Document:

EXHIBIT 10.1

                          AGREEMENT AND PLAN OF MERGER

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                          AGREEMENT AND PLAN OF MERGER

                          DATED AS OF DECEMBER 23, 2003

                                      AMONG

                           XECHEM INTERNATIONAL, INC.

                            CEPTOR ACQUISITION, INC.

                               CEPTOR CORPORATION

                                       AND

                 THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO

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                                TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----

Article I THE MERGER..........................................................6

     1.1       Merger.........................................................6

     1.2       Filing and Effective Time......................................6

     1.3       Effects of the Merger..........................................7

     1.4       Merger Consideration...........................................7

     1.5       Conversion of Merger Sub Shares................................7

     1.6       Exchange of Certificates; Payment of Merger Consideration......7

     1.7       Contingent Consideration.......................................8

     1.8       Dissenting Shareholders........................................8

     1.9       The Closing....................................................9

Article II REPRESENTATIONS AND WARRANTIES OF PARENT...........................9

     2.1       Corporate Status...............................................9

     2.2       Corporate Power and Authority..................................9

     2.3       Enforceability.................................................9

     2.4       No Violation...................................................9

     2.5       No Commissions................................................10

     2.6       Issuance of Preferred Shares..................................10

     2.7       SEC Documents.................................................10

Article III REPRESENTATIONS AND WARRANTIES OF MERGECO........................10

     3.1       Corporate Status..............................................10

     3.2       Corporate Power and Authority.................................10

     3.3       Enforceability................................................11

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     3.4       No Violation..................................................11

     3.5       No Commissions................................................11

     3.6       Mergeco Capitalization........................................11

     3.7       Business Activity.............................................11

Article IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
          AND THE COMPANY....................................................12

     4.1       Corporate Status..............................................12

     4.2       Corporate Power and Authority.................................12

     4.3       Enforceability................................................12

     4.4       No Violation..................................................12

     4.5       Capitalization................................................13

     4.6       Subsidiaries..................................................13

     4.7       Changes Since July 1, 2003....................................13

     4.8       Liabilities...................................................14

     4.9       Litigation....................................................14

     4.10      Real Estate...................................................14

     4.11      Good Title to and Condition of Assets.........................14

     4.12      Environmental Matters.........................................14

     4.13      Compliance with Laws..........................................14

     4.14      Tax Matters...................................................15

     4.15      ERISA.........................................................15

     4.16      Licenses and Permits..........................................15

     4.17      Intellectual Property.........................................16

     4.18      Contracts.....................................................17

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     4.19      Accuracy of Information Furnished by the Company..............17

     4.20      Authority of Shareholder......................................17

     4.21      No Commissions................................................18

Article V CONDUCT OF BUSINESS PENDING THE CLOSING............................18

     5.1       Conduct of Business Pending the Closing.......................18

     5.2       Investigation of the Company by Parent........................19

     5.3       Audit of Financial Statements.................................19

     5.4       Amendment of Convertible Notes................................20

     5.5       Pre-Clear Merger..............................................20

     5.6       Certificate of Designations...................................20

     5.7       Notification of Certain Matters...............................20

     5.8       Trading in Parent's Common Stock..............................20

Article VI ADDITIONAL AGREEMENTS.............................................20

     6.1       Further Assurances............................................20

     6.2       Confidentiality; Publicity....................................20

     6.3       No Other Discussions..........................................20

     6.4       Post Closing Funding..........................................21

     6.5       Other Agreements..............................................21

     6.6       Release.......................................................21

     6.7       Tax Filings...................................................21

Article VII CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGECO..............22

     7.1       Accuracy of Representations and Warranties and
               Compliance with Obligations...................................22

     7.2       Consents......................................................22

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     7.3       Amount of Indebtedness........................................22

     7.4       Secretary's Certificate.......................................22

     7.5       No Adverse Litigation.........................................22

     7.6       Other Closing Deliveries......................................22

     7.7       Due Diligence.................................................23

     7.8       Shareholder Approval..........................................23

Article VIII CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
          THE SHAREHOLDERS...................................................23

     8.1       Accuracy of Representations and Warranties and
               Compliance with Obligations...................................23

     8.2       No Adverse Litigation.........................................23

     8.3       Secretary's Certificate.......................................23

     8.4       Other Closing Deliveries......................................24

Article IX INDEMNIFICATION...................................................24

     9.1       Indemnification by the Shareholder............................24

     9.2       Indemnification for Shareholder Matters.......................25

     9.3       Indemnification by Parent.....................................25

     9.4       Notice of Claims..............................................26

     9.5       Third Person Claims...........................................27

     9.6       Exclusivity of Indemnification................................27

Article X SECURITIES LAW MATTERS.............................................27

     10.1      Disposition of Parent Securities..............................27

     10.2      Legend........................................................28

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Article XI DEFINITIONS.......................................................28

     11.1      Defined Terms.................................................28

     11.2      Other Definitional Provisions.................................31

Article XII TERMINATION, AMENDMENT AND WAIVER................................31

     12.1      Termination...................................................31

     12.2      Effect of Termination.........................................32

Article XIII GENERAL PROVISIONS..............................................32

     13.1      Notices.......................................................32

     13.2      Entire Agreement..............................................33

     13.3      Expenses......................................................33

     13.4      Amendment; Waiver.............................................33

     13.5      Binding Effect; Assignment....................................33

     13.6      Counterparts..................................................34

     13.7      Interpretation................................................34

     13.8      Governing Law; Interpretation.................................34

     13.9      Arm's Length Negotiations.....................................34

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                          AGREEMENT AND PLAN OF MERGER
                          ----------------------------

     This Agreement and Plan of Merger is entered into the 23rd day of December,
2003,  by  and  among  Xechem   International,   Inc.,  a  Delaware  corporation
("PARENT"); Ceptor Acquisition, Inc., a Delaware corporation, and a wholly owned
subsidiary of Parent  ("MERGECO");  Ceptor Corporation,  a Delaware  corporation
("TARGET" or "COMPANY");  and the  shareholders of the Company,  as set forth on
the  signature  page  hereto  (each  a  "SHAREHOLDER"  and   collectively,   the
"SHAREHOLDERS").  Certain  other  capitalized  terms used  herein are defined in
Article XI or elsewhere throughout this Agreement.

                                    RECITALS
                                    --------

     A.   The  Shareholders  own, and until the Closing (as defined herein) will
own, in excess of 98% of the issued and  outstanding  shares of capital stock of
the Company;

     B.   Upon the terms and subject to the conditions set forth herein,  Parent
desires  to  acquire  all of the shares of  capital  stock of the  Company  (the
"TARGET  SHARES")  in exchange  for shares of Class C Series 7 Preferred  Stock,
$0.00001  par value per share,  of Parent (the  "PREFERRED  STOCK"),  having the
rights and preferences set forth on the Certificate of Designations, Preferences
and Rights attached hereto as EXHIBIT A (the "CERTIFICATE OF DESIGNATIONS");

     C.   Parent and the Company  have  agreed to  accomplish  this  transaction
through a reverse  triangular  merger  whereby  Mergeco will merge with and into
Target, and Target will be the surviving corporation (the "MERGER");

     D.   The   parties   hereto   intend   that  the   merger   qualify   as  a
"reorganization" within the meaning of Section 386(a)(1) of the Code; and

     E.   Each of the Boards of  Directors  of Target,  Parent and Mergeco  have
approved this Agreement,  and prior to the Closing Date, the Shareholders of the
Company will have approved this Agreement.

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:

                                   ARTICLE I
                                   THE MERGER

     1.1  MERGER. Upon and subject to the terms and conditions set forth in this
Agreement and in accordance with the Delaware General  Business  Corporation Law
(the  "DGCL"),  Mergeco  shall be merged  with and into  Target.  Following  the
Merger, Target shall continue to exist as the surviving  corporation  (sometimes
referred to as the "SURVIVING CORPORATION") and the separate corporate existence
of Mergeco shall cease.

     1.2  FILING AND EFFECTIVE  TIME.  At the Closing,  Mergeco and Target shall
file with the  Secretary  of State of the State of  Delaware  a  Certificate  of
Merger,  appropriately  completed and executed in accordance with Section 251 of
the DGCL. The Merger shall become effective upon

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filing of the Certificate of Merger,  in accordance with Section 103 of the DGCL
(the  "EFFECTIVE  TIME," and the date  thereof  hereinafter  referred  to as the
"EFFECTIVE DATE").

     1.3  EFFECTS OF THE MERGER.  The Merger shall have the effects set forth in
Section 251 of the DGCL. In addition:

          (a)  The Certificate of  Incorporation  of Mergeco as in effect at the
Effective  Time  shall be the  certificate  of  incorporation  of the  Surviving
Corporation, until duly amended as provided therein or by applicable law;

          (b)  The bylaws of Mergeco as in effect at the Effective Time shall be
the bylaws of the Surviving Corporation,  until duly amended as provided therein
or by applicable law;

          (c)  The officers of Mergeco  immediately prior to the Merger shall be
the officers of the Surviving Corporation until the earlier of their resignation
or removal or until their respective  successors are duly elected and qualified,
as the case may be; and

          (d)  The  directors of Mergeco shall be the directors of the Surviving
Corporation  until the earlier of their earlier  resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.

     1.4  MERGER CONSIDERATION. At the Effective Time, the Target Shares, issued
and outstanding at and as of the Effective  Time,  other than shares held in the
Company's  treasury,  by virtue of the Merger and without any further  action on
the part of the holder  thereof,  shall be  converted  into (i) an  aggregate of
6,000 shares of Preferred Stock (the "CLOSING  CONSIDERATION")  and (ii) a right
to receive the Contingent  Consideration  (as defined  below).  At the Effective
Time,  each  Target  Share  shall be  converted  into the right to  receive  (i)
0.0018378  shares of Preferred Stock and (ii) a right to receive  0.000000306 of
the amount of the Contingent Consideration.

     1.5  CONVERSION OF MERGER SUB SHARES.  At and as of the Effective  Time, by
virtue of the Merger and without any further action on the part of Parent,  each
share of no par value common stock of Mergeco  issued and  outstanding to Parent
immediately  prior to the  Effective  Time  shall by  virtue  of the  Merger  by
converted into one share of common stock of the Surviving Corporation.

     1.6  EXCHANGE  OF  CERTIFICATES;  PAYMENT OF MERGER  CONSIDERATION.  At the
Closing,  the Shareholders shall surrender to Parent their stock  certificate(s)
representing their Target Shares. Upon receipt of the stock certificates, Parent
shall cancel such stock  certificates  and Parent shall  thereupon issue a stock
certificate  representing  the  Preferred  Shares into which such Target  Shares
previously represented by the surrendered  certificate shall have been converted
at the Effective Time. From and after the Effective Time,  until so surrendered,
the Company stock certificates shall be deemed for all purposes to represent and
evidence  only the right to  receive  the per share  consideration  set forth in
SECTION 1.4, for each share  represented by such  certificates,  and no interest
shall be paid or accrued on such  amount and the holders of such  Company  stock
certificates  shall  cease to have any  rights  as  common  shareholders  of the
Company.

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     1.7  CONTINGENT  CONSIDERATION.  In addition to the Closing  Consideration,
Parent shall issue to the  Shareholders a series of $1,000,000  awards (each, an
"AWARD"),  payable in shares of common stock of Parent,  upon the  occurrence of
one of  following  with  respect  to a  development  drug that is  substantially
derived from the  Company's  patents,  technology  and  compounds (as listed and
described on SCHEDULE 4.17) (each, a "DEVELOPMENT DRUG"):

          (a)  A filing  of a Phase  II  application  within  36  months  of the
Closing Date;

          (b)  A filing  of a Phase  III  application  within  60  months of the
Closing Date; or

          (c)  A NDA filing is made within 72 months of the Closing Date.

Only one Award is payable per  Development  Drug even if such  Development  Drug
satisfies more than one of the  conditions in (a)-(c) above.  Upon a Development
Drug  satisfying  one of the foregoing  conditions for the first time (an "AWARD
EVENT"),  the  Company  shall  within 30 days of such Award  Event  issue to the
Shareholders  an  aggregate  number of shares of common stock of Parent equal to
$1,000,000  divided by Current  Share Value.  The  aggregate  amount paid to the
Shareholders  hereunder with respect to all of the Development Drugs, if any, is
referred to herein as the "CONTINGENT CONSIDERATION".  Each Shareholder shall be
entitled to receive  his,  her,  or its  proportional  amount of the  Contingent
Consideration.  As used herein,  the term  "CURRENT  SHARE VALUE" shall mean the
lower of (i) $.20 and (ii) the average  closing price per share of Parent Common
Stock as reported on the OTC Bulletin  Board (or such other market on which such
share of common  stock are then  listed) for the twenty five (25)  trading  days
immediately  preceding  the  date of such  Award  Event,  subject  to  equitable
adjustment as the parties agree in the event of a stock split, recapitalization,
stock dividend, distribution or reclassification.  An Award Event will be deemed
to have  occurred  pursuant to (a)-(c) if the  research  studies in support of a
Phase II, III or NDA filing have been completed  satisfactorily  and the results
support a  reasonable  conclusion  that a Phase II, III or NDA filing  should be
pursued,  notwithstanding  that the actual filing has not been  submitted to the
FDA for  consideration  within the time applicable period specified in (a) - (c)
hereof.

     1.8  DISSENTING SHAREHOLDERS.

          (a)  Notwithstanding  anything  herein to the  contrary,  any share of
capital  stock of the Company  owned by a  Dissenting  Shareholder  shall not be
converted  into the  right to  receive  the  consideration  hereunder,  but such
Dissenting  Shareholder  shall be entitled to only such payments as are provided
for by the DGCL, which shall be paid by the Surviving Corporation.

          (b)  Notwithstanding   the  provisions  of  SECTION  1.8(a),   if  any
Dissenting  Shareholder shall  effectively  withdraw or lose (through failure to
perfect or otherwise) such  shareholder's  right to receive the payment provided
for by the DGCL for such  shareholder's  shares of capital stock of the Company,
then, as of the Effective Time, such Dissenting  Shareholder's shares of capital
stock of the Company shall  automatically be converted into the right to receive
only such  consideration  as is provided for in 262 of the DGCL,  which shall be
paid by Parent without interest thereon.

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          (c)  Prior to the  Closing  Date,  the  Company  shall give Parent (i)
prompt notice of any written demands by Dissenting Shareholders,  withdrawals of
such demands and any other similar  instruments  served pursuant to the DGCL and
received by the Company and (ii) the opportunity to discuss with the Company any
negotiations  and  proceedings  with respect to such demands and to  participate
with the  Company in such  negotiations  and  proceedings.  Prior to the Closing
Date,  the Company shall not,  except with the prior written  consent of Parent,
voluntarily  make  any  payment  with  respect  to  any  demands  by  Dissenting
Shareholders or settle or offer to settle any such demands

     1.9  THE  CLOSING.  The  Closing of the Merger (the  "CLOSING")  shall take
place as soon as the  conditions set forth in Articles VIII and IX are satisfied
or at such later date as the parties  may agree (the  "CLOSING  DATE"),  at such
place as the parties may agree.

                                   ARTICLE II
                    REPRESENTATIONS AND WARRANTIES OF PARENT

     As a material  inducement to the Company and the Shareholders to enter into
this Agreement and to consummate the transactions  contemplated  hereby,  Parent
makes the  following  representations  and  warranties  to the  Company  and the
Shareholders:

     2.1  CORPORATE  STATUS.  Parent is a corporation  duly  organized,  validly
existing  and in good  standing  under the laws of the State of Delaware and has
full  corporate  power and  authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.

     2.2  CORPORATE  POWER AND  AUTHORITY.  Parent has the  corporate  power and
authority  to execute  and  deliver  this  Agreement  and the  Parent  Ancillary
Documents, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Parent has taken all corporate
action  necessary to authorize its execution and delivery of this  Agreement and
the Parent Ancillary Documents, the performance of its obligations hereunder and
thereunder and the  consummation  of the  transactions  contemplated  hereby and
thereby.  No approval of the stockholders of Parent is required to authorize the
transactions contemplated hereby.

     2.3  ENFORCEABILITY. This Agreement has been duly executed and delivered by
Parent  and  constitutes  a legal,  valid  and  binding  obligation  of  Parent,
enforceable  against Parent in accordance  with its terms and each of the Parent
Ancillary  Documents,  upon  execution and delivery by Parent,  will be a legal,
valid and binding obligation of Parent enforceable in accordance with its terms.

     2.4  NO VIOLATION.  The  execution  and delivery of this  Agreement and the
Parent Ancillary  Documents by Parent,  the performance by it of its obligations
hereunder  and  thereunder  and  the  consummation  by  it of  the  transactions
contemplated by this Agreement and the Parent  Ancillary  Documents will not (i)
contravene any provision of its  Certificate of  incorporation  or bylaws,  (ii)
violate or conflict with any law, statute, ordinance, rule, regulation,  decree,
writ,  injunction,  judgment or order of any  Governmental  Authority  or of any
arbitration  award which is either  applicable  to,  binding upon or enforceable
against Parent, (iii) conflict

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with, result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both,  constitute a default)
under,  or  give  rise  to a right  to  terminate,  amend,  modify,  abandon  or
accelerate,  any Contract  which is applicable  to,  binding upon or enforceable
against Parent, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of Parent,  or (v) require
the  consent,   approval,   authorization  or  permit  of,  or  filing  with  or
notification to, any Governmental Authority,  any court or tribunal or any other
Person,  except the  Secretary of State of the State of Delaware,  or the SEC or
other filings required to be made by Parent.

     2.5  NO COMMISSIONS.  Parent has incurred no obligation for any finder's or
broker's or agent's fees or  commissions or similar  compensation  in connection
with the transactions contemplated hereby.

     2.6  ISSUANCE OF  PREFERRED  SHARES.  Upon the Closing and the issuance and
delivery of the  certificates  representing the shares of Preferred Stock to the
Shareholders,  the Preferred Stock will be, and upon conversion of the Preferred
Stock into shares of Parent Common Stock in accordance  with the  Certificate of
Designations  such  Common  Stock  will  be,  validly  issued,  fully  paid  and
non-assessable,  and will not be subject to any Liens. The Preferred Stock shall
have the terms as set forth in the form of Certificate of Designations  attached
hereto as Exhibit A.

     2.7  SEC DOCUMENTS.  Parent has made available (including through the SEC's
EDGAR  Database) to the Company and the  Shareholders  each  statement,  report,
registration statement, definitive proxy statement, and other filings (including
exhibits,  supplements and schedules thereto) filed with the SEC by Parent since
January  1,  2002  (collectively,  the  "PARENT  SEC  DOCUMENTS").  As of  their
respective  filing  dates,  the Parent SEC  Documents  complied in all  material
respects with the  requirements  of the Exchange Act and the Securities Act, and
none of the Parent SEC Documents  contained  any untrue  statement of a material
fact or  omitted  to state a  material  fact  required  to be stated  therein or
necessary to make the statements made therein,  in light of the circumstances in
which they were  made,  not  misleading,  except to the  extent  corrected  by a
subsequently filed Parent SEC Document.

                                  ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF MERGECO

     As a material  inducement to the Company and the  Shareholder to enter into
this Agreement and to consummate the transactions  contemplated  hereby,  Parent
and  Mergeco  jointly  and  severally  make the  following  representations  and
warranties to the Company and the Shareholders:

     3.1  CORPORATE  STATUS.  Mergeco is a corporation  duly organized,  validly
existing  and in good  standing  under the laws of the State of Delaware and has
full  corporate  power and  authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.

     3.2  CORPORATE  POWER AND  AUTHORITY.  Mergeco has the corporate  power and
authority  to execute  and deliver  this  Agreement  and the  Mergeco  Ancillary
Agreements, to perform its

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obligations   hereunder  and  thereunder  and  to  consummate  the  transactions
contemplated  hereby and  thereby.  Mergeco  has taken all action  necessary  to
authorize its execution and delivery of this  Agreement,  the performance of its
obligations  hereunder and thereunder and the  consummation of the  transactions
contemplated hereby and thereby.

     3.3  ENFORCEABILITY. This Agreement has been duly executed and delivered by
Mergeco  and  constitutes  a legal,  valid and  binding  obligation  of Mergeco,
enforceable against Mergeco in accordance with its terms and each of the Mergeco
Ancillary  Agreements,  upon execution and delivery by Mergeco, will be a legal,
valid and binding  obligation  of Mergeco  enforceable  in  accordance  with its
terms.

     3.4  NO VIOLATION.  The  execution  and delivery of this  Agreement and the
Mergeco  Ancillary   Agreements  by  Mergeco,  the  performance  by  it  of  its
obligations  hereunder  and  thereunder  and  the  consummation  by  it  of  the
transactions contemplated by this Agreement and the Mergeco Ancillary Agreements
will not (i) contravene any provision of the  certificate  of  incorporation  or
bylaws of Mergeco,  (ii) violate or conflict with any law,  statute,  ordinance,
rule,  regulation,   decree,  writ,   injunction,   judgment  or  order  of  any
Governmental  Authority or of any arbitration  award which is either  applicable
to, binding upon or enforceable against Mergeco,  (iii) conflict with, result in
any  breach of, or  constitute  a default  (or an event  which  would,  with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate,  amend,  modify,  abandon or accelerate,  any
Contract which is applicable to,  binding upon or enforceable  against  Mergeco,
(iv) result in or require the  creation or  imposition  of any Lien upon or with
respect to any of the property or assets of Mergeco, or (v) require the consent,
approval,  authorization  or permit of, or filing with or  notification  to, any
Governmental  Authority,  any court or tribunal or any other Person,  except the
Secretary  of  State  of the  State of  Delaware,  or the SEC or  other  filings
required to be made by Parent.

     3.6  NO COMMISSIONS. Mergeco has incurred no obligation for any finder's or
broker's or agent's fees or  commissions or similar  compensation  in connection
with the transactions contemplated hereby.

     3.7  MERGECO CAPITALIZATION. Mergeco's authorized capital stock consists of
one thousand  (1,000) shares of common stock, no par value, of which one hundred
(100) shares are issued and outstanding  all of which are validly issued,  fully
paid and  non-assessable.  There are no options,  warrants,  preemptive  rights,
conversion  privileges  or other  contracts  which  give any Person the right to
acquire  any capital  stock of Mergeco or any  interest  therein.  Parent is the
beneficial and record owner of all of the outstanding  shares of common stock of
Mergeco, free and clear of all Liens.

     3.8  BUSINESS ACTIVITY. Mergeco has not engaged in any business activity of
any nature prior to the date of this Agreement.

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                                   ARTICLE IV
                        REPRESENTATIONS AND WARRANTIES OF
                        THE SHAREHOLDER AND THE COMPANY

     As a material inducement to Parent and Mergeco to enter into this Agreement
and to consummate  the  transactions  contemplated  hereby,  the Company and the
Shareholders  make the following  representations  and  warranties to Parent and
Mergeco:

     4.1  CORPORATE STATUS. 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  corporate  power and authority to own or lease its property and
to  carry on its  business  as now  being  conducted.  The  Company  is  legally
qualified to transact business and is in good standing as a foreign  corporation
in the  State of New  York,  which is the only  foreign  jurisdiction  where the
nature  of  its  property  and  the  conduct  of  its  business   requires  such
qualification,  except for such  jurisdictions  where the  failure to so qualify
would not have a material  adverse effect on the financial  condition or results
of operation of the Company (a "MATERIAL ADVERSE  EFFECT").  There is no pending
or  threatened  proceeding  for  the  dissolution,  liquidation,  insolvency  or
rehabilitation of the Company.

     4.2  CORPORATE  POWER AND AUTHORITY.  The Company has full corporate  power
and authority to execute and deliver this  Agreement  and the Company  Ancillary
Documents, to perform its obligations hereunder and thereunder and to consummate
the  transactions  contemplated  hereby and  thereby.  The Company has taken all
corporate  action  necessary to  authorize  its  execution  and delivery of this
Agreement  and  the  Company  Ancillary   Documents,   the  performance  of  its
obligations  hereunder and thereunder and the  consummation of the  transactions
contemplated hereby and thereby.

     4.3  ENFORCEABILITY. This Agreement has been duly executed and delivered by
the Company and  constitutes  the legal,  valid and  binding  obligation  of the
Company,  enforceable  against it in  accordance  with its terms and each of the
Company Ancillary Documents, upon execution and delivery by the Company, will be
a legal, valid and binding  obligation of the Company  enforceable in accordance
with its terms.

     4.4  NO  VIOLATION.  Except as set forth on SCHEDULE 4.4, the execution and
delivery of this Agreement and the Company  Ancillary  Documents by the Company,
the  performance  by it of its  obligations  hereunder  and  thereunder  and the
consummation  by it of the  transactions  contemplated by this Agreement and the
Company  Ancillary  Documents  will  not (i)  contravene  any  provision  of the
certificate of incorporation or bylaws of the Company,  (ii) violate or conflict
with any law, statute,  ordinance,  rule, regulation,  decree, writ, injunction,
judgment or order of any  Governmental  Authority  or of any  arbitration  award
which is either applicable to, binding upon or enforceable  against the Company;
(iii)  conflict  with,  result in any breach of, or  constitute a default (or an
event  which  would,  with the  passage of time or the giving of notice or both,
constitute  a  default)  under,  or give  rise to a right to  terminate,  amend,
modify, abandon or accelerate, any Contract which is applicable to, binding upon
or  enforceable  against the Company,  (iv) result in or require the creation or
imposition  of any Lien upon or with respect to any of the property or assets of
the Company, or (v) require the consent, approval, authorization

                                       12
<PAGE>

or permit of, or filing with or notification to, any Governmental Authority, any
court or  tribunal or any other  Person,  except the  Secretary  of State of the
State of Delaware.

     4.5  CAPITALIZATION.  SCHEDULE 4.5 sets forth, with respect to the Company,
(i) the number of authorized shares of each class of its capital stock, (ii) the
number of issued and outstanding  shares of each class of its capital stock, and
(iii) the number of shares of each class of its capital  stock which are held in
treasury.  All of the issued  and  outstanding  shares of  capital  stock of the
Company (i) are legally and beneficially  owned by the Person in such amounts as
set forth each Person's name on SCHEDULE 4.5, (ii) have been duly authorized and
validly  issued and are fully  paid and  non-assessable,  (iii)  were  issued in
compliance with all applicable state and federal  securities laws, and (iv) were
not issued in violation of any preemptive rights or rights of first refusal.  No
preemptive  rights  or  rights  of  first  refusal  exist  with  respect  to the
outstanding shares of capital stock of the Company,  and no such rights arise by
virtue of or in connection with the transactions  contemplated hereby. Except as
disclosed or  specifically  referred to on SCHEDULE 4.5 there are no outstanding
or authorized rights, options,  warrants,  convertible securities,  subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that  could  require  the  Company  to issue or sell any  shares of its
capital stock (or securities  convertible into or exchangeable for shares of its
capital  stock).  There are no outstanding  stock  appreciation,  phantom stock,
profit participation or other similar rights with respect to the Company.  There
are no proxies, voting rights or other agreements or understandings with respect
to the voting or transfer of the outstanding  capital stock of the Company.  The
Company is not obligated to redeem or otherwise  acquire any of its  outstanding
shares of capital stock.

     4.6  SUBSIDIARIES.  Except as set forth on SCHEDULE  4.6,  the Company does
not own, directly or indirectly,  any outstanding  voting securities of or other
interests in, or control, any other corporation,  partnership,  joint venture or
other business entity.

     4.7  CHANGES SINCE JULY 1, 2003.  Except as disclosed in SCHEDULE 4.7 or as
contemplated herein, since July 1, 2003, the Company has not:

          (i)       issued any capital stock or other securities;

          (ii)      made any  distribution  of or with  respect  to its  capital
     stock or other securities or purchased or redeemed any of its securities;

          (iii)     sold,  leased or transferred any of its properties or assets
     including  selling,  licensing  or  transferring  any  rights  in the Owned
     Intellectual Property;

          (iv)      made or obligated itself to make capital expenditures;

          (v)       made any payment in respect of its liabilities other than in
     the ordinary course of business consistent with past practice;

          (vi)      incurred  any  obligations  or  liabilities  (including  any
     indebtedness)  or entered into any  transaction  or series of  transactions
     involving in excess of $1,000 in the aggregate  out of the ordinary  course
     of business,  except for this Agreement and the  transactions  contemplated
     hereby;

                                       13
<PAGE>

          (vii)     suffered any theft, damage, destruction or casualty loss;

          (viii)    made or adopted  any change in its  accounting  practice  or
     policies;

          (ix)      terminated, amended or modified any contract;

          (x)       imposed  any  security  interest or other Lien on any of its
     assets including the Owned Intellectual Property;

          (xi)      delayed paying any accounts payable,  not being contested in
     good faith,  otherwise than in the ordinary  course of business  consistent
     with past practice; or

          (xii)     agreed to do or authorized any of the foregoing.

     4.8  LIABILITIES. Except as set forth on SCHEDULE 4.8, the Company does not
have any liabilities or obligations,  whether accrued,  absolute,  contingent or
otherwise, except (i) to the extent specifically set forth in or incorporated by
express  reference in any of the Schedules  attached hereto,  and (ii) recurring
liabilities, payable in thirty days, incurred in the ordinary course of business
consistent with past practice, none of which are past due.

     4.9  LITIGATION. There is no action, suit, or other legal or administrative
proceeding  or  governmental   investigation,   pending  or,  to  the  Company's
Knowledge, threatened,  anticipated or contemplated against, by or affecting the
Company or any of its  properties or assets,  or which  question the validity or
enforceability of this Agreement or the transactions contemplated hereby, and to
the Company's Knowledge,  there is no basis for any of the foregoing.  There are
no  outstanding  orders,  decrees  or  stipulations  issued by any  Governmental
Authority  in any  proceeding  to which the Company is or was a party which have
not  been  complied  with in full or  which  continue  to  impose  any  material
obligations on the Company.

     4.10 REAL ESTATE. The Company does not own or lease, and never has owned or
leased any real property.

     4.11 GOOD TITLE TO AND CONDITION OF ASSETS.  The Company has good and valid
title to all of its Assets (as hereinafter defined), free and clear of any Liens
or restrictions on use. For purposes of this Agreement,  the term "ASSETS" means
all of the  properties  and assets of the  Company,  whether  real,  personal or
mixed, tangible or intangible, wherever located.

     4.12 ENVIRONMENTAL  MATTERS.  The operations of the Company are and have at
all times  been in  compliance  in all  material  respects  with all  applicable
Environmental Laws. Neither the Company nor any Shareholder has received written
notice of any violation of any  Environmental  Laws  applicable to the Assets or
the Company's operations.

     4.13 COMPLIANCE WITH LAWS.

          (a)  The Company has complied in all material  respects with all laws,
regulations  and orders  applicable to it, its business,  operations and Assets.
The Company has not been cited, fined or otherwise notified of any asserted past
or present material failure to comply

                                       14
<PAGE>

with any laws,  regulations or orders and no proceeding with respect to any such
material violation is pending or threatened.

          (b)  The Company has not made any payment of funds in connection  with
its business  which is prohibited by law, and no funds have been set aside to be
used in connection with its business for any payment prohibited by law.

     4.14 TAX  MATTERS.  Except as set forth in SCHEDULE  4.14  hereto,  all Tax
Returns  required  to be filed  prior to the date  hereof  with  respect  to the
Company,  or any of its income,  properties,  franchises or operations have been
filed,  each such Tax Return has been prepared in compliance with all applicable
laws and regulations,  and all such Tax Returns are true,  complete and accurate
in all  respects.  All Taxes due and  payable by or with  respect to the Company
have been paid or accrued  on or will be accrued on its books and  records as of
the Closing.  Except as set forth in SCHEDULE  4.14 hereto:  (i) with respect to
each taxable  period of the Company,  no taxable  period has been audited by the
relevant taxing authority;  (ii) no deficiency or proposed  adjustment which has
not been settled or otherwise resolved for any amount of Taxes has been asserted
or assessed by any taxing  authority;  (iii) the  Company has not  consented  to
extend the time in which any Taxes may be  assessed or  collected  by any taxing
authority;  (iv) the Company has not  requested  or been granted an extension of
the time for filing any Tax Return to a date later than the  Closing  Date;  (v)
there is no action,  suit,  taxing authority  proceeding,  or audit or claim for
refund now in  progress,  pending or  threatened  against or with respect to the
Company  regarding  Taxes;  (vi)  there are no Liens for Taxes  (other  than for
current Taxes not yet due and payable) upon the assets of the Company; (vii) the
Company has not made any payments,  and is or will not become  obligated  (under
any contract  entered into on or before the Closing  Date) to make any payments,
that will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign law); (viii) no claim has ever been made by
a taxing authority in a jurisdiction where the Company does not file Tax Returns
that is or may be subject to Taxes  assessed  by such  jurisdiction;  (ix) true,
correct and complete  copies of all income Tax Returns  filed by or with respect
to the Company for the past two years has been  furnished  or made  available to
Parent;  and (xi) no sales or use tax or property transfer tax (other than sales
tax  on  aircraft,  boats,  mobile  homes  and  motor  vehicles),  non-recurring
intangibles  tax,  documentary  stamp tax or other excise tax (or comparable tax
imposed by any Governmental  Authority) will be payable by the Company or Parent
by virtue of the transactions completed in this Agreement.

     4.15 ERISA. Except as set forth on SCHEDULE 4.15, the Company does not have
and never has had any employment  benefit  plans,  as defined in Section 3(2) of
ERISA,  multiemployer  plans,  as defined in  Section  3(37) of ERISA,  employee
welfare  benefit  plans,   as  defined  in  Section  3(1)  of  ERISA,   deferred
compensation plans, stock option plans, bonus plans, hospitalization, disability
and other  insurance  plans,  severance or  termination  pay plans and policies,
whether or not  described in Section 3(3) of ERISA,  in which  employees,  their
spouses or dependents, or the Company participate.

     4.16 LICENSES AND PERMITS.  The Company possesses all licenses and required
governmental or official approvals, permits or authorizations (collectively, the
"PERMITS")  necessary  to lawfully  conduct its business  and  operations  which
Permits  are listed on  SCHEDULE  4.17.  All such  Permits are valid and in full
force and effect, the Company is in material

                                       15
<PAGE>

compliance  with the  requirements  thereof,  and no  proceeding  is  pending or
threatened to revoke or amend any of them.

     4.17 INTELLECTUAL PROPERTY.

          (a)  The  Company  owns all right,  title,  and  interest in (free and
clear of all Liens)  ("OWNED  INTELLECTUAL  PROPERTY")  all of the  Intellectual
Property described on SCHEDULE 4.17.

          (b)  SCHEDULE 4.17 lists (i) all patents and patent  applications  and
all registered  and material  unregistered  trademarks,  trade names and service
marks, registered and material unregistered copyrights,  and mask works included
in the Owned  Intellectual  Property,  including the jurisdictions in which each
such Owned Intellectual Property right has been issued or registered or in which
any  application  for such issuance and  registration  has been filed;  (ii) all
licenses,  sublicenses  and other  agreements  to which the  Company  is a party
pursuant  to which  any  Person  is  authorized  to use any  Owned  Intellectual
Property; and (iii) all licenses,  sublicenses and other agreements to which the
Company  is a party  pursuant  to which the  Company  is  authorized  to use any
third-party  (including without limitation for the purposes of this SECTION 4.17
any  employees  of  the  Company)  Intellectual  Property  which  is  not  Owned
Intellectual  Property, or which is incorporated in, is, or forms a part of, any
Owned Intellectual Property.  Except as set forth in SCHEDULE 4.17, no royalties
or  other  continuing  payment  obligations  are  due in  respect  of the  Owned
Intellectual  Property.  Except as set forth in SCHEDULE  4.17,  all patents and
registrations or applications  therefor included in Owned Intellectual  Property
are valid and  subsisting  and in full force and effect and are  applied for and
owned in the name of the Company.

          (c)  The Company is not, nor will it be, as a result of the  execution
and delivery of this Agreement or the performance of its obligations  under this
Agreement,  in breach of any license,  sublicense or other agreement relating to
Owned Intellectual Property Rights.

          (d)  The  Owned  Intellectual   Property  does  not  dilute,   misuse,
infringe,  misappropriate  or otherwise come into conflict with any Intellectual
Property of any other Person (including without limitation any Employee), except
for such dilutions, misuses, infringements, misappropriations or other conflicts
which,  individually  or in the  aggregate,  would  not  have  or be  reasonably
expected to have a Material Adverse Effect. No charge, complaint, demand, notice
or claim is pending  or has been made to such  effect  and the  Company  has not
received  written notice so alleging  (including any claim that the Company must
license  or  refrain  from  using any  Intellectual  Property  of any other such
Person). No action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand is pending  or, to the  Company's  Knowledge,  threatened,  that
challenges the legality, validity,  enforceability, use or ownership of any item
of Owned Intellectual  Property,  nor is any Owned Intellectual Property subject
to any outstanding injunction, judgment, order, decree, ruling or charge.

          (e)  To the Company's  knowledge,  no third party has interfered with,
infringed  upon,  misappropriated,  misused,  diluted  or  otherwise  come  into
conflict with any Owned Intellectual Property.

                                       16
<PAGE>

     4.18 CONTRACTS.  SCHEDULE  4.18 sets forth a list of each Contract to which
the Company is a party or by which its properties  and assets are bound,  except
for Contracts  cancelable  within 30 days without  payment or penalty,  true and
correct copies of which have been provided to Parent (a "DESIGNATED  CONTRACT").
The Company has not violated any of the terms or  conditions  of any  Designated
Contract or any term or  condition  which would permit  termination  or material
modification  of any Designated  Contract,  and the Company has not received any
claim for breach or  indemnification  or notice of default or termination  under
any  Designated  Contract.  No event has occurred  which  constitutes,  or after
notice or the  passage  of time,  or both,  would  constitute,  a default by the
Company under any Designated Contract,  and to the Company's Knowledge,  no such
event has occurred which  constitutes or would  constitute a material default by
any other party.

     4.19 ACCURACY OF INFORMATION  FURNISHED BY THE COMPANY.  No  representation
contained  in this  Article IV  contains,  and the  certificate  referred  to in
SECTION 7.1 when delivered will not contain,  any untrue statement of a material
fact or  omits  (or in the  case of such  certificate,  will  omit)  to  state a
material fact necessary to make the statements contained therein not misleading.

     4.20 AUTHORITY OF SHAREHOLDER.  Notwithstanding the first paragraph of this
ARTICLE IV, each Shareholder severally and not jointly, with respect to himself,
herself, or itself only, represents and warrants as follows:

          (a)  Authority.  Shareholder has full legal right,  power and capacity
and  authority  to enter  into  this  Agreement  and the  Shareholder  Ancillary
Agreements and perform his obligations hereunder and thereunder.

          (b)  Enforceability.   The  Agreement  and  each  of  the  Shareholder
Ancillary  Agreements  has  been,  or at  Closing  will be,  duly  executed  and
delivered by Shareholder and does constitute,  or at Closing will constitute,  a
valid and binding obligation of Shareholder,  enforceable against Shareholder in
accordance with its terms.

          (c)  No Violation. Except as set forth on SCHEDULE 4.20, the execution
and delivery of this Agreement and the Shareholder Ancillary Agreements to which
Shareholder  is a party will not (i) violate or conflict with any law,  statute,
ordinance, rule, regulation, decree, writ, injunction,  judgment or order of any
Governmental  Authority  or of any  arbitration  award which is  applicable  to,
binding upon or enforceable  against  Shareholder of which Shareholder is aware;
(ii)  conflict  with,  result in any breach of, or  constitute  a default (or an
event  which  would,  with the  passage of time or the giving of notice or both,
constitute  a  default)  under,  or give  rise to a right to  terminate,  amend,
modify, abandon or accelerate, any Contract which is applicable to, binding upon
or enforceable against  Shareholder,  (iii) result in or require the creation or
imposition  of any Lien upon or with respect to any of the property or assets of
the Shareholder, or (iv) require the consent, approval,  authorization or permit
of, or filing with or notification to, any Governmental Authority,  any court or
tribunal  or any other  Person,  except the  Secretary  of State of the State of
Delaware.

          (d)  Target Shares.  Shareholder  own his, her or its Target Shares as
set forth on SCHEDULE 4..5, free and clear of all Liens, restrictions and claims
of any kind. The

                                       17
<PAGE>

Shareholders  have not granted to any Person any rights  (including proxy rights
or options) with respect to his, her or its Target Shares,  and  Shareholder has
no  claim  against  the  Company  or any of its  directors,  officers  or  other
Shareholders  with respect to the issuance of any shares of capital stock of the
Company.

          (e)  Investment Intent;  Sophistication.  The Shareholder is acquiring
his interest in Preferred Shares for his own account for investment and not with
a view to, or for the sale in connection with, any distribution of his interest,
except in compliance  with  applicable  state and federal  securities  laws. The
Shareholder has been provided,  to his satisfaction,  the opportunity to discuss
the transactions  contemplated hereby with Parent and has had the opportunity to
obtain such  information  pertaining to Parent as has been requested,  including
but not limited to filings made by Parent with the SEC under the  Exchange  Act.
The  Shareholder  has such  knowledge  and  experience in business and financial
matters that he is capable of  evaluating  the merits and risks of an investment
in  Preferred  Shares,  and is  capable of bearing  the  economic  risks of such
investment  and is able to bear a complete  loss of his  investment in Preferred
Shares. The Shareholder acknowledges that Preferred Shares to be issued pursuant
to this  Agreement  have not been  registered  under the Securities Act and that
such shares may not be sold,  transferred or otherwise disposed of by the holder
thereof except in compliance with the legend set forth in SECTION 10.2.

     4.21 NO  COMMISSIONS.  Neither the Company nor the Shareholder has incurred
any  obligation  for any finder's or broker's or agent's fees or  commissions or
similar compensation in connection with the transactions contemplated hereby.

                                   ARTICLE V
                     CONDUCT OF BUSINESS PENDING THE CLOSING

     5.1  CONDUCT  OF  BUSINESS   PENDING  THE  CLOSING.   Except   pursuant  to
commitments  disclosed in, or permitted or contemplated  by this Agreement,  the
Company  covenants and agrees that,  between the date of this  Agreement and the
Closing Date,  the business of the Company  shall be conducted  only in, and the
Company  shall not take any action  except in, the ordinary  course of business,
consistent with past practice and in compliance with all rules,  regulations and
laws. By way of amplification and not limitation, except pursuant to commitments
disclosed in, or permitted or contemplated by, this Agreement, the Company shall
not,  between  the date of this  Agreement  and the  Closing  Date,  directly or
indirectly,  do or propose or agree to do any of the following without the prior
written consent of Parent:

          (a)  amend or otherwise  change its  certificate of  incorporation  or
bylaws;

          (b)  issue,  sell,  pledge,  dispose of,  encumber,  or, authorize the
issuance, sale, pledge,  disposition,  grant or encumbrance of (i) any shares of
its capital stock of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of such capital stock,  or any
other  ownership  interest,  thereof,  or (ii) any of its  assets,  tangible  or
intangible,  except in the  ordinary  course of  business  consistent  with past
practice;

          (c)  declare,   set  aside,   make  or  pay  any   dividend  or  other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;

                                       18
<PAGE>

          (d)  reclassify,  combine,  split,  subdivide  or redeem,  purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

          (e)  (i) acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation, or acquisition of stock or assets) any interest
in any  corporation,  partnership  or other  business  organization  or division
thereof or any  assets,  or make any  investment  either by purchase of stock or
securities,  contributions  of capital or property  transfer,  or, except in the
ordinary  course of  business,  consistent  with  past  practice,  purchase  any
property or assets of any other Person, (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume,  guarantee or endorse or otherwise
as an accommodation  become  responsible for, the obligations of any Person,  or
make any loans or advances,  or (iii) enter into any Contract  other than in the
ordinary course of business, consistent with past practice;

          (f)  make any  capital  expenditure  or enter  into  any  contract  or
commitment therefore;

          (g)  amend, terminate or extend any Contract;

          (h)  delay or  accelerate  payment  of any  account  payable  or other
liability  of the Company  beyond or in advance of its due date or the date when
such  liability  would  have  been  paid  in the  ordinary  course  of  business
consistent with past practice; or

          (i)  agree,  in writing or otherwise,  to take or authorize any of the
foregoing actions or any action which would make any  representation or warranty
contained in Article IV untrue or incorrect.

     5.2  INVESTIGATION  OF THE COMPANY BY PARENT.  The Company and Shareholders
shall afford to the officers, employees and authorized representatives of Parent
(including,  without  limitation,  independent public accountants and attorneys)
complete  access  during  normal  business  hours  to the  offices,  properties,
employees  and  business  and  financial  records  (including   computer  files,
retrieval  programs  and  similar  documentation)  of the  Company to the extent
Parent  shall deem  necessary or  desirable  and shall  furnish to Parent or its
authorized representatives such additional information concerning the Company as
shall be reasonably  requested.  Parent agrees that such investigation  shall be
conducted in such a manner as not to interfere  unreasonably with the operations
of the Company. No investigation made by Parent or its representatives hereunder
shall affect the  representations  and  warranties of the Company or Shareholder
hereunder.

     5.3  AUDIT OF  FINANCIAL  STATEMENTS.  The Parent,  at its  expense,  shall
engage an accounting firm (the  "AUDITORS") to prepare  financial  statements of
the  Company,  if necessary  pursuant to the  Exchange  Act, for the years ended
November 30, 2002 and 2003.  Parent shall cause such financial  statements to be
completed  within 60 days of the Closing  Date,  and shall obtain the consent of
the Auditors for the filing of such audited  financial  statements in connection
with the Company's  filing on Form 8-K with the SEC (reporting the  consummation
of the transactions  contemplated by this Agreement) and to the incorporation by
reference of such audited financial  statements in any registrations  statements
wherein the Company incorporates such financial statements by reference.

                                       19
<PAGE>

     5.4  AMENDMENT OF CONVERTIBLE NOTES. Prior to the Closing Date, the Company
shall  cause  those  certain  promissory  notes  listed  on  SCHEDULE  4.18 (the
"CONVERTIBLE  NOTES") to be amended to delete any obligations  thereunder to (i)
prepay or redeem such note prior to its  schedule  maturity  date and (ii) issue
any shares of capital  stock or any other  equity  interest  of the Parent  upon
conversion of such note or otherwise.

     5.5  PRE-CLEAR  MERGER.  Parent,  Mergeco  and the  Company  shall take all
necessary steps to pre-clear the Merger with the Secretary of State of the State
of Delaware, in order that on the Closing Date, the Certificate of Merger may be
filed with the Secretary of State of the State of Delaware and become  effective
upon filing.

     5.6  CERTIFICATE  OF  DESIGNATIONS.  Prior to the Closing Date,  the Parent
shall file the Certificate of  Designations,  substantially in the form attached
hereto as EXHIBIT A, with the Secretary of State of the State of Delaware.

     5.7  NOTIFICATION  OF CERTAIN  MATTERS.  The Company and Parent  shall give
prompt  notice to the other of the  occurrence  or  non-occurrence  of any event
which would likely cause any  representation or warranty  contained herein to be
untrue or inaccurate, or any covenant,  condition, or agreement contained herein
not to be complied with or satisfied.

     5.8  TRADING  IN  PARENT'S  COMMON  STOCK.  Except as  otherwise  expressly
consented to by Parent,  from the date of this Agreement until the Closing Date,
neither the Company,  nor any  Shareholder  (nor any  Affiliates  thereof)  will
directly or indirectly  purchase or sell  (including  short sales) any shares of
common  stock of the Parent in any  transactions  effected  on the OTC  Bulletin
Board.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

     6.1  FURTHER  ASSURANCES.   Each  party  shall  execute  and  deliver  such
additional  instruments  and other documents and shall take such further actions
as may be necessary or appropriate to effectuate,  carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.

     6.2  CONFIDENTIALITY;  PUBLICITY.  Except as may be  required  by law or as
otherwise permitted or expressly  contemplated  herein, prior to the Closing, no
party   hereto  or  their   respective   Affiliates,   employees,   agents   and
representatives  shall disclose to any third party this Agreement or the subject
matter or terms hereof without the prior consent of the other parties hereto. No
press  release or other  public  announcement  related to this  Agreement or the
transactions contemplated hereby shall be issued by any party hereto without the
prior  approval  of the other  parties,  except that Parent may make such public
disclosure  which  Parent  believes  in good faith is  required by law or by the
terms of any listing agreement with or requirements of a securities exchange.

     6.3  NO OTHER DISCUSSIONS.  Neither the Company,  nor any Shareholder,  and
their respective  Affiliates,  employees,  agents or  representatives  shall (i)
initiate or encourage the initiation by others of  discussions  or  negotiations
with third parties or respond to  solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,

                                       20
<PAGE>

business or properties of the Company (whether by merger, consolidation, sale of
stock or otherwise)  or (ii) enter into any agreement or commitment  (whether or
not binding) with respect to any of the foregoing transactions. The Shareholders
will  immediately  notify  Parent if any third party  attempts  to initiate  any
solicitation,  discussion  or  negotiation  with respect to any of the foregoing
transactions.

     6.4  POST CLOSING  FUNDING.  From time to time  following the Closing Date,
but prior to May 31, 2004, the Parent shall, upon at least 30 day written notice
from either Dr. Stracher or Dr. Kesner, advance to the Surviving Corporation, in
the form of debt or  equity,  an  additional  amount  of at least  $250,000  (in
addition to the $50,000  already  advanced to the  Company).  Dr. Kesner and Dr.
Stracher,  on behalf of the  Shareholders,  shall have the right to specifically
enforce  this  provision   against  the  Parent,  it  being  intended  that  the
Shareholders  are intended  beneficiaries  of this  SECTION 6.4.  Payment to Dr.
Stracher  and  Kesner of their  consulting  fees shall not  constitute  payments
towards Parent's  post-closing funding obligation,  as set forth in this SECTION
6.4. In addition to their right to specifically  enforce this provision,  in the
event  that  Parent  has not  funded at least  $300,000  for  Ceptor  technology
research  activities  by May 31, 2004  Parent  shall issue to each of Kesner and
Stracher an additional $150,000 of Parent Preferred Stock ($300,000 in total).

     6.5  OTHER AGREEMENTS. At the Closing, Parent shall execute and deliver the
following agreements (collectively, the "COLLATERAL AGREEMENTS"):

          (a)  a consulting agreement between the Parent and Dr. Stracher in the
form of EXHIBIT B (the "STRACHER CONSULTING AGREEMENT");

          (b)  a consulting  agreement  between the Parent and Dr. Kesner in the
form of EXHIBIT C (the "KESNER CONSULTING AGREEMENT"); and

          (c)  a   registration   rights   agreement   between  Parent  and  the
Shareholders in the form of EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT").

     6.6  RELEASE. Each Shareholder, on behalf of himself, his executors, heirs,
beneficiaries, administrators, Affiliates, successors and assigns (collectively,
the "RELEASING PARTIES"), does hereby release and discharge the Company and each
of the Company's officers, directors, and other Shareholders (collectively,  the
"RELEASED  PARTIES")  from and  against any and all  actions,  causes of action,
claims,  charges,  liabilities,   accounts,  demands,  obligations,   contracts,
agreements,  costs, grievances,  promises,  covenants, and complaints,  known or
unknown,  suspected or unsuspected,  direct or indirect, in law or in equity, of
any kind or character,  that he or any of the Releasing Parties have ever had or
may  have at any time  through  the date of this  Agreement  against  any of the
Released Parties.

     6.7  TAX FILINGS.  Parent, the Company,  Mergeco and the Shareholders shall
file all Tax Returns  consistent  with the treatment of the Merger as a tax free
"reorganization"  within the meaning of Section  368(a)(1)  of the Code.  Parent
shall cause to be filed at Parent's  cost and  expense,  tax returns for Company
for the Company's fiscal year ended November 30, 2003 and thereafter;  PROVIDED,
HOWEVER, that Shareholders shall be responsible for the payment of all Taxes for
the fiscal  year ended 2003 and prior  taxable  periods.  Dr.  Stracher  and Dr.
Kesner shall

                                       21
<PAGE>

have the right to approve,  not to be unreasonably  withheld,  all tax elections
that could be made for fiscal year 2003 and prior  periods  that would  increase
such year's taxes attributable to the Shareholders

                                  ARTICLE VII
               CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGECO

     The  obligations  of Parent and Mergeco  hereunder  shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions,  any or
all of which may be waived in whole or in part by Parent:

     7.1  ACCURACY  OF  REPRESENTATIONS   AND  WARRANTIES  AND  COMPLIANCE  WITH
OBLIGATIONS.   The  representations  and  warranties  of  the  Company  and  the
Shareholders contained in ARTICLE IV of this Agreement shall be true and correct
at and as of the  Closing  Date with the same force and effect as though made at
and as of  that  time  except  (i)  for  changes  specifically  permitted  by or
disclosed in this Agreement,  and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date.  The  Company and the  Shareholders  shall have  performed  and
complied with all of their respective  obligations required by this Agreement to
be performed or complied with at or prior to the Closing  Date.  The Company and
the Shareholders  shall have delivered to Parent a certificate,  dated as of the
Closing  Date,  duly signed (in the case of the  Company by its chief  executive
officer),  stating that such representations and warranties are true and correct
and that all such obligations have been performed and complied with.

     7.2  CONSENTS.  The Company shall have received the consents and approvals,
in form and substance  reasonably  satisfactory to Parent,  to the  transactions
contemplated hereby from the Persons specified in Schedule 4.4.

     7.3  AMOUNT OF  INDEBTEDNESS.  The Company  shall not have  liabilities  in
excess of $300,000 as of the Closing Date,  exclusive of  liabilities  for rent,
materials,  insurance and similar expenses which shall not exceed $25,000 in the
aggregate.

     7.4  SECRETARY'S  CERTIFICATE.  The Company shall have  delivered to Parent
(i) copies of the certificate of incorporation and bylaws of the Company since a
specified date; (ii) copies of resolutions  adopted by the Board of Directors of
the Company and the  Shareholder  authorizing the  transactions  contemplated by
this Agreement, and (iii) certificates of good standing of the Company issued by
the State of  Delaware,  certified  in each case as of the  Closing  Date by the
Secretary as being true, correct and complete.

     7.5  NO ADVERSE  LITIGATION.  There shall not be pending or threatened  any
action or  proceeding  by or before  any court or other  Governmental  Authority
which shall seek to restrain,  prohibit,  invalidate or collect  damages arising
out of the Agreement or any other transaction contemplated hereby, and which, in
the judgment of Parent,  makes it  inadvisable to proceed with the Agreement and
other transactions contemplated hereby.

     7.6  OTHER CLOSING DELIVERIES. At Closing, Parent shall have received:

          (a)  each  Shareholder   Ancillary  Agreement  duly  executed  by  the
Shareholder;

                                       22
<PAGE>

          (b)  each Company Ancillary Agreement duly executed by the Company;

          (c)  resignations  effective as of the Closing Date from such officers
and directors of the Company as Parent shall have requested in writing; and

          (d)  the stock books, stock ledgers,  minute books, corporate seal and
other books and records of the Company.

     7.7  DUE   DILIGENCE.   Parent  shall  have  completed  its  due  diligence
investigation  and the results of such  investigation  shall be  satisfactory to
Parent, in its sole discretion.

     7.8  SHAREHOLDER  APPROVAL.  This  Agreement  shall  have been  adopted  by
holders of at least 98% of the outstanding  Target Shares prior to the Effective
Time.

                                  ARTICLE VIII
                        CONDITIONS TO THE OBLIGATIONS OF
                        THE COMPANY AND THE SHAREHOLDERS

     The   obligations  of  the  Company  and  the  Shareholder  to  effect  the
Transaction  shall be subject to the fulfillment at or prior to the Closing Date
of the  following  conditions,  any or all of which may be waived in whole or in
part by the Company and the Shareholder:

     8.1  ACCURACY  OF  REPRESENTATIONS   AND  WARRANTIES  AND  COMPLIANCE  WITH
OBLIGATIONS.  The representations and warranties of Parent and Mergeco contained
in this  Agreement  shall be true and correct at and as of the Closing Date with
the same force and effect as though  made at and as of that time  except (i) for
changes specifically  permitted by or disclosed pursuant to this Agreement,  and
(ii) that those  representations and warranties which address matters only as of
a  particular  date shall  remain true and  correct as of such date.  Parent and
Mergeco  shall  have  performed  and  complied  with  all  of  their  respective
obligations  required by this  Agreement to be performed or complied  with at or
prior to the  Closing  Date.  Parent and  Mergeco  shall have  delivered  to the
Shareholder  a  certificate,  dated as of the  Closing  Date,  and  signed by an
executive officer,  certifying that such representations and warranties are true
and correct and that all such obligations have been performed and complied with.

     8.2  NO ADVERSE  LITIGATION.  There shall not be pending or threatened  any
action or  proceeding  by or before any court or other  governmental  body which
shall seek to restrain,  prohibit,  invalidate or collect damages arising out of
the Agreement or any of the transactions  contemplated  hereby, and which in the
judgment of the  Shareholder  makes it inadvisable to proceed with the Agreement
or any other transaction contemplated hereby.

     8.3  SECRETARY'S  CERTIFICATE.  The  Parent  shall  have  delivered  to the
Shareholders (i) copies of the certificate of incorporation and bylaws of Parent
since a  specified  date,  (ii)  copies of  resolutions  adopted by the Board of
Directors  of the  Parent  authorizing  the  transactions  contemplated  by this
Agreement,  (iii) the  Certificate of  Designations as certified as filed by the
Secretary  of  State of the  State of  Delaware;  and (iv)  certificate  of good
standing of the Parent Company issued by the State of Delaware certified in each
case  as of the  Closing  Date by the  Secretary  as  being  true,  correct  and
complete.

                                       23
<PAGE>

     8.4  OTHER CLOSING DELIVERIES.  At Closing, the Company and the Shareholder
shall have  received  each  Parent  Ancillary  Document  and  Mergeco  Ancillary
Agreement,  duly executed by Parent, Mergeco and/or its Affiliates,  as the case
may be.

                                   ARTICLE IX
                                 INDEMNIFICATION

     9.1  INDEMNIFICATION   BY  THE  SHAREHOLDER.   The  Shareholders  agree  to
indemnify  and  hold  harmless  Parent,  the  Surviving  Corporation  and  their
respective  successors and assigns (the "PARENT  INDEMNITEES")  from and against
any  and  all  Losses  and  Expenses  incurred  by such  Parent  Indemnitees  in
connection with or arising from:

          (a)  Any  breach  by the  Company  of any of  its  covenants  in  this
Agreement or in any Company Ancillary Document, or any failure of the Company to
perform any of its  obligations  in this  Agreement or in any Company  Ancillary
Document;  PROVIDED,  HOWEVER, with respect to the Company, this indemnification
is limited to  breaches of  agreements  and  covenants  to be  performed  by the
Company on or prior to the Closing Date;

          (b)  Any   breach  of  any   warranty   or  the   inaccuracy   of  any
representation  regarding the Company  contained in ARTICLE IV or referred to in
the  Agreement  or any  certificate  delivered  by or on behalf  of the  Company
pursuant  hereto,  except for the  representations  and warranties  contained in
Section 4.20; and

          (c)  the  exercise of  dissenters'  rights by any  shareholder  of the
Company;

PROVIDED, HOWEVER, that the Shareholders shall be required to indemnify and hold
harmless  under  clauses (a) and (b) of this  Section with respect to Losses and
Expenses  incurred by the Parent  Indemnitees,  only if the aggregate  amount of
such Losses and Expenses exceeds $25,000 (the "THRESHOLD AMOUNT"), in which case
the  Shareholders  shall be obligated to indemnify  Parent  Indemnitees  for the
entire  amount of the  Losses  and  Expenses  from the first  dollar;  PROVIDED,
FURTHER,  that  the  aggregate  maximum  amount  required  to  be  paid  by  the
Shareholders  pursuant to this SECTION 9.1 hereunder  shall not exceed the value
of the shares of  Preferred  Stock and the shares of Common  Stock in payment of
the Awards,  determined in accordance with SECTION 9.4(c) (the  "INDEMNIFICATION
LIMIT").

     The  indemnification  provided  for in this  SECTION  9.1  shall  terminate
fifteen  (15) months  after the Closing Date (and no claims shall be made by the
Parent  Indemnitees  under this  SECTION  9.1(b)  thereafter),  except  that the
indemnification by Shareholders shall continue as to:

          (a)  The  representations  and  warranties  set forth in SECTIONS 4.11
(title to assets), as to all of which no time limitation shall apply;

          (b)  The  representations  and  warranties  set forth in SECTIONS 4.15
(ERISA),  and 4.14 (Taxes),  which shall survive for the  applicable  statute of
limitations  period  under  which a claim can be brought  against  Parent or the
Company; and

          (c)  Any Loss or Expense of which any Parent  Indemnitee  has notified
the Shareholder in accordance  with the  requirements of SECTION 9.4 on or prior
to the date such

                                       24
<PAGE>

indemnification  would otherwise  terminate in accordance with this SECTION 9.1,
as to which the obligation of Shareholder  shall continue until the liability of
Shareholder  shall  have  been  determined  pursuant  to this  ARTICLE  IX,  and
Shareholder shall have reimbursed all Parent  Indemnitees for the full amount of
such Loss and Expense in accordance with this ARTICLE IX.

To the extent any Parent Indemnitee is entitled to  indemnification  pursuant to
this SECTION 9.1,  Shareholder,  their  successors  and assigns  hereby  forever
waive, release and agree not to make any claim or bring any cost recovery action
against the Parent  Indemnitees,  successors  and assigns  under any director or
officer  indemnity  agreement,  or  provision  in law  or  under  the  Company's
Certificate  of   incorporation   or  by-laws  or  under  CERCLA  or  any  other
Environmental  Law to the extent that such claim or cost recovery action relates
to the same matter as constitutes the basis for such Parent  Indemnitees'  claim
for indemnification.

     9.2  INDEMNIFICATION FOR SHAREHOLDER MATTERS.  Each Shareholder  severally,
and not jointly,  agrees to indemnify and hold  harmless the Parent  Indemnitees
from and  against  any and all  Losses  and  Expenses  incurred  by such  Parent
Indemnitees in connection with or arising from:

          (a)  Any breach by such  Shareholder  of any of the  covenants of such
Shareholder in this Agreement or in any Shareholder Ancillary Agreement to which
such  Shareholder is a party, or any failure of such  Shareholder to perform any
of his, her or its obligations in this Agreement or in any Shareholder Ancillary
Agreement; and

          (b)  Any   breach  of  any   warranty   or  the   inaccuracy   of  any
representation or warranty of such Shareholder contained in SECTION 4.20 of this
Agreement,  any  certificate  or  schedule  delivered  by or on  behalf  of such
Shareholder  pursuant hereto,  or any other Shareholder  Ancillary  Agreement to
which such Member is a party;

PROVIDED;  HOWEVER; each Member's liability under this SECTION 9.2 (and together
with any of  Shareholder's  liability  under  SECTION 9.1) shall not exceed such
Shareholder's  pro-rata percentage of Indemnification Limit. The indemnification
provided for in this SECTION 9.2 shall survive indefinitely.

     9.3  INDEMNIFICATION  BY  PARENT.  Parent  agrees  to  indemnify  and  hold
harmless the  Shareholder  and their  successors  and assigns (the  "SHAREHOLDER
INDEMNITEES")  from and against any and all Losses and Expenses incurred by such
Shareholder Indemnitees in connection with or arising from:

          (a)  Any breach by Parent of any of its  covenants  or  agreements  in
this  Agreement  or any failure by Parent to perform any of its  obligations  in
this Agreement;

          (b)  Any   breach  of  any   warranty   or  the   inaccuracy   of  any
representation  of Parent  contained or referred to in this  Agreement or in any
certificate delivered by or on behalf of Parent pursuant hereto; and

          (c)  Any  claim  or  liability  arising  out  of  the  conduct  by the
Surviving Corporation or Parent of the business from and after the Closing Date.

                                       25
<PAGE>

     The  indemnification  provided for in this SECTION  9.3(b) shall  terminate
fifteen  (15) months  after the Closing Date (and no claims shall be made by the
Shareholder under this SECTION 9.3 thereafter),  except that the indemnification
by Parent shall continue as to:

          (a)  Any  Loss  or  Expense  of  which  Shareholder  Indemnitees  have
notified Parent in accordance  with the  requirements of SECTION 9.4 on or prior
to the date such  indemnification  would otherwise  terminate in accordance with
this SECTION 9.3, as to which the  obligation of Parent shall continue until the
liability of Parent shall have been determined  pursuant to this ARTICLE IX, and
Parent shall have reimbursed all the Shareholder Indemnitees for the full amount
of such Loss and Expense in accordance with this ARTICLE IX.

     9.4  NOTICE OF CLAIMS.

          (a)  Any Parent Indemnitee or Shareholder Indemnitee (the "INDEMNIFIED
PARTY")  seeking  indemnification  hereunder  shall give the party  obligated to
provide indemnification to such Indemnified Party (the "INDEMNITOR") a notice (a
"CLAIM  NOTICE")  describing in  reasonable  detail the facts giving rise to any
claim for  indemnification  hereunder and shall include in such Claim Notice (if
then known) the amount or the method of computation of the amount of such claim,
and a reference to the provision of this Agreement or any agreement, document or
instrument  executed  pursuant hereto or in connection  herewith upon which such
claim is based; PROVIDED, that a Claim Notice in respect of any action at law or
suit in equity by or against a third Person as to which  indemnification will be
sought shall be given promptly  after the action or suit is commenced;  PROVIDED
FURTHER that failure to give such notice shall not relieve the Indemnitor of its
obligations hereunder except to the extent it shall have been prejudiced by such
failure.

          (b)  After the giving of any Claim Notice pursuant hereto,  the amount
of  indemnification  to which an Indemnified  Party shall be entitled under this
ARTICLE  IX  shall be  determined:  (i) by the  written  agreement  between  the
Indemnified  Party and the Indemnitor;  or (ii) by a final judgment or decree of
any court of competent jurisdiction.  The judgment or decree of a court shall be
deemed final when the time for appeal,  if any, shall have expired and no appeal
shall  have  been  taken or when all  appeals  taken  shall  have  been  finally
determined. The Indemnified Party shall have the burden of proof in establishing
the amount of Loss and Expense suffered by it.

          (c)  If a Parent Indemnity is entitled to  indemnification  hereunder,
and the amount of  indemnification  to which Parent  Indemnitee  is entitled has
been determined as provided for in SECTION 9.4(b),  the Shareholders may satisfy
such claim, at the option of the Shareholders, by promptly tendering (i) cash or
(ii) shares of  Preferred  Stock (or that number of shares of common  stock into
which the Preferred Stock was converted) or shares common stock of Parent issued
to Shareholders hereunder Parent Indemnitee.  For purposes of this ARTICLE IX, a
share of  Preferred  Stock  shall have a value of $1,000,  and a share of common
stock  issued in  satisfaction  of an Award shall have the  Current  Share Value
assigned  to  it  hereunder.   If  a  Shareholder   Indemnitee  is  entitled  to
indemnification hereunder, Parent shall pay to Shareholder Indemnitee the amount
of indemnification to which Shareholder Indemnitee is entitled promptly after it
has been determined as provided for in SECTION 9.4(b).

                                       26
<PAGE>

     9.5  THIRD PERSON CLAIMS.  The  Indemnitor  shall have the right to conduct
and  control,  through  counsel of its  choosing  reasonably  acceptable  to the
Indemnitee,  the defense,  compromise  or  settlement of any third Person claim,
action or suit against the Indemnified Party as to which indemnification will be
sought by any Indemnified Party from any Indemnitor  hereunder if the Indemnitor
has acknowledged and agreed in writing that if the same is adversely determined,
the Indemnitor has an obligation to provide  indemnification  to the Indemnified
Party in  respect  thereof.  In any  such  case,  the  Indemnified  Party  shall
cooperate in connection  therewith  and shall furnish such records,  information
and  testimony and attend such  conferences,  discovery  proceedings,  hearings,
trials  and  appeals  as may  be  reasonably  requested  by  the  Indemnitor  in
connection  therewith.  The Indemnified  Party may participate,  through counsel
chosen by it and at its own expense, in the defense of any such claim, action or
suit as to which the  Indemnitor  has so  elected  to conduct  and  control  the
defense thereof. Notwithstanding the foregoing, the Indemnified Party shall have
the right subject to obtaining Indemnitor's prior written consent to pay, settle
or  compromise  any such claim,  action or suit,  PROVIDED that if no consent is
obtained,  the  Indemnified  Party shall waive any right to indemnity  therefore
hereunder  unless such consent is unreasonably  withheld in which event no claim
for indemnity therefore hereunder shall be waived.

     9.6  EXCLUSIVITY  OF  INDEMNIFICATION.  If the Closing  shall be completed,
indemnification  under SECTIONS 9.1, 9.2 and 9.3 of this Agreement  shall be the
sole and  exclusive  remedy  available to Parent,  Mergeco,  the Company and the
Shareholder  for the  recovery of damages in respect of any Losses and  Expenses
incurred  by Parent,  Mergeco,  the  Company or the  Shareholder  referred to in
SECTION  9.1,  9.2 or 9.3.  Without  limiting the  generality  of the  preceding
sentence, subject to the completion of the Closing, each of Parent, Mergeco, the
Company and the  Shareholder  hereby  waives any claim or cause of action  which
such party might be entitled to assert in respect of any such Losses or Expenses
(including  any claim or cause of action for fraud,  misrepresentation  or other
cause under the common law or any  securities,  trade  regulation  or other law)
other than claims and causes of action for  indemnification  under  SECTION 9.1,
9.2 or 9.3 or for specific  performance of the covenants of a party set forth in
this Agreement.

                                   ARTICLE X
                             SECURITIES LAW MATTERS

     The parties agree as follows with respect to the sale or other  disposition
after the Closing Date of Preferred Shares:

     10.1 DISPOSITION  OF PARENT  SECURITIES.  The  Shareholder  represents  and
warrants  that each of the Preferred  Shares being  acquired by him hereunder is
being  acquired and will be acquired for his own account and will not be sold or
otherwise disposed of, except pursuant to (i) an exemption from the registration
requirements  under the  Securities  Act,  which does not  require the filing by
Parent with the SEC of any registration  statement,  offering  circular or other
disclosure statement, in which case the Shareholder shall first supply to Parent
an opinion of counsel  (which  counsel and  opinions  shall be  satisfactory  to
Parent) that such  exception  is  available,  or (ii) an effective  registration
statement filed by Parent with the SEC under the Securities Act.

                                       27
<PAGE>

     10.2 LEGEND. Each of the Preferred Shares shall bear the following legend:

          THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
          TO THE PROVISIONS OF RULE 145(D)  PROMULGATED UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "ACT"),  AND MAY NOT BE SOLD,  TRANSFERRED OR
          OTHERWISE  DISPOSED OF BY THE HOLDER  EXCEPT  PURSUANT TO AN EFFECTIVE
          REGISTRATION  STATEMENT FILED UNDER THE ACT WITH RESPECT THERETO OR IN
          ACCORDANCE   WITH  AN  OPINION  OF  COUNSEL  IN  FORM  AND   SUBSTANCE
          SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS
          AVAILABLE.

                                   ARTICLE XI
                                   DEFINITIONS

     11.1 DEFINED  TERMS.  As used herein,  the  following  terms shall have the
following meanings:

          "Affiliate"  means, with respect to any Person, any other Person which
          directly or indirectly controls,  is controlled by or is under control
          with such Person.

          "Company   Ancillary   Documents"  all  agreements,   instruments  and
          documents,  being or to be executed and delivered by the Company under
          this Agreement or in connection herewith.

          "Company's Knowledge," or words to that effect as used herein refer to
          the personal actual knowledge of the Shareholder, and to the knowledge
          which he should have reasonably had as the chief executive  officer of
          the  Company  who was  involved  in the day to day  operations  of the
          Company.

          "Contract"  means  any  indenture,   lease,  sublease,  license,  loan
          agreement,  mortgage,  note,  indenture,   restriction,  will,  trust,
          commitment,  obligation or other  contract,  agreement or  instrument,
          whether written or oral.

          "Dissenting  Shareholder"  means any  holder of  capital  stock of the
          Company  who,  as a result  of the  transaction  contemplated  hereby,
          perfects his, her or its rights in accordance with Sections 262 of the
          DGCL and  ceases  to have any of the  rights of a  shareholder  of the
          Company  other than the right to be paid the payments  provided for by
          the DGCL for his,  her or its shares of capital  stock of the  Company
          and any other rights under the DGCL.

          "Environmental  Law"  means all laws,  statutes,  regulations,  rules,
          codes or ordinances derived from or relating to all federal, state and
          local laws or regulations relating to or addressing the environmental,
          health or safety,  including,  but not limited  to, the  Comprehensive
          Environmental  Response,  Compensation  and  Liability Act of 1980, as
          amended by the Superfund

                                       28
<PAGE>

          Amendment and Reauthorization Act of 1986, 42 U.S.C.  ss.9601, et seq.
          (hereinafter  collectively "CERCLA"); the Solid Waste Disposal Act, as
          amended by the  Resource  Conservation  and  Recovery  Act of 1976 and
          subsequent  Hazardous  and Solid Waste  Amendments  of 1984, 42 U.S.C.
          ss.6901  et seq.  ("SARA")  (hereinafter,  collectively  "RCRA"),  the
          Hazardous Materials Transportation Act, as amended, 49 U.S.C. ss.1801,
          et seq.; the Clean Water Act, as amended, 33 U.S. C. ss.1311, et seq.;
          the  Clean  Air  Act,  as  amended  (42  U.S.C.  ss.7401-7642);  Toxic
          Substances  Control Act, as amended,  15 U.S. C. ss.2601 et seq.;  the
          Federal  Insecticide,  Fungicide,  and Rodenticide Act, as amended,  7
          U.S.C.  ss.136-136y  ("FIFRA");  the Emergency  Planning and Community
          Right-to-Know  Act of 1986, as amended,  42 U.S.C.  ss.11001,  et seq.
          (Title III of SARA) ("EPCRA");  the Occupational Safety and Health Act
          of 1970, as amended, 29 U.S.C. ss.651, et seq. ("OSHA").

          "Environmental  Lien"  means  a Lien  in  favor  of  any  Governmental
          Authority for (i) any liability under any  Environmental  Law, or (ii)
          damages arising from, or costs incurred by such Governmental Authority
          in  response  to, a  Release  or  threatened  Release  of a  Hazardous
          Substance into the environment.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
          amended.

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

          "Expenses"  means any and all  expenses  incurred in  connection  with
          investigating,  defending  or  asserting  any claim,  action,  suit or
          proceeding  incident  to  any  matter  indemnified  against  hereunder
          (including,  without  limitation,  court  filing  fees,  court  costs,
          arbitration  fees or costs,  witness  fees,  and  reasonable  fees and
          disbursements  of  legal  counsel,  investigators,  expert  witnesses,
          consultants, accountants and other professionals).

          "GAAP" means generally accepted accounting principles in effect in the
          United States of America from time to time.

          "Governmental  Authority"  means any nation or government,  any state,
          regional, local or other political subdivision thereof, and any entity
          or official exercising executive, legislative, judicial, regulatory or
          administrative functions of or pertaining to government.

          "Hazardous Substances" means any substance,  chemical or waste that is
          listed,  or contains  material  amounts of one or more components that
          are  defined,  designated,   classified,   considered  or  listed,  as
          hazardous,  toxic or radioactive under any Environmental  Law; as well
          as any asbestos or asbestos-containing material, petroleum,  petroleum
          product or by-product, crude oil or any fraction thereof, natural gas,
          natural gas liquids,  liquefied  natural gas,  synthetic gas usable as
          fuel, or polychlorinated biphenyls ("PCBS").

                                       29
<PAGE>

          "Intellectual Property" means (i) all names, brands, logos and slogans
          embodying  business or product goodwill or indications of origin,  and
          all trademarks,  corporate names,  trade names,  service marks,  trade
          dress, domain names and universal resource locators, together with all
          translations,  adaptations,  derivations and combinations  thereof and
          all applications,  registrations and renewals in connection therewith,
          and all of the goodwill associated therewith; (ii) all patents, patent
          applications,  patent  disclosures,  inventions (whether patentable or
          unpatentable   and  whether  or  not  reduced  to  practice)  and  all
          improvements thereof,  including, but not limited to, any provisional,
          utility, continuation, continuation-in-part or divisional applications
          filed in the U.S. or other  jurisdictions and all reissues,  revisions
          and  extensions  thereof and all  reexamination  certificates  issuing
          therefrom;  (iii) all websites,  copyrights,  and copyrightable  works
          both   published  and   unpublished,   including  all   registrations,
          applications and renewals in connection  therewith;  (iv) all computer
          and electronic data processing programs and software programs (in both
          source  code and  object  code  form),  data,  databases  and  related
          documentation;   (v)  all  inventions,   improvements,   developments,
          modifications,   derivative  works,   know-how,   trade  secrets,  and
          confidential information (including research and development, know-how
          formulas,  compositions,  manufacturing  and production  processes and
          techniques, methods, schematics,  technology, technical data, designs,
          drawings,  flowcharts,  block diagrams,  specifications,  customer and
          supplier  lists,   pricing  and  cost  information  and  business  and
          marketing  plans  and  proposals);  (vi)  all  licenses,  sublicenses,
          permissions and other agreements relating to any of the foregoing; and
          (vii) all other  intellectual  property  rights (in  whatever  form or
          medium)  relating  to any of the  foregoing  (including  remedies  and
          recoveries  against  infringement  hereof and rights of  protection of
          interest therein under the laws of all jurisdictions).

          "Lien" means any mortgage,  pledge,  security  interest,  encumbrance,
          lien or  charge  of any  kind  (including,  but not  limited  to,  any
          conditional sale or other title retention agreement,  any lease in the
          nature  thereof,  and the filing of or agreement to give any financing
          statement  under the Uniform  Commercial Code or comparable law or any
          jurisdiction  in  connection  with  such  mortgage,  pledge,  security
          interest, encumbrance, lien or charge).

          "Losses"  means  any loss,  cost,  obligation,  liability,  settlement
          payment, award, judgment, fine, penalty,  damage, expense,  deficiency
          or other charge, but not including Expenses.

          "Mergeco Ancillary  Agreements" means all agreements,  instruments and
          documents  being or to be executed and delivered by Mergeco under this
          Agreement or in connection herewith.

          "Parent  Ancillary  Documents"  means all agreements,  instruments and
          documents  being or to be executed and  delivered by Parent under this
          Agreement or in connection herewith.

                                       30
<PAGE>

          "Person"  means  an  individual,  partnership,  corporation,  business
          trust, joint stock company, estate, trust, unincorporated association,
          joint  venture,  Governmental  Authority or other entity,  of whatever
          nature.

          "Property"  means  any real or  personal  property,  plant,  building,
          facility,  structure,  underground storage tank, equipment or unit, or
          other asset  owned,  leased or  operated  by the Company  prior to the
          Closing Date (including any surface water thereon or adjacent thereto,
          and soil or groundwater thereunder).

          "SEC" means the Securities and Exchange Commission.

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

          "Shareholder  Ancillary Agreements" means all agreements,  instruments
          and  documents  being or to be executed and  delivered by  Shareholder
          under this Agreement or in connection herewith.

          "Tax Return"  means any tax return,  filing or  information  statement
          required to be filed in connection  with or with respect to any Taxes;
          and

          "Taxes" means all taxes, fees or other assessments, including, but not
          limited to, income, excise,  property,  sales, franchise,  intangible,
          withholding,  social  security and  unemployment  taxes imposed by any
          federal, state, local or foreign governmental agency, and any interest
          or penalties related thereto.

     11.2 OTHER DEFINITIONAL PROVISIONS.

          (a)  All  terms  defined  in this  Agreement  shall  have the  defined
meanings  when used in any  certificates,  reports  or other  documents  made or
delivered pursuant hereto or thereto, unless the context otherwise requires.

          (b)  Terms  defined in the singular  shall have a  comparable  meaning
when used in the plural, and vice versa.

          (c)  All  matters  of an  accounting  nature in  connection  with this
Agreement  and the  transactions  contemplated  hereby  shall be  determined  in
accordance  with GAAP applied on a basis  consistent  with prior periods,  where
applicable.

          (d)  As used herein, the neuter gender shall also denote the masculine
and  feminine,  and the  masculine  gender  shall  also  denote  the  neuter and
feminine, where the context so permits.

                                  ARTICLE XII
                        TERMINATION, AMENDMENT AND WAIVER

     12.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:

                                       31
<PAGE>

          (a)  at any time prior to the Closing Date, by mutual written  consent
of Parent and the Company at any time prior to the Closing;

          (b)  at any time prior to the Closing  Date, by Parent in the event of
a material  breach by the Company or the  Shareholder  of any  provision of this
Agreement,  by  Parent  giving  notice  thereof  to the  Company  specifying  in
reasonable detail the material breach;

          (c)  at any time  prior to the  Closing  Date,  by the  Company in the
event of a  material  breach by  Parent  or  Mergeco  of any  provision  of this
Agreement,  by the  Company  giving  notice  thereof  to  Parent  specifying  in
reasonable detail the material breach; or

          (d)  at any time prior to the  Closing  Date,  by any of Parent or the
Shareholder  if the  Closing  shall  not have  occurred  by  January  31,  2004;
PROVIDED, HOWEVER, that neither Parent, nor the Shareholder shall be entitled to
terminate  this  Agreement  pursuant to this  SECTION  12.1(d),  if such party's
knowing or willful  breach of this Agreement has prevented the  consummation  of
the transactions contemplated hereby.

     12.2 EFFECT  OF  TERMINATION.  Except  as a party  may  otherwise  agree in
writing,  the  termination of this Agreement by a party pursuant to this Section
will not be deemed to be a waiver of any rights of such party or its  Affiliates
who are parties to this Agreement arising from any default thereunder by another
party.

                                  ARTICLE XIII
                               GENERAL PROVISIONS

     13.1 NOTICES.   All  notices,   requests,   demands,   claims,   and  other
communications  hereunder  shall be in  writing  and shall be  delivered  (which
delivery may be by contract  carrier,  receipt  acknowledged,  or by telecopy or
other electronic  transmission) to a party at the following  address or telecopy
number for such party (or to such other  address or telecopy  number  which such
party shall designate in writing to the other party):

          (a)  if to Parent to:

               Xechem International, Inc.
               100 Jersey Avenue
               Building B Suite 310
               New Brunswick, NJ 08901

               Attn: William Pursley
               Phone: 732-247-3300
               Fax: 732-247-4090

               with a copy to:

               Shefsky & Froelich Ltd.
               444 North Michigan Avenue
               Suite 2500
               Chicago, Illinois 60611

                                       32
<PAGE>

               Attn: Mitchell D Goldsmith
               Phone: (312) 836-4006
               Fax: (312) 527-5921

          (b)  if to the Company or the Shareholder to:

               Dr. Kesner
               17 Spring Hill Lake Road
               West Orange, NJ, 07052

               And
               Dr. Stracher
               47 The Oaks
               Roslyn, NY, 11576

               With a copy to:
               Lampf, Lipkind, Prupis & Petigrow
               210 East 49th Street
               New York, New York 10017
               Attn: Harvey Kesner
               Phone: 212-527-9974
               Fax: 212-527-9976

     13.2 ENTIRE   AGREEMENT.   This  Agreement   (including  the  Exhibits  and
Schedules)  contains the entire  understanding  of the parties in respect of its
subject matter and supersedes all prior agreements and  understandings  (oral or
written)  between or among the parties with respect to such subject matter.  The
Exhibits  and  Schedules  constitute  a part  hereof as though set forth in full
above.

     13.3 EXPENSES.  Except as otherwise  provided herein, the parties shall pay
their own fees and  expenses,  including  their own  counsel  fees,  incurred in
connection with this Agreement or any transaction contemplated hereby.

     13.4 AMENDMENT;  WAIVER.  This  Agreement  may  not be  modified,  amended,
supplemented,  canceled or discharged,  except by written instrument executed by
all parties.  No failure to  exercise,  and no delay in  exercising,  any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right,  power or privilege  hereunder preclude
the exercise of any other right, power or privilege.  No waiver of any breach of
any  provision  shall be deemed to be a waiver of any  preceding  or  succeeding
breach of the same or any other provision,  nor shall any waiver be implied from
any course of dealing between the parties.  No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for  performance of any other  obligations
or any other acts.

     13.5 BINDING  EFFECT;  ASSIGNMENT.  The  rights  and  obligations  of  this
Agreement  shall  bind  and  inure  to the  benefit  of the  parties  and  their
respective successors, heirs and assigns.

                                       33
<PAGE>

Nothing  expressed or implied herein shall be construed to give any other person
any legal or equitable rights hereunder.

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

     13.7 INTERPRETATION.  When a  reference  is made in  this  Agreement  to an
article, section,  paragraph,  clause, schedule or exhibit, such reference shall
be deemed to be to this  Agreement  unless  otherwise  indicated.  The  headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation  of this Agreement.  Whenever the words
"include,"  "includes" or "including" are used in this Agreement,  they shall be
deemed to be followed by the words  "without  limitation."  Time shall be of the
essence in this Agreement.

     13.8 GOVERNING LAW;  INTERPRETATION.  This Agreement  shall be construed in
accordance  with and  governed  for all  purposes  by the  laws of the  State of
Delaware applicable to contracts executed and to be wholly performed within such
State.

     13.9 ARM'S LENGTH NEGOTIATIONS.  Each party herein expressly represents and
warrants to all other parties hereto that (a) before  executing this  Agreement,
said party has fully  informed  itself of the terms,  contents,  conditions  and
effects of this Agreement;  (b) said party has relied solely and completely upon
its own  judgment  in  executing  this  Agreement;  (c) said  party  has had the
opportunity to seek and has obtained the advice of counsel before executing this
Agreement;  (d) said  party  has acted  voluntarily  and of its own free will in
executing  this  Agreement;  (e) said party is not acting under duress,  whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.

                            (SIGNATURES PAGE FOLLOWS)

                                       34
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and delivered as of the day and year first above written.

                                        XECHEM INTERNATIONAL, INC

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

                                        CEPTOR ACQUISITION, INC.

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

                                        CEPTOR CORPORATION

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

                                        ------------------------------
                                                 SHAREHOLDER

<PAGE>EXHIBIT 10.2

                          CERTIFICATE OF DESIGNATIONS,
                            PREFERENCES AND RIGHTS OF
                    CLASS C, SERIES 7 VOTING PREFERRED STOCK
                                       OF
                           XECHEM INTERNATIONAL, INC.

<PAGE>

                          CERTIFICATE OF DESIGNATIONS,
                            PREFERENCES AND RIGHTS OF
                    CLASS C, SERIES 7 VOTING PREFERRED STOCK
                                       OF
                           XECHEM INTERNATIONAL, INC.

                             A DELAWARE CORPORATION

                         PURSUANT TO SECTION 151 OF THE
                            DELAWARE CORPORATION LAW

     1.   AUTHORIZING RESOLUTION.

     Xechem International,  Inc., a corporation organized and existing under the
laws of the  State  of  Delaware  (the  "Company"),  hereby  certifies  that the
following  resolutions  were duly  adopted on December  22, 2003 by the Board of
Directors of the Company  pursuant to the authority of the Board of Directors as
required by Section 151 of the Delaware General Corporation Law:

     RESOLVED,  that pursuant to the authority granted to the Board of Directors
in accordance with the provisions of the Company's Certificate of Incorporation,
as amended,  the Board of Directors hereby  authorizes a series of the Company's
previously authorized Class C Preferred Stock, $0.00001 par value per share (the
"Class C Preferred  Stock" or the  "Preferred C Shares"),  and hereby states the
designation and number of shares,  and fixes the relative  rights,  preferences,
privileges and restrictions thereof as follows:

     2.   DESIGNATIONS  AND NUMBERS OF SHARES.  The  designation of this series,
which  consists  of 6,000  shares of Class C  Preferred  Stock,  is the "Class C
Series 7 Voting  Preferred  Stock"  (hereinafter  called the "Series 7 Preferred
Stock")")  and the face amount shall be One  Thousand  Dollars  ($1,000.00)  per
share (the "Stated Value"). .

     3.   DIVIDENDS.  The holders of shares of Series 7 Preferred Stock (each, a
"Holder" and collectively, the "Holders") shall be entitled to receive dividends
("Dividends") on the Series 7 Preferred Stock, at the rate paid on the Company's
common  stock,  $0.00001  par value per share  (the  "Common  Shares" or "Common
Stock"),  whenever  funds are legally  available and when and as declared by the
Company's Board of Directors

     4.   PRIORITY.

          4.1  PAYMENT OF DISSOLUTION,  ETC. Upon the occurrence and continuance
of  (i)  any  insolvency  or  bankruptcy   proceedings,   or  any  receivership,
liquidation,   reorganization   or  other  similar   proceedings  in  connection
therewith, commenced by the Company or by its creditors, as such, or relating to
its assets,  not stayed or dismissed  within sixty (60) days after the filing or
initiation of the  proceedings,  or (ii) the  dissolution or other winding up of
the Company  whether  total or partial,  whether  voluntary or  involuntary  and
whether or not  involving  insolvency or  bankruptcy  proceedings,  or (iii) any
assignment for the benefit of creditors or any marshaling of the material assets
or material liabilities of the Company (a "Liquidation  Event"), no distribution
shall be made to the holders of any shares of capital stock (other than Parity

<PAGE>

Securities or Senior  Securities (as defined below)) of the Company unless prior
thereto each Holder shall have received the  Liquidation  Preference (as defined
below) with  respect to each share of Series 7 Preferred  Stock then held by the
Holder.  Neither  the  consolidation  or merger of the  Company  (regardless  of
whether  the  shareholders  of the  Company  prior  to such  transaction  do not
possess,  immediately  following such  transaction,  securities  representing at
least 50% of the  voting  power of the  surviving  entity),  or a sale of all or
substantially  all of the  Company's  assets for cash or securities or any other
property, shall be considered a liquidation.

     In the event that upon the  occurrence of a Liquidation  Event,  the assets
available for distribution to the Holders of the Series 7 Preferred Stock and to
the holders of the Parity  Securities (as defined below) are insufficient to pay
the  Liquidation  Preference  with respect to all of the  outstanding  shares of
Series 7 Preferred  Stock and of the Parity  Securities,  such  assets  shall be
distributed  ratably  among  such  shares in  proportion  to the ratio  that the
liquidation  preference  payable  on each  such  share  bears  to the  aggregate
liquidation preference payable on all such shares. "Parity Securities" means any
Class C  Preferred  Stock of any series  which  shall,  if the  amounts  payable
thereon in  liquidation  are not paid in full, be entitled to share ratably with
the Series 7 Preferred Stock in any distribution of assets.  "Junior Securities"
means the Common  Shares,  the Series 6 Preferred  Stock,  and the shares of any
other class or series of equity securities of the Company which (by the terms of
the Certificate of Incorporation or of the instrument by which the Board, acting
pursuant to authority  granted in the Certificate of  Incorporation,  as amended
from time to time,  shall fix the relative  rights,  preferences and limitations
thereof) shall be  subordinated or junior to the rights of the holders of Series
7 Preferred Stock upon a Liquidation Event.  "Senior  Securities" shall mean the
Class A Voting  Preferred  Stock of the  Company and any  subsequent  classes or
series of preferred stock of the Company with liquidation  preferences  superior
to the Series 7 Preferred Stock Liquidation Preference.

          4.2  LIQUIDATION PREFERENCE. The "Liquidation Preference" with respect
to a share of Series 7 Preferred  Stock shall mean an amount equal to the Stated
Value of such share plus all accrued and unpaid Dividends thereon.

          4.3  RANKING.  The Series 7 Preferred  Stock will rank with respect to
rights upon a Liquidation Event,  senior to Junior Securities,  as they exist on
the date  hereof or as the Junior  Securities  may be  constituted  from time to
time;  on a parity  with  Parity  Securities  as the  Parity  Securities  may be
constituted  from time to time,  and  junior to the Senior  Securities,  as they
exist on the date hereof or as the Senior  Securities  may be  constituted  from
time to time.  The  Board of  Directors  in its sole  discretion  may  designate
subsequent  series of Class C Preferred Stock to be senior,  junior or in parity
with the Series 7 Preferred Stock.

     5.   Conversion.

          5.1  RIGHT  TO  CONVERT.  Subject  to  the  limitations  contained  in
Sections  5.7 and 5.9 below,  each Holder shall have the right to convert at any
time and from time to time,  some or all of its  shares  of  Series 7  Preferred
Stock into the number of fully-paid and non-assessable  Common Shares,  free and
clear of any liens,  claims,  preemptive  rights or  encumbrances  imposed by or
through the Company (the "Conversion Shares"), as is computed in accordance with
the terms hereof (a "Conversion").

<PAGE>

          5.2  RESERVATION  OF  COMMON  SHARES  ISSUABLE  UPON  CONVERSION.  The
Company shall at all times reserve and keep  available out of its authorized but
unissued Common Shares, free from any preemptive rights,  solely for the purpose
of  effecting  Conversions  hereunder,  the  number of its  Common  Shares  (the
"Reserved  Amount")  as shall  from time to time be  sufficient  to  effect  the
Conversion  of the Series 7  Preferred  Stock.  If the  Company  shall issue any
securities  or make any change in its capital  structure  which would change the
number of Conversion  Shares  deliverable upon the Conversion of the outstanding
shares of Series 7 Preferred Stock, the Company shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of Common
Shares  authorized  and  reserved,  free  from any  preemptive  rights,  for the
Conversion.

          5.3  CONVERSION  NOTICE.  In  order  to  convert  shares  of  Series 7
Preferred  Stock,  or any portion  thereof,  the Holder  shall send by facsimile
transmission  (with a hard copy to follow by first class  mail) on the  business
day before the Holder wishes to effect a Conversion (the "Conversion Date"), (i)
a notice of conversion to the Company and to its designated  transfer  agent, if
any, for the Common Shares (the "Transfer  Agent")  stating the number of shares
of Series 7 Preferred  Stock to be converted,  the amount of Dividends  declared
but unpaid on the shares of Series 7 Preferred  Stock then held by the Holder up
to and including the  Conversion  Date,  the  applicable  Conversion  Rate and a
calculation  of the number of Common Shares  issuable upon the  Conversion  (the
"Conversion  Notice")  and  (ii)  a  copy  of the  certificate  or  certificates
representing  the Series 7 Preferred  Stock being  converted.  The Holder  shall
thereafter  send the original of the  certificate or  certificates  by overnight
mail to the  Company.  In the case of a  dispute  as to the  calculation  of the
Conversion  Rate or the number of Conversion  Shares issuable upon a Conversion,
the Company shall promptly  issue to the Holder the number of Conversion  Shares
that  are not  disputed  and  shall  submit  the  disputed  calculations  to its
independent  accountants within two (2) business days of receipt of the Holder's
Conversion  Notice.  The Company  shall cause its  accountants  to calculate the
Conversion  Rate as provided  herein and to notify the Company and the Holder of
the  results in writing no later than two  business  days  following  the day on
which it received the disputed calculations.  The accountants' calculation shall
be deemed conclusive absent manifest error. The fees of the accountants shall be
borne equally by the Company and the Holder delivering the Conversion Notice.

          5.4  NUMBER OF  CONVERSION  SHARES;  CONVERSION  RATE.  Subject to the
provisions  of  Section 6,  below,  each  share of Series 7  Preferred  Stock is
convertible,  pursuant to a Conversion, into duly and validly issued, fully paid
and  nonassessable  Common Shares at a rate of five thousand  (5,000)  shares of
Common Stock for each share of Series 7 Preferred  Stock,  subject to adjustment
as set forth below (this rate,  as adjusted from time to time,  the  "Conversion
Rate").

          5.5  DELIVERY OF COMMON SHARES UPON CONVERSION;  LEGEND.  Upon receipt
of a Conversion  Notice  pursuant to Section 5.3 above,  the Company  shall,  no
later than the close of  business  on the later to occur of (i) the third  (3rd)
business day following the Conversion  Date set forth in the  Conversion  Notice
and (ii) the business day following the day on which the original certificate or
certificates representing the shares of Series 7 Preferred Stock being converted
are received by the Company (the "Delivery  Date"),  issue and deliver or caused
to be  delivered  to the Holder the number of  Conversion  Shares as  determined
hereunder.  Each certificate  representing the Conversion  Shares shall bear the
following legend:

<PAGE>

          THE SHARES OF COMMON STOCK REPRESENTED BY THIS  CERTIFICATE:  HAVE NOT
          BEEN REGISTERED  UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS
          AND MAY NOT BE  SOLD,  TRANSFERRED  OR  OTHERWISE  DISPOSED  OF BY THE
          HOLDER EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT FILED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  WITH RESPECT THERETO OR
          IN  ACCORDANCE  WITH AN  OPINION  OF  COUNSEL  IN FORM  AND  SUBSTANCE
          SATISFACTORY  TO THE ISSUER THAT AN EXEMPTION  FROM SUCH  REGISTRATION
          AND FROM ANY APPLICABLE STATE SECURITIES LAWS IS AVAILABLE.

          5.6  NO FRACTIONAL SHARES. No fractional Common Shares shall be issued
upon the Conversion of any Series 7 Preferred  Stock.  Upon any  Conversion,  in
lieu of any  fractional  Share  otherwise  issuable in respect of the  aggregate
number of Series 7 Preferred Stock of any Holder that are converted,  the Holder
shall be entitled to receive an amount in cash  (computed  to the nearest  cent,
with one-half  cent rounded  upward) equal to the same fraction of closing price
of a share of Common  Stock on the OTC  Bulletin  Board (or, if the OTC Bulletin
Board should not be principal  market on which the Common Stock shall be trading
or quoted,  then on the then current principal market, or if there is no market,
as  conclusively  determined by the Company's Board of Directors in its sole and
absolute  good faith  discretion).  If more than one share of Series 7 Preferred
Stock is surrendered  for Conversion at one time by or for the same Holder,  the
number of full Common Shares issuable upon Conversion  thereof shall be computed
on the basis of the  aggregate  number of  shares  of Series 7  Preferred  Stock
surrendered.

          5.7  CERTIFICATE  AS TO  ADJUSTMENTS.  Upon  the  occurrence  of  each
adjustment or  readjustment  of the Conversion Rate with respect to the Series 7
Preferred Stock pursuant to this Section 5, the Company,  at its expense,  shall
compute such  adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each  holder of Series 7  Preferred  Stock a  certificate
setting forth such  adjustment or  readjustment  and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written  request at any time of any Holder,  furnish or cause to be furnished to
such  Holder  a  like   certificate   setting  forth  (a)such   adjustment   and
readjustment,  (b)the  Conversion  Rate,  and (c)the  number of shares of Common
Stock and the  amount,  if any,  of other  property  which at the time  would be
received upon the conversion of a share of Series 7 Preferred Stock.

          5.8  MANDATORY CONVERSION.  Upon the declaration of effectiveness of a
firm commitment  public offering of the Company's Common Stock for $5,000,000 or
more at a post  money  valuation  of not less  than  $10,000,000,  the  Series 7
Preferred Stock shall  automatically  convert into Common Shares of the Company,
in accordance with the terms of Section 5 and Section 6 hereof.

          5.9  LIMITATION  OF  CONVERSION.  Notwithstanding  the  rights  of the
Holders to convert the Series 7 Preferred  Stock into shares of Common  Stock as
determined by the Conversion Rate and the other terms hereunder, no Holder shall
have the right to convert such

<PAGE>

Holder's  shares of Series 7  Preferred  Stock into  shares of Common  Stock if,
immediately  after giving effect to such conversion,  such Holder will be deemed
to be the  beneficial  owner of 5% or more of the  outstanding  shares of Common
Stock of the Company,  as determined  pursuant to Rule 13(d)-3 of the Securities
and Exchange Act of 1934 as amended.

     6.   Adjustments to Conversion Rate.

          6.1  ADJUSTMENT.  From and after the date hereof,  the Conversion Rate
is subject to  adjustment  from time to time as provided  below in this  Section
6.1.

               (i)  If the Company sets a  "Determination  Date" (as hereinafter
          defined)  with respect to the payment of, or the making of, a dividend
          or other distribution in Common Shares or other equity securities,  or
          any   indebtedness  or  other   securities   convertible  into  equity
          securities,  with  respect  to  its  Common  Shares  or  other  equity
          securities,  or any indebtedness or other securities  convertible into
          equity securities  (including by way of reclassification of any of its
          Common Shares), the Conversion Rate in effect on the day following the
          Determination  Date shall be increased by  multiplying  the Conversion
          Rate in effect on the Determination Date by a fraction,  the numerator
          of which shall be:

                    (1)  the sum of the number of Common Shares  outstanding  on
               the  Determination  Date,  immediately  prior to the  dividend or
               other  distribution,  plus the total number of Common  Shares (or
               the number of Commons  Shares into which such  securities  may be
               converted), constituting the dividend or other distribution;

and the denominator of which shall be:

                    (2)  the  number  of  Common  Shares   outstanding   on  the
               Determination   Date,   excluding   effect  of  the  dividend  or
               distribution.

               (ii) If outstanding  Common Shares are subdivided or split into a
          greater number of Common  Shares,  or combined into a lesser number of
          Common Shares, pursuant to a stock dividend, stock split or otherwise,
          the  Conversion  Rate in effect  on the day  following  such  split or
          combination shall be increased in the case of a split, or decreased in
          the case of a  combination,  by  multiplying  the  Conversion  Rate in
          effect  on the date of the split or  combination  by a  fraction,  the
          numerator of which shall be:

                    (1)  the sum of the  number  of  Common  Shares  outstanding
               immediately after the split or combination;

and the denominator of which shall be:

<PAGE>

                    (2)  the  number of Common  Shares  outstanding  immediately
               prior to the split or  combination,  excluding the effect of such
               split or combination.

               (iii)For the  purposes  of this  Section  6, the number of Common
          Shares at any time  outstanding  (i) shall  include,  in  addition  to
          outstanding  Common Shares, the number of Common Shares into which the
          Series  7  Preferred  Stock,  or  any of the  Company's  other  equity
          securities,  convertible  indebtedness or other securities convertible
          into Common  Shares  (specifically  excluded  from  Common  Shares are
          warrants  or  options to acquire  Common  Shares);  and (ii) shall not
          include  treasury  shares.  For the  purposes  of this  Section 6, the
          number  of  Common   Shares   constituting   the   dividend  or  other
          distribution shall include,  if applicable,  Common Shares represented
          by cash issued in lieu of fractional  Common  Shares.  The increase in
          the  Conversion  Rate will become  effective on the day  following the
          Determination  Date. The  "Determination  Date" means, with respect to
          any   dividend  or  other   distribution,   the  date  fixed  for  the
          determination  of  the  holders  of  Common  Shares  or  other  equity
          securities  of  the  Company  entitled  to  receive  the  dividend  or
          distribution

               (iv) All adjustments to the Conversion Rate will be calculated to
          the nearest 1/100th of a Common Share. No adjustment in the Conversion
          Rate will be required unless the adjustment  would require an increase
          or decrease of at least one percent in the Conversion Rate;  provided,
          however,  that any adjustments which by reason of this Section 6.1(iv)
          are not  required  to be made shall be carried  forward and taken into
          account  in  any  subsequent   adjustment.   All  adjustments  to  the
          Conversion Rate shall be made successively.

          6.2  ADJUSTMENT FOR  REORGANIZATION,  CONSOLIDATION,  MERGER,  SALE OF
ASSETS.   If  there  shall  occur  any  (i)   capital   reorganization   or  any
reclassification of the Common Shares or other equity securities of the Company,
(ii)  the  consolidation  or  merger  of  the  Company,  or a  sale  of  all  or
substantially  all of the  Company's  assets for cash or securities or any other
property,  (each,  an  "Organic  Change"),  each  outstanding  share of Series 7
Preferred  Stock shall  thereafter be  convertible  into the number of shares or
other  securities  or property to which a holder of the number of Common  Shares
deliverable upon conversion of each share of Series 7 Preferred Stock would have
been entitled upon the Organic Change.  Appropriate adjustment (as determined by
the Company and the holders of a majority of the outstanding  Shares of Series 7
Preferred Stock) shall be made in the application of the provisions  hereof with
respect to the rights of the Holders so that the provisions  hereof  (including,
without limitation,  provisions with respect to changes in and other adjustments
of the Conversion Rate) shall thereafter be applicable,  as nearly as reasonably
practicable,  in relation to any shares or other property thereafter deliverable
upon the conversion of the Series 7 Preferred Stock.

     7.   VOTING. Except as otherwise provided by law, the Holders of the Series
7 Preferred  Stock and the holders of Common  Shares  shall vote as one class in
any and all matters with respect to which  holders of Common  Shares have voting
or consent rights. Each share of

<PAGE>

Series 7 Preferred  Stock shall be entitled to cast the number of votes equal to
the number of Conversion  Shares into which a share of Series 7 Preferred  Stock
is then  convertible;  provided,  however,  that any fraction of a vote shall be
rounded  up or  down,  as the  case  may be,  to the  nearest  whole  vote.  The
Conversion  Rate  to be used in  connection  with  the  foregoing  shall  be the
Conversion Rate in effect on the date fixed for the  determination of holders of
Common Shares entitled to vote on the matter.

     8.   HOLDERS;  NOTICES. The term "Holder" or "Holders" wherever used herein
with respect to a holder or holders of shares of Series 7 Preferred  Stock shall
mean the holder or  holders  of record of such  shares as set forth on the stock
transfer  record of the  Company.  Whenever  any notice is  required to be given
under this Certificate of  Designations,  such notice may be given personally or
by mail.  Any notice given to a Holder of any share of Series 7 Preferred  Stock
shall be  sufficient  if given to the holder of record of such share at the last
address  set  forth  for  such  holder  on  the  stock  transfer  record  of the
Corporation.  Any  notice  given by mail shall be deemed to have been given when
deposited  in  the  United  States  mail  with  postage  thereon  prepaid.   The
Corporation  shall send to the holders of the Series 7 Preferred Stock copies of
any  notices,  statements,  or other  communications  sent to the holders of the
Common  Stock and of the  setting of a record date for the holders of the Common
Stock for any purpose.

     9.   NO IMPAIRMENT.  Subject to the terms of Section 10 below,  the Company
will not, by amendment of its  Certificate  of  Incorporation,  avoid or seek to
avoid  the  observance  or  performance  of any of the terms to be  observed  or
performed  hereunder by the Company,  but will at all times in good faith assist
in the carrying out of all the provisions of this Certificate of Designation and
in the taking of all such action as may be necessary or  appropriate in order to
protect  the  rights of the  holders  of the Series 7  Preferred  Stock  against
impairment.

     10.  AMENDMENT.  This  Certificate may only be amended from time to time by
written  consent of the  Company and the Holders of a majority of the issued and
outstanding shares of Series 7 Preferred Stock.

     IN WITNESS WHEREOF, Xechem International,  Inc. has caused this Certificate
of  Designation,  Preferences,  and  Rights  of the  Class  C,  Series  7 Voting
Preferred  Stock to be executed by its duly  authorized  officer  this __ day of
January, 2004 .

                                        XECHEM INTERNATIONAL, INC.

                                        By:/s/ William Pursley
                                           --------------------
                                           President

<PAGE>

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