the employment of, furnishing of services by, rental
of real or personal  property  from,  or  otherwise  requiring  payments to, any
officer,  employee  or  director  of the  Company or any  Related  Party of such
persons  or  entities  (other  than  pursuant  to the  terms  of  employment  or
consulting arrangements by the Company disclosed in the Company's SEC Reports or
any such  agreements  that hereafter shall be approved by the Company's Board of
Directors).  For  purposes of this  Agreement,  "Related  Party"  shall mean any
individual  who is a director  or officer of the  Company;  any Person who is an
"affiliate"  of the  Company,  as such  term is  defined  in Rule 405  under the
Securities  Act;  any Person that owns five  percent or more of the  outstanding
equity stock of any class of the  Company;  any member of the family (as defined
in Section 267(c)(4) of the Internal Revenue Code) of, or any individual who has
the  same  home as,  any  individual  (or the  spouse  of any  such  individual)
described  above;  and any trust,  estate or  partnership of which an individual
described above is a guarantor, fiduciary, beneficiary or partner.

         (d)  BUSINESS.  The  Company  will  only  engage  in  the  business  of
research,  development and production of pharmaceutical  products and activities
ancillary thereto.

         (e)  CONFLICTING  AGREEMENTS.  The  Company  will  not  enter  into any
agreement  which by its terms might  restrict the  performance  of the Company's
obligations  pursuant to the terms of this Agreement or the provisions  relating
to the  Series  B  Preferred  Stock  included  in the  Series B  Certificate  of
Designation,  including, but not limited to, registration rights and the payment
of dividends on, the redemption,  voting or conversion of the Series B Preferred
Stock.

         (f)  EMPLOYEE  STOCK  AND STOCK  OPTIONS.  The  Company  will not issue
Common Stock or stock  options to its officers,  directors,  employees or others
who render  services to the Company  except for  issuances of stock  options and
issuances of shares of Common Stock upon exercise of such stock  options  which,
in each case, constitute Excluded Shares (as defined in the Series B Certificate
of Designation).

                                       19
<PAGE>


         (g)  NO CHANGES.  Between the date of execution of this  Agreement  and
the  Closing  Date,  and except for the  filing of the Series B  Certificate  of
Designation,  the Company shall not,  without the prior  written  consent of the
Purchasers:  (a) issue any  capital  stock or any  option,  warrant  or right to
acquire capital stock;  (b) organize any Subsidiary;  (c) make any change in its
capital  stock;  (d) declare or pay any dividends or make any  distributions  in
respect of its  capital  stock;  (e) enter into any merger or  consolidation  or
other business  combination,  (f)  repurchase  any stock,  or (g) enter into any
material transaction, agreement, understanding or commitment; provided that, for
purposes of (g) above,  the prior written consent of the Purchasers shall not be
required in the event that the directors  selected by the Purchasers  consent to
such action.

         (h)  ENVIRONMENTAL MATTERS.

                           (i)    The Company shall promptly  advise each holder
of the Series B Preferred  Stock in writing of any pending or threatened  claim,
demand  or  action  by any  governmental  body or third  party  relating  to any
Hazardous  Materials  affecting any properties owned or leased by the Company of
which it has knowledge.  The Company shall not discharge,  place, release, spill
or dispose of any Hazardous  Materials or any other pollutants or effluents upon
any properties owned or leased by the Company or elsewhere  (including,  but not
limited to,  underground  injection of such substances) other than in compliance
with the Applicable  Environmental Laws and the Company shall not discharge into
the air any emission which would require a permit under the Clean Air Act or its
state counterparts or any other Applicable  Environmental Laws. The stockholders
of the Company  shall have no control  over,  or authority  with respect to, the
waste disposal operations of the Company.

                           (ii)   The use of any  property by the  Company,  and
any future development, construction and operation of property purchased, leased
or otherwise acquired by the Company,  shall, in all respects,  comply with, and
are or shall be, lawful,  permitted and conforming uses in all material respects
under  all  applicable  building,  fire,  safety,  subdivision,  zoning,  sewer,
environmental,  securities, health, insurance and other laws, ordinances, rules,
regulations and plan approval  conditions of any  governmental or public body or
authority.

         SECTION 6.03    CERTAIN ADDITIONAL NEGATIVE COVENANTS. Without limiting
any other covenants or provisions  hereof, the Company covenants and agrees that
it will comply with and observe the following negative covenants and provisions,
and will cause each  Subsidiary to comply with and observe such of the following
covenants and provisions as are applicable to such Subsidiary,  if and when such
Subsidiary  exists,  and will not without the written  consent or written waiver
(which consent or waiver shall not be  unreasonably  withheld) of the holders of
at least 66-2/3% of the holders of the Series B Preferred  Stock,  do any of the
actions  set forth in the  following  covenants  and  provisions  so long as any
Series B Preferred Stock remains outstanding:

         (a)  INDEBTEDNESS:   COMMITMENTS.   The  Company  will  not  incur  (a)
Indebtedness in excess of $100,000, or (b) Commitments (defined below) in excess
of $100,000 in the  aggregate.  For  purposes of this  Agreement,  "Commitments"
shall mean all  obligations of the Company and its  Subsidiaries,  contingent or
otherwise,  pursuant to long-term  leases (other 

                                       20
<PAGE>


than  leases  for real  property),  or other  obligations  pursuant  to  similar
agreements  which,  in each case,  are required to be  capitalized in accordance
with GAAP.

         (b)  GUARANTEES.  The Company  will not incur any  guarantee or similar
contingent  obligation  in  respect of the  Indebtedness  of others in excess of
$100,000,  whether  or  not  classified  on the  Company's  balance  sheet  as a
liability.

         (c)  NO ACQUISITIONS. The Company shall not, nor shall it permit any of
its  Subsidiaries  to,  acquire or agree to acquire by merging or  consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets  of, or by any other  manner,  any  business  or any  corporation,
partnership,  association or other business  organization or division thereof or
otherwise  acquire or agree to  acquire,  or permit any of its  Subsidiaries  to
acquire or agree to acquire,  any assets for a purchase price which is in excess
of ten percent (10%) of the Company's net worth.

         (d)  NO DISPOSITIONS. Other than in the ordinary course of business and
other than  dispositions of obsolete assets,  the Company will not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of
or agree to sell, lease, encumber or otherwise dispose of, in any transaction or
series of related transactions,  assets having an aggregate book value in excess
of ten percent (10%) of the Company's net worth.

         SECTION 6.04.

         (a)  TERMINATION OF SECTION 6.03 CERTAIN ADDITIONAL NEGATIVE COVENANTS.
The Company's  obligations  under the provisions set forth in Section 6.03 above
shall  terminate  on the earlier to occur of (i) the second  anniversary  of the
Closing Date or (ii) the date on which the closing price of the Common Shares of
the Company on NASDAQ  (or,  if not then  listed on NASDAQ,  listed on any other
national  securities  market) shall have exceeded  $10.00 per share  (subject to
adjustment) for a period of 60 consecutive days.


                                   ARTICLE VII

                               REGISTRATION RIGHTS
         SECTION 7.01.

         (a)  INCIDENTAL  REGISTRATION.  If the  Company at any time (other than
pursuant to subsection  (b) below))  proposes to register any of its  securities
under the Securities Act for sale to the public,  whether for its own account or
for the  account of other  security  holders  or both  (except  with  respect to
registration  statements  on Forms S-4,  S-8 or any  successor  to such forms or
another form not available for registering  the Registrable  Securities for sale
to the  public),  each such time it will  promptly  give  written  notice to all
holders  of the  Registrable  Securities  of its  intention  so to do.  Upon the
written  request of any such holder,  received by the Company within thirty (30)
days after the giving of any such notice by the Company,  to register any or all
of its  Registrable  Securities,  the Company will use its best efforts to cause
the Registrable 

                                       21
<PAGE>


Securities as to which  registration shall have been so requested to be included
in the  securities to be covered by the  registration  statement  proposed to be
filed by the  Company,  all to the extent  requisite to permit the sale or other
disposition  by the holder (in  accordance  with its  written  request)  of such
Registrable  Securities so registered.  If the registration of which the Company
gives notice is for a registered public offering involving an underwriting,  the
Company shall so advise the holders of  Registrable  Securities as a part of the
written notice given pursuant to this Section  7.01(a).  In such event the right
of any holder of Registrable Securities to registration pursuant to this Section
7.01(a)  shall  be  conditioned   upon  such  holder's   participation  in  such
underwriting  to  the  extent  provided  herein.   All  holders  of  Registrable
Securities  proposing to distribute their securities  through such  underwriting
shall (together with the Company and the Other  Shareholders  (as defined below)
distributing  their  securities   through  such  underwriting)   enter  into  an
underwriting  agreement in customary form with the  underwriter or  underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section  7.01(a),  if the  underwriter  determines  that marketing  factors
require a  limitation  on the number of shares to be  underwritten,  the Company
shall so  advise  all  holders  of  securities  requesting  registration  of any
limitations on the number of shares to be underwritten, and the number of shares
of  securities  that  are  entitled  to be  included  in  the  registration  and
underwriting  shall be allocated (i) first to the Company with respect to shares
of Common  Stock being sold for its own  account;  and (ii) then,  to holders of
Registrable  Securities  and  Other  Shareholders   requesting  registration  in
proportion,  as nearly as practicable,  to the respective  amounts of securities
owned by  them.  Notwithstanding  the  foregoing  provisions,  the  Company  may
withdraw any registration  statement referred to in this Section 7.01(a) without
thereby incurring any liability to the holders of Registrable Securities. If any
holder  of  Registrable   Securities  disapproves  of  the  terms  of  any  such
underwriting,  it may  elect to  withdraw  therefrom  by  written  notice to the
Company and the  underwriter.  Any  Registrable  Securities or other  securities
excluded  or  withdrawn  from such  underwriting  shall be  withdrawn  from such
registration.

         (b)  REGISTRATION ON FORM S-3.

         (i)  In addition to the rights provided in Section 7.01(a),  subject to
              a limit of one (1)  registration  hereunder  in any six (6)  month
              period,  if  at  any  time  (A)  any  holder  or  holders  of  the
              Registrable   Securities   request   that  the   Company   file  a
              registration  statement on Form S-3 or any comparable or successor
              form  thereto  for a public  offering of all or any portion of the
              shares of Registrable Securities held by such requesting holder or
              holders, the reasonably  anticipated aggregate price to the public
              of which  would  exceed  US  $500,000,  and (B) the  Company  is a
              registrant entitled to use Form S-3 or any comparable or successor
              form thereto to register  such shares,  then the Company shall use
              its best efforts to register  under the Securities Act on Form S-3
              or any  comparable or successor  form thereto,  for public sale in
              accordance  with  the  method  of  disposition  specified  in such
              notice, the number of shares of Registrable  Securities  specified
              in such notice.

         (ii) Following  receipt of any notice under this Section  7.01(b),  the
              Company  shall  immediately  notify  all  holders  of  Registrable
              Securities from whom notice has not been received and such holders
              shall then be entitled within thirty (30) days after

                                       22
<PAGE>

               receipt of such notice from the Company to request the Company to
               include in the requested registration all or any portion of their
               shares of Registrable Securities.  The Company shall use its best
               efforts to register under the Securities  Act, for public sale in
               accordance with the method of disposition specified in the notice
               from requesting holders described in paragraph (a) above,  within
               45 days of its  receipt of such  notice,  the number of shares of
               Registrable  Securities  specified  in  such  notice  (and in all
               notices  received by the Company from other holders within thirty
               (30) days  after the  receipt  of such  notice by such  holders).
               Notwithstanding  anything to the contrary  contained  herein,  no
               request  may  be  made  under  this  Section  7.01(b)  after  the
               effective date of a registration  statement  filed by the Company
               covering a firm commitment underwritten public offering and prior
               to the  later  to  occur  of the  completion  of  the  period  of
               distribution  for such  offering  or 90 days after the  effective
               date of such registration statement.

         (iii) If the holders requesting such registration  intend to distribute
               the Registrable  Securities  covered by their request by means of
               an  underwriting,  they shall so advise the  Company as a part of
               their  request  made  pursuant  to this  Section  7.01(b) and the
               Company  shall  include such  information  in the written  notice
               referred to in paragraph  (ii) above.  The right of any holder to
               registration   pursuant  to  this   Section   7.01(b)   shall  be
               conditioned  upon such holder's  agreeing to  participate in such
               underwriting and to permit inclusion of such holder's Registrable
               Securities in the underwriting.  If such method of disposition is
               an  underwritten  public  offering,  the  holders  of at  least a
               majority in interest of the shares of  Registrable  Securities to
               be sold in such offering may  designate the managing  underwriter
               of such offering,  which managing underwriter shall be reasonably
               acceptable to the Company.  A holder may elect to include in such
               underwriting  all or a  part  of the  Registrable  Securities  it
               holds.

         (iv)  A registration  statement  filed pursuant to this Section 7.01(b)
               may, subject to the following  provisions,  include (A) shares of
               Common  Stock for sale by the  Company for its own  account,  (B)
               shares of Common  Stock  held by  officers  or  directors  of the
               Company  and (C) shares of Common  Stock held by persons  who are
               entitled to include such shares in such  registration (the "Other
               Shareholders"),  in each  case  for sale in  accordance  with the
               method  of  disposition  specified  by  the  requesting  holders;
               PROVIDED,  HOWEVER,  that if the  number of  shares  so  included
               pursuant to clauses (A), (B) and (C) above  exceeds the number of
               Registrable   Securities  presented  by  the  holders  requesting
               registration  thereof,  then such registration shall be deemed to
               be a registration  in accordance  with Section  7.01(a).  If such
               registration  shall be underwritten,  the Company,  such officers
               and  directors  and Other  Shareholders  proposing to  distribute
               their  shares  through  such  underwriting  shall  enter  into an
               underwriting  agreement in customary form with the representative
               of the underwriter or underwriters selected for such underwriting
               on terms no less favorable to such  officers,  directors or Other
               Shareholders  than the terms  afforded the holders of Registrable
               Securities.  If and to the extent that the  managing  underwriter
               determines that marketing factors

                                       23

<PAGE>

               require a  limitation  on the number of shares to be  included in
               such  registration,  then the  shares  of  Common  Stock  held by
               officers or directors (other than Registrable  Securities) of the
               Company  or  by  Other   Shareholders   (other  than  Registrable
               Securities)  and shares of Common Stock to be sold by the Company
               for its own account shall be excluded from such  registration  to
               the extent so required by such managing  underwriter,  and unless
               the holders of such shares and the Company have otherwise  agreed
               in writing,  such exclusion  shall be applied first to the shares
               held by the directors and officers and the Other  Shareholders to
               the extent  required  by the  managing  underwriter,  then to the
               shares of Common  Stock of the Company to be included for its own
               account to the extent  required by the managing  underwriter.  If
               the  managing  underwriter   determines  that  marketing  factors
               require a limitation of the number of  Registrable  Securities to
               be  registered  under  this  Section  7.01(a),  then  Registrable
               Securities  shall be excluded in such manner that the  securities
               to be sold shall be allocated  among the selling holders pro rata
               based on their ownership of Registrable Securities.  In any event
               all securities to be sold other than Registrable  Securities will
               be excluded prior to any exclusion of Registrable Securities.  No
               Registrable  Securities or any other  security  excluded from the
               underwriting by reason of the underwriter's  marketing limitation
               shall  be  included  in  such  registration.  If  any  holder  of
               Registrable  Securities,  officer,  director or Other Shareholder
               who has  requested  inclusion  in such  registration  as provided
               above, disapproves of the terms of the underwriting,  such holder
               of securities  may elect to withdraw  therefrom by written notice
               to the Company and the managing  underwriter.  The  securities so
               withdrawn shall also be withdrawn from  registration.  Except for
               registration  statements on Form S-4, S-8 or any comparable  form
               or  successor  thereto,  the  Company  will  not  file  with  the
               Commission any other  registration  statement with respect to its
               Common  Stock,  whether  for its  own  account  or that of  other
               stockholders,   from  the  date  of  receipt  of  a  notice  from
               requesting  holders  pursuant  to  this  Section  4.3  until  the
               completion  of the  period of  distribution  of the  registration
               contemplated thereby or 120 days after the effective date of such
               registration, whichever is later.

         SECTION 7.02. REGISTRATION PROCEDURES. In connection with the Company's
requirement  to  use  its  best  efforts  to  effect  the  registration  of  any
Registrable  Shares under the Securities Act, the Company will, as expeditiously
as possible:

                (a) prepare and file with the  Commission  such  amendments  and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration  statement effective for
the period specified herein and comply with the provisions of the Securities Act
with  respect  to the  disposition  of all  Registrable  Shares  covered by such
registration  statement  in  accordance  with the  sellers'  intended  method of
disposition set forth in such registration statement for such period;

                (b) furnish to each seller of Registrable  Shares such number of
copies of the  registration  statement and each such  amendment  and  supplement
thereto  (in each case  including  all  exhibits)  and the  prospectus  included
therein  (including each preliminary

                                       24

<PAGE>

prospectus)  as such persons  reasonably  may request in order to facilitate the
public  sale or other  disposition  of the  Registrable  Shares  covered by such
registration statement;

                (c) use its best efforts to register or qualify the  Registrable
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Registrable Shares reasonably shall
request,  PROVIDED,  HOWEVER, that the Company shall not for any such purpose be
required to qualify generally to transact  business as a foreign  corporation in
any  jurisdiction  where it is not so qualified or to consent to general service
of process in any such  jurisdiction,  unless the Company is already  subject to
service in such jurisdiction;

                (d) use its best efforts to list the Registrable  Shares covered
by such registration  statement with any securities exchange on which the Common
Stock of the Company is then listed;

                (e) comply with all applicable  rules and regulations  under the
Securities Act and Exchange Act;

                (f) immediately  notify each seller of Registrable  Shares under
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
of which the Company has knowledge as a result of which the prospectus contained
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 light of
the circumstances then existing, and promptly prepare and furnish to such seller
a reasonable  number of copies of a prospectus  supplemented or amended so that,
as thereafter  delivered to the  purchasers  of such  Registrable  Shares,  such
prospectus  shall not include an untrue  statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein not misleading in light of the circumstances then existing;

                (g) make  available for inspection by each seller of Registrable
Shares,  and any  attorney,  accountant  or other agent  retained by such seller
reasonable  access to all  financial  and  other  records,  pertinent  corporate
documents and properties of the Company, as such parties may reasonably request,
and cause  the  Company's  officers,  directors  and  employees  to  supply  all
information  reasonably  requested by any such seller,  attorney,  accountant or
agent in connection with such registration statement;

                (h) cooperate with the selling holders of Registrable  Shares to
facilitate  the timely  preparation  and delivery of  certificates  representing
Registrable Shares to be sold, such certificates to be in such denominations and
registered in such names as such holders or the managing underwriter may request
at least two business days prior to any sale of Registrable Shares; and

                (i) permit any holder of Registrable Shares which holder, in the
sole and exclusive judgment,  exercised in good faith, of such holder,  might be
deemed to be a

                                       25

<PAGE>

controlling  person  of  the  Company,  to  participate  in  good  faith  in the
preparation  of such  registration  or  comparable  statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included.

                In connection with each registration  hereunder,  the sellers of
Registrable  Shares  will  furnish to the  Company in writing  such  information
requested  by  the  Company  with  respect  to   themselves   and  the  proposed
distribution  by them as shall be necessary in order to assure  compliance  with
Federal and applicable state securities laws; and such sellers shall provide the
Company with  appropriate  representations  with respect to the accuracy of such
information.

         SECTION 7.03. EXPENSES.   All  expenses   incurred  in  complying  with
Sections 7.01 and 7.02,  including,  without  limitation,  all  registration and
filing  fees,   printing  expenses,   fees  and  disbursements  of  counsel  and
independent  public  accountants for the Company,  fees and expenses  (including
counsel fees) incurred in connection  with  complying  with state  securities or
"blue sky" laws, fees of the National  Association of Securities Dealers,  Inc.,
transfer taxes, fees of transfer agents and registrars,  and reasonable fees and
disbursements  of one counsel  selected by a majority in interest of the sellers
of Registrable Shares, shall be paid by the Company.

         SECTION 7.04. INDEMNIFICATION AND CONTRIBUTION.

                (a) In the  event of a  registration  of any of the  Registrable
Shares under the  Securities  Act pursuant to this Article VII, the Company will
indemnify  and hold harmless each holder of  Registrable  Shares,  its officers,
directors and partners,  and each other person, if any, who controls such holder
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities,  joint or several, to which such holder, officer, director, partner
or controlling  person may become subject under the Securities Act or otherwise,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based  upon (i) any  untrue  statement  or alleged
untrue  statement of any material  fact  contained in any  prospectus,  offering
circular or other document incident to such registration  (including any related
notification,  registration  statement under which such Registrable  Shares were
registered  under the Securities  Act pursuant to Section 7.01, any  preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof),  (ii) any blue sky  application  or  other  document  executed  by the
Company  specifically  for  that  purpose  or  based  upon  written  information
furnished by the Company  filed in any state or other  jurisdiction  in order to
qualify any or all of the  Registrable  Shares under the securities laws thereof
(any  such  application,  document  or  information  herein  called a "Blue  Sky
Application"),  (iii) any  omission  or  alleged  omission  to state in any such
registration statement,  prospectus,  amendment or supplement or in any Blue Sky
Applications  executed or filed by the Company,  a material  fact required to be
stated therein or necessary to make the statements therein not misleading,  (iv)
any violation by the Company or its agents of the  Securities Act or any rule or
regulation promulgated under the Securities Act applicable to the Company or its
agents and relating to action or inaction  required of the Company in connection
with  such  registration,  or

                                       26

<PAGE>

(v) any failure to register or qualify the Registrable Shares in any state where
the Company or its agents has affirmatively undertaken or agreed in writing that
the Company will undertake such registration or qualification  (provided that in
such instance the Company shall not be so liable if it has used its best efforts
to so register or qualify the  Registrable  Shares) and will reimburse each such
seller, and such officer, director and partner, and each such 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,
promptly after being so incurred,  PROVIDED,  HOWEVER, that the Company will not
be liable  in any such  case if and to the  extent  that any such  loss,  claim,
damage  or  liability  arises  out of or is based  upon an untrue  statement  or
alleged untrue  statement or omission or alleged  omission so made in conformity
with written  information  furnished by any such holder or any such  controlling
person  in  writing  specifically  for use in  such  registration  statement  or
prospectus.

                (b) In the  event of a  registration  of any of the  Registrable
Shares under the  Securities  Act  pursuant to this Article VII,  each seller of
such Registrable  Shares thereunder,  severally and not jointly,  will indemnify
and hold  harmless  the Company,  each person,  if any, who controls the Company
within the meaning of the Securities  Act, each officer of the Company who signs
the registration  statement,  each director of the Company, each other seller of
Registrable Shares against all losses, claims, damages or liabilities,  joint or
several,  to which the Company or such  officer,  director  or other  seller may
become subject under the  Securities  Act or otherwise,  insofar as such losses,
claims,  damages or liabilities (or actions in respect  thereof) arise out of or
are based upon any untrue  statement or alleged untrue statement of any material
fact contained in any prospectus offering circular or other document incident to
such registration  (including any related notification,  registration  statement
under which such  Registrable  Shares were  registered  under the Securities Act
pursuant  to  Section  7.01,  any  preliminary  prospectus  or final  prospectus
contained  therein,  or any  amendment or supplement  thereof),  or any Blue Sky
Application  or arise out of or are based upon 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,  and will reimburse the Company and
each such  officer,  director and other  seller for any legal or other  expenses
reasonably  incurred by them in connection with  investigating  or defending any
such loss, claim, damage, liability or action, promptly after being so incurred,
PROVIDED, HOWEVER, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue  statement or alleged untrue statement or omission
or alleged  omission made in reliance upon and in  conformity  with  information
pertaining to such seller, as such,  furnished in writing to the Company by such
seller  specifically for use in such registration  statement or prospectus;  and
PROVIDED, FURTHER, HOWEVER, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage,  liability or expense
which  is  equal  to the  proportion  that  the  public  offering  price  of the
securities  sold by such seller under such  registration  statement bears to the
total public  offering price of all securities sold  thereunder,  but not in any
event  to  exceed  the  proceeds  received  by  such  seller  from  the  sale of
Registrable Shares covered by such registration statement.

                (c) Promptly after receipt by an indemnified  party hereunder of
notice of the  commencement of any action,  such  indemnified  party shall, if a
claim in respect thereof is to

                                       27

<PAGE>

be made against the indemnifying party hereunder,  notify the indemnifying party
in writing thereof,  but the omission so to notify the indemnifying  party shall
not relieve it from any liability  which it may have to such  indemnified  party
other than under this Section and shall only relieve it from any liability which
it may have to such  indemnified  party under this  Section if and to the extent
the indemnifying  party is prejudiced by such omission.  In case any such action
shall  be  brought  against  any  indemnified  party  and it  shall  notify  the
indemnifying party of the commencement  thereof, the indemnifying party shall be
entitled  to  participate  in and,  to the extent it shall  wish,  to assume and
undertake  the defense  thereof with counsel  satisfactory  to such  indemnified
party,  and, after notice from the indemnifying  party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such  indemnified  party under this Section for any
legal expenses  subsequently  incurred by such  indemnified  party in connection
with the defense thereof other than  reasonable  costs of  investigation  and of
liaison with counsel so selected,  PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified  party and the  indemnifying  party
and the  indemnified  party shall have  reasonably  concluded  that there may be
reasonable  defenses  available to it which are different  from or additional to
those  available  to  the  indemnifying  party  or  that  the  interests  of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying  party,  the  indemnified  party  shall  have the right to select a
separate  counsel and to assume such legal defenses and otherwise to participate
in the  defense of such  action,  with the  expenses  and fees of such  separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying  party as incurred.  No  indemnifying  party, in the defense of any
such claim or action,  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 action. Each indemnified party shall furnish such information regarding
itself or the claim in question as an indemnifying  party may reasonably request
in writing and as shall be  reasonably  required in  connection  with defense of
such claim and litigation resulting therefrom.

                (d) In order to provide for just and equitable  contribution  to
joint  liability  under the  Securities  Act in any case in which either (i) the
Company,   any  holder  of  Registrable  Shares  exercising  rights  under  this
Agreement,  or any  controlling  person  of any such  holder,  makes a claim for
indemnification pursuant to this Section but it is judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration  of time to appeal or the denial of the last  right of  appeal)  that
such  indemnification may not be enforced in such case  notwithstanding the fact
that  this  Section  provides  for   indemnification   in  such  case,  or  (ii)
contribution  under  the  Securities  Act  may be  required  on the  part of the
Company, any such selling holder or any such controlling person in circumstances
for which indemnification is provided under this Section; then, and in each such
case,  the  Company and such holder will  contribute  to the  aggregate  losses,
claims,  damages or liabilities to which they may be subject (after contribution
from  others) in such  proportion  so that such  holder is  responsible  for the
portion  represented  by the  percentage  that the public  offering price of its
Registrable  Shares offered by the  registration  statement  bears to the public
offering price of all securities offered by such registration statement, and the
Company is responsible for the

                                       28

<PAGE>

remaining portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder
of Registrable Shares will be required to contribute any amount in excess of the
proceeds  received from the sale of all such  Registrable  Shares  offered by it
pursuant to such registration  statement;  and (B) no person or entity guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities Act) will be entitled to  contribution  from any person or entity who
was not guilty of such fraudulent misrepresentation.

                (e) The  indemnities  and  obligations  provided in this Section
shall survive the transfer of any Registrable Shares by such holder.


                                  ARTICLE VIII

                          LIMITATIONS AND RESTRICTIONS

         SECTION 8.01. RESTRICTIONS  ON  SALES  BY  PURCHASERS.  Each  Purchaser
agrees that until the first anniversary of the Closing  hereunder,  it will not,
nor will it permit any of its  Affiliates  to sell or propose to sell any Shares
purchased at the Closing except as follows:

         (a)      A Purchaser may transfer Shares to any of its Affiliates;

         (b)      A Purchaser may sell its Shares  pursuant to a tender offer or
exchange offer for all outstanding shares of the Company's Common Stock approved
by the Company's Board of Directors;

         (c)      A  Purchaser  may  (i) if  such  Purchaser  is a  partnership,
distribute Shares to the partners of such  partnership,  (ii) transfer Shares to
such Purchaser's  children and/or grandchildren and/or such Purchaser's spouse's
children and/or grandchildren, whether biological or adopted (collectively, such
Purchaser's "descendants"),  (iii) transfer Shares to the trustee or trustees of
a trust revocable solely by such Purchaser,  (iv) transfer Shares to the trustee
or trustees of an  irrevocable  trust the sole  beneficiaries  of which are such
Purchaser, his spouse and/or his descendants,  (v) transfer Shares to a guardian
or  conservator,  or (vi) transfer any such shares in the event of death to such
Purchaser's  heirs  or the  beneficiaries  or the  legal  representative  of his
estate; and

         (d)      A  Purchaser  may sell all or any part of the Shares  owned by
Purchaser  or its  Affiliates  pursuant to the  registration  rights  provisions
contained in Article VII.

                                       29

<PAGE>

                                   ARTICLE IX

                                 MISCELLANEOUS

         SECTION 9.01. NOTICES.  All  notices,  requests,   consents  and  other
communications  hereunder  shall  be in  writing,  shall  be  addressed  to  the
receiving  party's  address set forth below or to such other  address as a party
may  designate by notice  hereunder,  and shall be either (i) delivered by hand,
(ii) made by telecopy or facsimile  transmission  (receipt  confirmed)  or (iii)
sent by international overnight or express courier.


                                       30

<PAGE>

If to the Company:                          SunPharm Corporation
                                            The Veranda, Suite 301
                                            814 Highway AIA
                                            Ponte Vedra Beach, FL 32082
                                            Attn:  President
                                            FAX:  (904) 394-2727

with a copy to:                             Cecilia Bryant, General Counsel
                                            1400 Prudential Drive, Suite 7
                                            Jacksonville, FL  32207
                                            FAX:  (904) 398-5477

If to a Purchaser:                          at its address on Schedule A hereto

with a copy to:                             Mintz Levin Cohn Ferris Glovsky and
                                              Popeo, P.C.
                                            One Financial Center
                                            Boston, MA  02111
                                            Attn:  Lewis J. Geffen, Esq.
                                            FAX:  (617) 542-2241

All notices,  requests,  consents and other  communications  hereunder  shall be
deemed to have been  given  either (i) if by hand,  at the time of the  delivery
thereof to the  receiving  party at the  address of such party set forth  above,
(ii) if made by telecopy or  facsimile  transmission,  at the time that  receipt
thereof has been acknowledged by electronic  confirmation or otherwise, or (iii)
if sent by overnight or express  courier,  on the Business Day following the day
such notice is delivered to the courier service.

         SECTION 9.02. LEGENDS.   Each  Purchaser   acknowledges   that,   until
registered  under the Securities Act and any applicable state securities laws or
transferred  pursuant  to the  provisions  of Rule  144  promulgated  under  the
Securities Act ("Rule 144"), each certificate representing a Share, whether upon
initial  issuance  or upon any  transfer  thereof,  shall bear a legend (and the
Company and its transfer agent shall make a notation on its books of transfer to
such effect),  prominently  stamped or printed  thereon,  in  substantially  the
following form:

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "ACT"),  OR THE SECURITIES  LAWS OF ANY  APPLICABLE  STATE OR
         OTHER JURISDICTION, HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
         WITH A VIEW TO  DISTRIBUTION  OR RESALE  AND MAY NOT BE SOLD,
         MORTGAGED,  PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
         THE  ABSENCE  OF  (1)  AN  EFFECTIVE  REGISTRATION  STATEMENT
         COVERING  SUCH  SECURITIES  UNDER THE ACT AND ANY

                                  31

<PAGE>

         SECURITIES   LAWS   OF  ANY   APPLICABLE   STATE   OR   OTHER
         JURISDICTION,  (2) AN EXEMPTION FROM  REGISTRATION , PURSUANT
         TO RULE 144 UNDER THE ACT OR (3) A  WRITTEN  OPINION  IN FORM
         AND SUBSTANCE  SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
         REGISTRATION   IS  NOT   REQUIRED   PURSUANT  TO  SOME  OTHER
         APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR UNDER
         OTHER APPLICABLE SECURITIES LAWS."

         SECTION 9.03. ENTIRE  AGREEMENT.  This  Agreement  embodies  the entire
agreement  and  understanding  between  the parties  hereto with  respect to the
provisions  hereof  and  supersedes  all prior oral or  written  agreements  and
understandings  relating  to the  provisions  hereof,  and no  other  statement,
representation,  warranty,  covenant or agreement of any kind not  expressly set
forth  in this  Agreement  shall  affect,  or be used to  interpret,  change  or
restrict, the express terms and provisions of this Agreement.

         SECTION 9.04. MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement  executed by
the Company and the holders of not less than a majority of the outstanding, with
the Series B Preferred  Stock and the Common Stock  voting  together as a single
class.

         SECTION 9.05. WAIVERS  AND  CONSENTS.  Except  as  otherwise  expressly
provided  herein,  the terms and provisions of this Agreement may be waived,  or
consent for the departure  therefrom granted,  only by written document executed
by the Company  and the  holders of not less than a majority of the  outstanding
Shares.  No such waiver or consent  shall be deemed to be or shall  constitute a
waiver  or  consent  with  respect  to any  other  terms or  provisions  of this
Agreement,  whether  or not  similar.  Each  such  waiver  or  consent  shall be
effective  only in the  specific  instance  and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

         SECTION 9.06. ASSIGNMENT.   The  rights  and  obligations   under  this
Agreement  may not be assigned by either party hereto  without the prior written
consent of the other party (which consent shall not be  unreasonably  withheld),
except  that a  Purchaser  without  the  consent of the  Company may assign this
Agreement  or  any of its  rights  or  obligations  (i) to an  Affiliate  of the
Purchaser or to an entity with which the Purchaser shall merge or consolidate or
to which the  Purchaser  shall  sell or assign all or  substantially  all of its
assets or (ii) in compliance  with the provisions of Section  4.01(b) or Section
8.01.

         SECTION 9.07. BENEFIT.  All  statements,  representations,  warranties,
covenants  and  agreements  in this  Agreement  shall be binding on the  parties
hereto and shall inure to the benefit of the respective successors and permitted
assigns of each party hereto.  Nothing in this  Agreement  shall be construed to
create any rights or obligations  except among the parties hereto, and no person
or entity  shall be regarded as a  third-party  beneficiary  of this  Agreement,
except for the persons entitled to indemnification pursuant to the provisions of
Article VII.

                                       32

<PAGE>

         SECTION 9.08. GOVERNING   LAW.  This   Agreement  and  the  rights  and
obligations of the parties  hereunder  shall be construed in accordance with and
governed  by the law of the  State of  Delaware,  without  giving  effect to the
conflict of law principles thereof.

         SECTION 9.09. SEVERABILITY.  In the event  that any court of  competent
jurisdiction  shall  determine  that  any  provision,  or any  portion  thereof,
contained in this Agreement  shall be  unenforceable  in any respect,  then such
provision  shall be  deemed  limited  to the  extent  that such  court  deems it
enforceable,  and as so limited  shall  remain in full force and effect.  In the
event that such court shall deem any such provision,  or portion thereof, wholly
unenforceable,  the remaining  provisions of this Agreement  shall  nevertheless
remain in full force and effect.

         SECTION 9.10. INTERPRETATION.  The parties hereto acknowledge and agree
that:  (i) each party and its  counsel  reviewed  and  negotiated  the terms and
provisions of this Agreement and have contributed to its revision; (ii) the rule
of  construction  to the effect that any  ambiguities  are resolved  against the
drafting party shall not be employed in the  interpretation  of this  Agreement;
and (iii) the terms and provisions of this Agreement  shall be construed  fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.

         SECTION 9.11. HEADINGS AND  CAPTIONS.  The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way  modify,  or affect the  meaning or  construction  of any of the
terms or provisions hereof.

         SECTION 9.12. ENFORCEMENT.  Each of the parties hereto acknowledges and
agrees  that the rights  acquired  by each party  hereunder  are unique and that
irreparable  damage would occur in the event that any of the  provisions of this
Agreement to be performed  by the other party were not  performed in  accordance
with their specific terms or were otherwise breached.  Accordingly,  in addition
to any other  remedy to which  the  parties  hereto  are  entitled  at law or in
equity,  each party hereto shall be entitled to an injunction or  injunctions to
prevent breaches of this Agreement by the other party.

         SECTION 9.13. NO WAIVER OF RIGHTS,  POWERS AND REMEDIES.  No failure or
delay by a party  hereto in  exercising  any right,  power or remedy  under this
Agreement, and no course of dealing between the parties hereto, shall operate as
a waiver of any such right,  power or remedy of the party.  No single or partial
exercise of any right,  power or remedy under this  Agreement by a party hereto,
nor any abandonment or discontinuance of steps to enforce any such right,  power
or remedy,  shall preclude such party from any other or further exercise thereof
or the exercise of any other right,  power or remedy hereunder.  The election of
any remedy by a party hereto shall not  constitute a waiver of the right of such
party to pursue other available remedies.  No notice to or demand on a party not
expressly  required under this Agreement  shall entitle the party receiving such
notice or demand to any other or  further  notice or demand in  similar or other
circumstances  or  constitute  a waiver of the rights of the party  giving  such
notice or demand to any other or  further  action in any  circumstances  without
such notice or demand.

                                       33

<PAGE>

         SECTION 9.14. EXPENSES.  Each of the parties  hereto  shall pay its own
fees and  expenses  in  connection  with  this  Agreement  and the  transactions
contemplated  hereby  whether or not the  transactions  contemplated  hereby are
consummated,  except  that (i) the  Company  shall pay the  reasonable  fees and
expenses for one legal counsel for the Purchasers and (ii) in the event that the
Closing does not occur  through no fault of the  Purchasers  after  execution of
this  Agreement,  the  Company  shall  be  responsible  for the  reasonable  and
documented out of pocket expenses of the Purchasers.

         SECTION 9.15  CONFIDENTIALITY. Each of the Purchasers, on the one hand,
and the Company,  on the other hand,  acknowledge and agree that any information
or data it has acquired  from the other,  not  otherwise  properly in the public
domain,  was  received  in  confidence.  Each such party  agrees not to divulge,
communicate or disclose,  or use to the detriment of the disclosing party or for
the  benefit  of any  other  person  or  persons,  or  misuse  in any  way,  any
confidential  information of the disclosing  party concerning the subject matter
hereof;  PROVIDED  that  (i)  the  foregoing  obligation  with  respect  to  the
disclosure and use of such information  shall not apply to any information which
such party can  demonstrate  (A) was at the time of  disclosure to such party or
thereafter,  but  prior to its  disclosure  by such  party to any  third  party,
through no fault of such party,  publicly  available  (other than as a result of
disclosure  by  such  party),  (B)  has  been  disclosed  to  such  party  on  a
non-confidential  basis from a source other than any other party which,  to such
party's  knowledge,  was not prohibited from disclosing such information to such
party by a legal,  contractual,  fiduciary  or  other  obligation,  (C) has been
independently  developed  by the such party  without the  violation of any of my
obligations  under  this  Agreement  or  (D)  is  required  to be  disclosed  by
applicable law (including,  without  limitation,  the federal  securities laws),
rule, regulation or regulatory body (including, without limitation, the National
Association of Insurance  Commissioners) and (ii) such party may, if required by
subpoena or valid legal process, disclose any such information,  but only to the
extent so required and only after using its best efforts to give the other party
or parties  (as the case may be) prior  notice of such  required  disclosure  in
order to afford such party or parties an opportunity to obtain an injunction,  a
protective order or other relief.

         SECTION 9.16. COUNTERPARTS.  This  Agreement  may be executed in one or
more  counterparts,  and by different  parties hereto on separate  counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

               IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this
Agreement  or caused this  Agreement  to be  executed  by their duly  authorized
representatives, as of the date first written above.

                                        SUNPHARM CORPORATION



                                        By:  /s/  STEFAN BORG
                                             -----------------------------------
                                        Name:     Stefan Borg

                                       34

<PAGE>

                                        Title:    President



                 Counterpart Signature Pages Begin on Next Page


                                       35

<PAGE>

                    COUNTERPART SIGNATURE PAGE FOR PURCHASERS

               The  undersigned  hereby agrees to become a party to that certain
Securities Purchase Agreement dated as of March 31, 1999 (the "Agreement") among
SunPharm   Corporation   (the   "Company")  and  others.   From  and  after  the
undersigned's  execution  and  delivery  and the  Company's  acceptance  of this
Counterpart Signature Page, the undersigned shall be a party to the Agreement.


                                        UNI-VEST
                                        ----------------------------------------
                                        Printed Name of Purchaser

                                        ----------------------------------------
                                        Signature of Purchaser

                                        Total Investment Amount: $500,000.00
                                                                 ---------------

                                        Number of shares of Series B Redeemable
                                        Convertible Preferred Stock: 66,667
                                                                    ------------

                                        Aggregate Purchase Price for shares of
                                        Series B Redeemable Convertible
                                        Stock: $4.00
                                               ---------------------------------

                                        Number of shares of Common 
                                        Stock: 183,333
                                               ---------------------------------

                                        Alternative a
                                        -------------
                                        Aggregate Purchase Price
                                        for Shares of Common Stock: 1,273
                                                                    ------------

                                        Alternative B
                                        -------------
                                        Number of 1997 Warrants Surrendered:

                                        ----------------------------------------
                                        By:        Claus Jorgensen
                                                   -----------------------------

                                        Title:     Managing Director
                                                   -----------------------------

                                        Address:   Nyropsgade 17
                                                   -----------------------------

                                                   1602 Copenhagen
                                                   -----------------------------

                                                   Denmark
                                                   -------

                                        Date:  March 31, 1999
                                               ---------------------------------


Agreed and accepted as to
66,667 shares of Series B Redeemable
------ Convertible Preferred Stock
183,333 shares of Common Stock
-------

SUNPHARM CORPORATION

BY:  /s/ STEFAN BORG
  -----------------------------
Title:   President
      -------------------------
Date:    March 31, 1999
      -------------------------

<PAGE>

                                   SCHEDULE A

<TABLE>
<CAPTION>

                           Number of             Number of             Number of       Cash Portion of
                       Preferred Shares        1997 Warrants         Common Shares     Purchase Price
         Purchaser   Purchased At Closing Surrendered At Closing Purchased At Closing  Paid At Closing
         ---------   -------------------- ---------------------- --------------------  ---------------

<S>                        <C>                                        <C>                 <C>      
Uni-Invest                 66,667                                     183,333             $ 500,000
Niopsgade 17
Copenhagen V
DK 1602


TOTAL                      66,667                                     183,333             $ 500,000

</TABLE>