MEDAREX INC, SC 13D, 1998-06-19

MEDAREX INC
SC 13D, 1998-06-19
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

SCHEDULE 13D
(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)

Medarex, Inc.
- -------------------------------------------------------------------------------
(Name of Issuer)

COMMON STOCK, par value $0.01
- -------------------------------------------------------------------------------
(Title of Class of Securities)

583916-10-1
- -------------------------------------------------------------------------------
CUSIP Number

BCC Acquisition I LLC
c/o Bay City Capital LLC
750 Battery Street
Suite 600
San Francisco, California 94111
(415) 676-3830

with a copy to:

Timothy G. Hoxie, Esq.
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, California 94104
(415) 772-6052
- -------------------------------------------------------------------------------
(Name, address and telephone number
of person authorized to receive notices and communications)

June 10,1998
-------------
(Date of Event which requires
filing of this statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box: / /

(Continued on following pages)

(Page 1 of 20 Pages)

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CUSIP NO. 583916-10-1 13D Page 2 of 20 pages
-----------
- --------------------------------------------------------------------------------

1) NAMES OF REPORTING PERSONS BCC Acquisition I LLC

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

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/

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

3) SEC USE ONLY

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

4) SOURCE OF FUNDS WC, AF

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

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)

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

6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

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

NUMBER OF 7) SOLE VOTING POWER -0-
SHARES
--------------------------------------------------------------
BENEFICIALLY
OWNED 8) SHARED VOTING POWER up to 7,383,629 shares
BY
--------------------------------------------------------------
EACH
REPORTING 9) SOLE DISPOSITIVE POWER -0-
PERSON
--------------------------------------------------------------
WITH
10) SHARED DISPOSITIVE POWER up to 7,383,629 shares

- --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

up to 7,383,629 shares

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

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /

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

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 25.0%

- --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON OO

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CUSIP NO. 583916-10-1 13D Page 3 of 20 pages
-----------

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

1) NAMES OF REPORTING PERSONS The Bay City Capital Fund I, L.P.

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

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
- --------------------------------------------------------------------------------

3) SEC USE ONLY

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

4) SOURCE OF FUNDS AF

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

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) / /

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

6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

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

NUMBER OF 7) SOLE VOTING POWER -0-
SHARES
---------------------------------------------------------------
BENEFICIALLY
OWNED 8) SHARED VOTING POWER up to 7,383,629 shares
BY
---------------------------------------------------------------
EACH
REPORTING 9) SOLE DISPOSITIVE POWER -0-
PERSON
---------------------------------------------------------------
WITH
10) SHARED DISPOSITIVE POWER up to 7,383,629 shares

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

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

up to 7,383,629 shares

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

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /

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

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 25.0%

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

14) TYPE OF REPORTING PERSON PN

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

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CUSIP NO. 583916-10-1 13D Page 4 of 20 pages
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- --------------------------------------------------------------------------------
1) NAMES OF REPORTING PERSONS Bay City Capital Management LLC

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

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/

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

3) SEC USE ONLY

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

4) SOURCE OF FUNDS AF

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

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) / /

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

6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

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

NUMBER OF 7) SOLE VOTING POWER -0-
SHARES
---------------------------------------------------------------
BENEFICIALLY
OWNED 8) SHARED VOTING POWER up to 7,383,629 shares
BY
---------------------------------------------------------------
EACH
REPORTING 9) SOLE DISPOSITIVE POWER -0-
PERSON
WITH ---------------------------------------------------------------
10) SHARED DISPOSITIVE POWER up to 7,383,629 shares

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

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

up to 7,383,629 shares

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

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /

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

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 25.0%

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

14) TYPE OF REPORTING PERSON OO

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CUSIP NO. 583916-10-1 13D Page 5 of 20 pages
-----------

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

1) NAMES OF REPORTING PERSONS Bay City Capital LLC

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

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/

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

3) SEC USE ONLY

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

4) SOURCE OF FUNDS AF

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

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) / /

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

6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

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

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

up to 7,383,629 shares

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

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /

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

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 25.0%

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

14) TYPE OF REPORTING PERSON OO

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

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CUSIP NO. 583916-10-1 13D Page 6 of 20 pages
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INTRODUCTION

BCC Acquisition I LLC, a Delaware limited liability company ("BCC
Acquisition"), hereby files this Statement on Schedule 13D (the "Statement") on
behalf of the Reporting Persons (as defined under Item 2) identified herein
pursuant to the Agreement with respect to Schedule 13D attached hereto as
Exhibit 7(1).

Bay City Capital Fund I, L.P., a Delaware limited partnership ("BCC"), is
the managing member of BCC Acquisition. Bay City Capital Management, LLC, a
Delaware limited liability company ("BCC Management"), is the general partner of
BCC. Bay City Capital LLC, a Delaware limited liability company ("BCC LLC")
provides investment advice to BCC.

Pursuant to a Rights Exchange Agreement (the "Rights Exchange Agreement"),
dated June 10, 1998, between BCC Acquisition and Medarex, Inc., a New Jersey
corporation (the "Issuer"), attached hereto as Exhibit 7(2), the Issuer agreed
to issue shares ("Shares") of its common stock ("Common Stock")and a warrant or
warrants ("Warrant" or "Warrants") to acquire additional Shares to BCC
Acquisition in exchange for the cancellation of certain rights BCC Acquisition
may subsequently acquire, as described below.

BCC Acquisition made an offer (the "Offer"), as called for in the Rights
Exchange Agreement, to purchase for cash any or all of $44,412,500 (subject to a
$22,206,250 minimum) in aggregate face value (the "Face Value") of the
contingent payment rights (the "Rights") held by the former shareholders of
GenPharm International, Inc. ("GenPharm"), in connection with an acquisition of
GenPharm by the Issuer, on October 21, 1997 (the "Merger"). These Rights arise
out of the Agreement and Plan of Reorganization, between the Issuer, Medarex
Acquisition Corp. and GenPharm, dated as of May 5, 1997 (the "Merger
Agreement"). The Offer is described more fully in the Offer to Purchase
attached hereto as Exhibit 7(5).

The Rights Exchange Agreement and the Offer to Purchase provide that,
immediately upon the consummation of the Offer, BCC Acquisition will exchange
each $6.75 in Face Value of

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CUSIP NO. 583916-10-1 13D Page 7 of 20 pages
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the Rights it acquires in the Offer for (i) one share of the Issuer's Common
Stock (up to a maximum of 6,579,629 shares) plus (ii) a Warrant or Warrants to
purchase .1222 shares of Common Stock of the Issuer (up to a maximum of 804,000
shares) at an exercise price of $10.00 per share exercisable over a period of
seven years. The Warrant or Warrants will be issued upon the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement," attached
hereto as Exhibit 7(3)) between the Issuer and BCC Acquisition.

In the event the minimum amount of Rights are accepted for purchase by BCC
Acquisition and assigned to BCC Acquisition, the number of shares of Common
Stock to be issued by the Issuer to BCC Acquisition in exchange for the Rights
will constitute approximately 14% (or approximately 25% if all the Rights are
assigned and accepted for payment) of the number of shares of the Issuer's
Common Stock that will be outstanding following completion of the Offer, in each
case including the shares that BCC Acquisition would hold upon exercise of the
Warrants.

The Rights Exchange Agreement also provides that the Issuer, while neither
supporting nor opposing the Offer, will facilitate the Offer (by, for example,
allowing transfer of the Rights - which are otherwise nontransferable - to BCC
Acquisition), will register the Shares and the Shares resulting from exercise of
the Warrant or Warrants to be issued to BCC Acquisition and will register any
resale thereof, and will pay to BCC Acquisition a fee of $750,000 (plus
expenses) in certain circumstances if the Offer is not consummated and the
Issuer completes a similar transaction with another party.

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CUSIP NO. 583916-10-1 13D Page 8 of 20 pages
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Item 1. SECURITY AND ISSUER.

The class of equity securities to which this Statement relates to is the
common stock, par value of $0.01, of Medarex, Inc., a corporation incorporated
under the laws of New Jersey, whose principal executive offices are located at
1545 Route 22 East, Annandale, New Jersey 08801.

Item 2. IDENTITY AND BACKGROUND.

This Statement is filed on behalf of BCC Acquisition, BCC, BCC Management
and BCC LLC, which serves as investment advisor to BCC Management pursuant to an
advisory agreement. BCC Acquisition, BCC, BCC Management and BCC LLC are each
referred to herein as a "Reporting Person" and are collectively referred to
herein as the "Reporting Persons."

a. BCC ACQUISITION.

The principal executive offices of BCC Acquisition are located at 750
Battery Street, Suite 600, San Francisco, California, 94111. BCC Acquisition is
a manager-managed Delaware limited liability company formed for the purpose of
completing the transactions described in the Introduction and under Items 3 and
4. The members of BCC Acquisition are BCC and Bay Investment Group, L.L.C., a
Delaware limited liability company ("BIG"). The manager of BCC Acquisition is
BCC, which has sole voting power and dispositive power with respect to the
business, properties and affairs of BCC Acquisition.

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CUSIP NO. 583916-10-1 13D Page 9 of 20 pages
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b. BCC.

The principal executive offices of BCC are located at 750 Battery
Street, Suite 600, San Francisco, California 94111. BCC is a Delaware limited
partnership the principal business of which is making investments in a variety
of special situations, including without limitation, recapitalizations and
biotechnology companies. BCC is the manager of BCC Acquisition and has sole
voting power and dispositive power with respect to the business, properties and
affairs of BCC Acquisition.

c. BCC MANAGEMENT.

The principal executive offices of BCC Management are located at 750
Battery Street, Suite 600, San Francisco, California 94111. BCC Management is a
Delaware limited liability company the principal business of which is serving as
the general partner of BCC. The members of BCC Management are two limited
liability companies, The Craves Group LLC, a Delaware limited liability company,
and BCC Amalgamated, LLC, a Delaware limited liability company. Each member has
a 50% membership interest in BCC Management. The names, business addresses,
principal occupations and citizenship of the managing directors and managers of
BCC Management are set forth on Schedule 1 hereto.

d. BCC LLC.

The principal executive offices of BCC LLC are located at 750 Battery
Street, Suite 600, San Francisco, California 94111. The principal business of
BCC LLC is to provide consulting and other investment banking services to life
sciences companies. BCC LLC is a Delaware limited liability company. The
members of BCC LLC are two limited liability companies, The Craves

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CUSIP NO. 583916-10-1 13D Page 10 of 20 pages
-----------

Group LLC, a Delaware limited liability company, and BCC Amalgamated, LLC, a
Delaware limited liability company. Each member has a 50% membership interest
in BCC LLC. The names, business addresses, principal occupations and
citizenship of the managing directors and managers of BCC Management are set
forth on Schedule 2 hereto.

During the last five years none of the Reporting Persons, nor any of their
individual managers or executive officers, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) nor have any
of such persons been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
State securities laws or finding any violation with respect to such laws.

Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

The total amount of funds required by BCC Acquisition to purchase the
Rights, which are to be exchanged for the Shares and a Warrant or Warrants upon
consummation of the Offer, pursuant to the Rights Exchange Agreement, is between
$17,765,000 and $35,530,000 (the "Funds").

The Limited Liability Company Operating Agreement for BCC Acquisition I
LLC, dated as of June 5, 1998 (the "LLC Agreement," attached hereto as Exhibit
7(4)), by and between BCC and BIG, provides that BCC Acquisition is to receive
$15,000,000 from BCC; the balance of the required Funds up to a maximum of
$23,000,000 will be contributed by BIG. The LLC Agreement also provides, among
other terms, covenants and conditions, that the business of BCC

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CUSIP NO. 583916-10-1 13D Page 11 of 20 pages
-----------

Acquisition shall be exclusively managed by BCC, as the manager of BCC
Acquisition, and that BCC is not removable as manager (as more fully described
in Exhibit 7(4) below).

Item 4. PURPOSE OF TRANSACTION.

The purpose of the transaction is to acquire for cash all of the Rights so
that, upon exchange of the Rights for Shares and a Warrant or Warrants of the
Issuer under the Rights Exchange Agreement, BCC Acquisition will have a
significant equity interest in the Issuer.

The Rights Exchange Agreement and the Offer to Purchase provide that,
immediately upon the consummation of the Offer, BCC Acquisition will exchange
each $6.75 in Face Value of the Rights it acquires in the Offer for (i) one
share of the Issuer's Common Stock (up to a maximum of 6,579,629 shares) plus
(ii) a Warrant or Warrants to purchase .1222 shares of Common Stock of the
Issuer (up to a maximum of 804,000 shares) at an exercise price of $10.00 per
share exercisable over a period of seven years. The Warrant or Warrants will be
issued upon the terms and conditions set forth in the Warrant Agreement (the
"Warrant Agreement," attached hereto as Exhibit 7(3)) between the Issuer and BCC
Acquisition.

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CUSIP NO. 583916-10-1 13D Page 12 of 20 pages
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Upon consummation of the Offer, BCC Acquisition shall obtain representation
on the board of directors of the Issuer. Under the terms of the Rights Exchange
Agreement, the Issuer has agreed to appoint one representative of BCC
Acquisition to serve as a member of the board of directors. In addition, so
long as BCC Acquisition owns at least 5% of the Issuer's outstanding Shares or
at least 75% of the number of Shares it received from the Issuer, as provided in
the Rights Exchange Agreement, the Issuer will use its reasonable best efforts
to ensure that BCC Acquisition's representative is included in the Issuer's
proxy materials as a nominee of the board of directors for election to the board
and is elected to serve on the Issuer's board of directors.

In addition, while no formal agreement currently exists as to any future
changes in the board of directors of the Issuer, discussions have taken place
between the Issuer and BCC Acquisition to the effect that it may be appropriate
for the addition of another new director who has substantial experience and
reputation in the biotechnology or pharmaceutical industry and who is deemed
mutually acceptable by the board of directors of the Issuer and BCC Acquisition.

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CUSIP NO. 583916-10-1 13D Page 13 of 20 pages
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BCC Acquisition does not presently have any plans to acquire control of the
Issuer, nor does it have any current plans relating to or which would result in
(i) an extraordinary corporate transaction relating to Issuer, (ii) the sale or
transfer of a material amount of the Issuer's assets, (iii) a change (beyond
that described above) in the Issuer's board of directors or management, (iv)
beyond that contemplated by the Offer and assigned to BCC Acquisition, the
Rights Exchange Agreement, any material change in the Issuer's capitalization or
dividend policy, (v) any other material change to the Issuer's corporate
structure and business, or (vi) distribution of the Issuer's shares or
termination of the Registration of the Issuer's shares under Section 12 of the
Exchange Act.

While BCC Acquisition presently intends to hold the Shares it acquires
under the Rights Exchange Agreement, it reserves the right to either acquire
more such Shares or sell, in any lawful manner, any or all of such Shares at any
time. In this regard, BCC Acquisition notes that, pursuant to the Rights
Exchange Agreement, the Issuer has agreed to file an S-3 shelf registration
statement covering the Shares resulting from the complete exercise of the
Warrant or Warrants to be acquired by BCC Acquisition within 30 days of the
closing of the Offer.

Item 5. INTEREST IN SECURITIES OF THE ISSUER.

(a) and (b)

The aggregate number of Shares and percentage of Common Stock of the Issuer
(based upon the representation of the Issuer in its Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1998, as filed with the Securities
and Exchange Commission that it had 22,197,486 shares of Common Stock
outstanding as of May 7, 1998) beneficially owned by each person named in Item
2, as well as the number of Shares of Common Stock as to which such person is
deemed to have sole power to vote or to direct the vote, shared power to vote or
to direct the vote, sole power to dispose or to direct the disposition, or
shared power to dispose or direct the disposition, in each case after giving
effect to the transactions contemplated by the Rights Exchange Agreement, is set
forth in the following table.

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CUSIP NO. 583916-10-1 13D Page 14 of 20 pages
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(This table shows the approximate maximum number of shares that could be
acquired upon exchange of the Rights, pursuant to the Rights Exchange Agreement,
and includes the Shares that would be received upon exercise of any Warrant or
Warrants.)

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

Reporting Person No. of Shares Percentage Power to Vote Power to Dispose
Beneficially of Class Shared Sole Shared Sole
Owned (Range)

- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BCC Acquisition 7,383,629 25.0% 7,383,629 7,383,629

- --------------------------------------------------------------------------------------------------
BCC 7,383,629 25.0% 7,383,629 7,383,629

- --------------------------------------------------------------------------------------------------
BCC Management 7,383,629 25.0% 7,383,629 7,383,629

- --------------------------------------------------------------------------------------------------
BCC LLC 7,383,629 25.0% 7,383,629 7,383,629

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

</TABLE>

The information required by Item 5 with respect to persons with whom voting
or dispositive power is shared is set forth in Item 2.

(c) To the best knowledge of the Reporting Persons, no person described in
paragraph (a) of this Item 5 has effected any transaction in the Common Stock of
the Issuer during the past 60 days other than as provided for in the agreements
described in the Introduction and under Items 3 and 4 above and attached hereto
as Exhibits 7(2) through 7(5).

(d) To the best knowledge of the Reporting Persons, no person other than
the Reporting Persons has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Common Stock of
the Issuer.

(e) Not applicable.

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CUSIP NO. 583916-10-1 13D Page 15 of 20 pages
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Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.

(a) RIGHTS EXCHANGE AGREEMENT

The Rights Exchange Agreement described and/or referred to in the
Introduction and Items 3, 4 and 5 is more fully described in Exhibit 7(2).

(b) WARRANT AGREEMENT

The Warrant Agreement referred to in the Introduction and Items 3, 4 and 5
is more fully described in Exhibit 7(3).

The LLC Agreement by and between BCC and BIG, provides that BCC Acquisition
is to receive $15,000,000 from BCC; the balance of the required Funds up to a
maximum of $23,000,000 will be contributed by BIG. The LLC Agreement also
provides, among other terms, covenants and conditions, the business of BCC
Acquisition shall be exclusively managed by BCC, as the manager of BCC
Acquisition, and BCC is not removable as manager (as more fully described in
Exhibit 7(4) below).

(d) OFFER TO PURCHASE

The Offer to Purchase referred to in the Introduction and Items 3 and 4 is
more fully described in Exhibit 7(5).

The description of the Rights Exchange Agreement, the Warrant Agreement,
the LLC Agreement and the Offer to Purchase, contained in this Schedule 13D, is
qualified in its entirety

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CUSIP NO. 583916-10-1 13D Page 16 of 20 pages
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by the complete text of the documents, copies of which are attached hereto as
Exhibits 7(2) through 7(5).

Item 7. MATERIAL TO BE FILED AS EXHIBITS.

Exhibit 7 (1). Agreement with Respect to Schedule 13D

Exhibit 7 (2). Rights Exchange Agreement

Exhibit 7 (3). Warrant Agreement

Exhibit 7 (4). Limited Liability Operating Agreement for BCC Acquisition I LLC

Exhibit 7 (5). Offer to Purchase

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CUSIP NO. 583916-10-1 13D Page 17 of 20 pages
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SIGNATURE

After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.

Dated: ____________ __, 1998

BCC Acquisition I LLC

By: Its Manager
The Bay City Capital Fund I, L.P.

By: Its General Partner
Bay City Capital Management LLC

By: /s/ Roger H. Salquist
----------------------------
Its: Manager

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CUSIP NO. 583916-10-1 13D Page 18 of 20 pages
-----------

LIST OF EXHIBITS

Exhibit No Description Page
----------- ----
<C> <S> <C>
7(1) Agreement with Respect to Schedule 13D

7(2) Rights Exchange Agreement

7(3) Warrant Agreement

7(4) Limited Liability Operating Agreement for
BCC Acquisition I LLC

7(5) Offer to Purchase

</TABLE>

<PAGE>

CUSIP NO. 583916-10-1 13D Page 19 of 20 pages
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SCHEDULE 1

Bay City Capital Management LLC

MANAGERS AND EXECUTIVE OFFICERS

Present Principal
Name and Business Address (1) Title Occupation or Employment
----------------------------- ----- -------------------------
<S> <C> <C>
Fred B. Craves Manager Chairman, Manager and Managing
Bay City Capital Management LLC Director of Bay City Capital
750 Battery Street, Suite 600 LLC and Manager of Bay City
San Francisco, California 94111 Capital Management LLC

John D. Diekman Manager Chairman of Affymetrix
Bay City Capital Management LLC
750 Battery Street, Suite 600
San Francisco, Ca. 94111

Roger H. Salquist Manager Manager and Managing Director
Bay City Capital Management LLC of Bay City Capital LLC and
750 Battery Street, Suite 600 Manager of Bay City Capital
San Francisco, Ca. 94111 Management LLC

Tom J. Pritzker Manager President of Hyatt
200 West Madison Street Corporation, a diversified
38th Floor company primarily engaged in
Chicago, Ill. 60606 real estate and hotel
management activities.

Jay A. Pritzker Manager Chairman of the Board of Hyatt
200 West Madison Street Corporation, a diversified
38th Floor company primarily engaged in
Chicago, Ill. 60606 real estate and hotel
management activities.

Gerald L. Cohn Manager Investor
19355 Turnberry Way
Apt. TH-3
North Miami, Fl. 33180

</TABLE>

(1) Each of Messrs. Craves, Diekman, Salquist, Thomas J. Pritzker, Jay A.
Pritzker and Gerald L. Cohn are United States citizens.

<PAGE>

CUSIP NO. 583916-10-1 13D Page 20 of 20 pages
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SCHEDULE 2

Bay City Capital LLC

MANAGERS AND EXECUTIVE OFFICERS

Present Principal
Name and Business Address (1) Title Occupation or Employment
----------------------------- ----- -------------------------
<S> <C> <C>
Fred B. Craves Chairman, Chairman, Manager and Managing
Bay City Capital Management LLC Manager Director of Bay City Capital
750 Battery Street, Suite 600 LLC and Manager of Bay City
San Francisco, California 94111 Capital Management LLC

John D. Diekman Manager Chairman of Affymetrix
Bay City Capital Management LLC and
750 Battery Street, Suite 600 Managing
San Francisco, Ca. 94111 Director

Roger H. Salquist Manager Manager and Managing Director
Bay City Capital Management LLC and of Bay City Capital LLC and
750 Battery Street, Suite 600 Managing Manager of Bay City Capital
San Francisco, Ca. 94111 Director Management LLC

Tom J. Pritzker Manager President of Hyatt
200 West Madison Street Corporation, a diversified
38th Floor company primarily engaged in
Chicago, Ill. 60606 real estate and hotel
management activities.

Gerald L. Cohn Manager Investor
19355 Turnberry Way
Apt. TH-3
North Miami, Fl. 33180

</TABLE>

(1) Each of Messrs. Craves, Diekman, Salquist, Thomas J. Pritzker, Jay A.
Pritzker and Gerald L. Cohn are United States citizens.

<PAGE>

EXHIBIT 7(1)

AGREEMENT WITH RESPECT TO SCHEDULE 13D

The undersigned hereby agree that any Statement on Schedule 13D to be
filed with the Securities and Exchange Commission by any of the undersigned,
including any amendment thereto, with respect to securities of Medarex Inc., a
New Jersey corporation, may be filed by BCC Acquisition I LLC on behalf of all
of the undersigned.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed in counter parts by their duly authorized signatories as of the 10th
day of June 1998.

Bay City Capital Management LLC and Bay City
Capital LLC

By: /s/ Roger H. Salquist
---------------------------------------------
Its: Manager

The Bay City Capital Fund I, L.P.

By: Its General Partner
Bay City Capital Management LLC

By: /s/ Roger H. Salquist
------------------------------------
Its: Manager

BCC Acquisition I LLC

By: Its Manager
The Bay City Capital Fund I, L.P.

By: Its General Partner
Bay City Capital Management LLC

By: /s/ Roger H. Salquist
----------------------------
Its: Manager

<PAGE>

MEDAREX, INC.

RIGHTS EXCHANGE

AGREEMENT

JUNE 10, 1998

<PAGE>

TABLE OF CONTENTS

<TABLE>

<S> <C>
SECTION 1. THE PURCHASER'S OFFER . . . . . . . . . . . . . . . . . . . . . . . . . .2

1.1 MAKING THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 COMPANY ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3 ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

SECTION 2. AUTHORIZATION AND ISSUANCE OF THE SECURITIES. . . . . . . . . . . . . . .4

SECTION 3. AGREEMENT TO EXCHANGE THE SECURITIES. . . . . . . . . . . . . . . . . . .5

3.1 ISSUANCE OF SHARES AND WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . .5
3.2 FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

SECTION 4. CLOSING AND DELIVERY. . . . . . . . . . . . . . . . . . . . . . . . . . .5

4.1 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
4.2 DELIVERY OF THE WARRANT AGREEMENT AND THE SHARES . . . . . . . . . . . . . . . .6

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . .6

5.1 ORGANIZATION AND STANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
5.2 CORPORATE POWER; AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . .6
5.3 ISSUANCE AND DELIVERY OF THE SHARES; GRANT OF THE WARRANTS . . . . . . . . . . .7
5.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . .7
5.5 CONSUMMATION OF MERGER; ISSUANCE OF RIGHTS . . . . . . . . . . . . . . . . . . .8
5.6 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
5.7 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.8 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 NO DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12 GOVERNMENTAL CONSENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 11
5.13 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.14 INVESTMENT COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.15 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.16 LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.17 BROKER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.. . . . . . . . . . . . 12

6.1 ORGANIZATION AND STANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 INVESTMENT PURPOSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 NO ADVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 RESTRICTION ON TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 BROKER'S FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 7. COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . 14

7.1 FULL COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 MAINTENANCE OF LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 PURCHASER REPRESENTATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 FILINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 SHELF REGISTRATION OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 8. NO-SHOP CLAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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<PAGE>

8.1 IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 THIRD-PARTY OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . . . . 17

SECTION 10. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING . . . . . . . . . . 17

10.1 CLOSING UNDER THE PURCHASER'S OFFER . . . . . . . . . . . . . . . . . . . . . 17
10.2 SURRENDER OF THE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.4 REPRESENTATIONS AND WARRANTIES CORRECT. . . . . . . . . . . . . . . . . . . . 17

SECTION 11. CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT THE CLOSING . . . . . . . 17

11.1 CLOSING UNDER PURCHASER'S OFFER . . . . . . . . . . . . . . . . . . . . . . . 18
11.2 APPOINTMENT OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.3 NO OTHER ISSUANCE BY THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . 18
11.4 STATEMENT OF POSITION OF THE COMPANY... . . . . . . . . . . . . . . . . . . . 18
11.5 DELIVERY OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.6 WARRANT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.7 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.8 REPRESENTATIONS AND WARRANTIES CORRECT. . . . . . . . . . . . . . . . . . . . 18
11.9 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SECTION 12. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT . . . . 19

12.1 REGISTRATION PROCEDURES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . 19
12.2 TRANSFER OF SECURITIES AFTER SHELF REGISTRATION . . . . . . . . . . . . . . . 20
12.3 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.4 TERMINATION OF CONDITIONS AND OBLIGATIONS . . . . . . . . . . . . . . . . . . 22
12.5 INFORMATION AVAILABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.6 CHANGES IN PURCHASER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 23

SECTION 13. INDEMNIFICATION FOR INCOMPLETE OR INACCURATE INFORMATION . . . . . . . 23

13.1 BY THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.2 BY THE PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.3 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 14. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

14.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
14.3 TERMINATION FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SECTION 15. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SECTION 16. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

16.1 WAIVERS AND AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.2 SECTIONS; HEADINGS; DOLLAR AMOUNTS. . . . . . . . . . . . . . . . . . . . . . 26
16.3 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.5 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.6 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.7 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.8 PAYMENT OF FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>

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<PAGE>

RIGHTS EXCHANGE
AGREEMENT

This Rights Exchange Agreement (this "Agreement") is made as of June 10,
1998 (the "Effective Date"), by and among Medarex, Inc., a New Jersey
corporation with its principal place of business at 1545 Route 22 East,
Annandale, New Jersey 08801 (the "Company"), and BCC Acquisition I LLC, a
Delaware limited liability company with its principal place of business at 750
Battery Street, Suite 600, c/o Bay City Capital, San Francisco, CA 94111
("Purchaser").

BACKGROUND

A. Pursuant to that certain Agreement and Plan of Reorganization dated
as of May 5, 1997 (the "Merger Agreement"), among the Company, Medarex
Acquisition Corp. ("Merger Sub"), and GenPharm International, Inc. ("GenPharm"),
GenPharm merged with and into Merger Sub, with GenPharm being the surviving
corporation and becoming a wholly-owned subsidiary of the Company (such
transaction referred to herein as the "Merger"). As a result of the Merger, the
former holders of GenPharm preferred stock and GenPharm common stock
(collectively, the "Holders", and each, individually, a "Holder") are currently
entitled to receive the remainder of the Merger Consideration (as defined in the
Merger Agreement), presently $44,412,500, in the form of shares of the common
stock of the Company, par value $.01 per share (the "Common Stock"), or, under
certain circumstances, cash, with such shares to be issued at a price per share
equal to the Fair Market Value thereof (as defined in the Merger Agreement).

B. Upon consummation of the Merger on October 21, 1997, certain of the
Holders received an initial issuance of Common Stock in partial satisfaction of
the Company's obligation to pay the Merger Consideration. The contingent
payment rights of the Holders to receive the remaining $44,412,500 in Merger
Consideration, as such amount may be adjusted downward under certain
circumstances, are herein referred to as the "Rights".

C. The Company and the Purchaser herein agree that, for purposes of
this Agreement, the aggregate face value of the Rights (the "Face Value") shall
be $44,412,500, although the Company and the Purchaser recognize that this value
may not represent the value that would actually be received by the Holders other
than pursuant to this transaction. The Face Value of the Rights held by any
individual Holder for purposes of this Agreement reflects such Holder's share of
such $44,412,500 and may be determined for each Holder by multiplying the per
share portion of the Merger Consideration allocable to each former share of
GenPharm preferred stock and common

<PAGE>

stock (assuming the full $44,412,500 is paid), as set forth on SCHEDULE 1
attached hereto, by the respective number of shares of GenPharm preferred stock
and/or common stock formerly held by such Holder.

D. The parties contemplate that the Purchaser will make an offer (the
"Purchaser's Offer") to purchase any or all of the Rights (subject to minimum of
a $22,206,250 in aggregate Face Value) from the Holders at a 20% discount from
the Face Value of such Rights, provided that the Company, among other things,
enters into this Agreement through which the Company shall issue to the
Purchaser, in exchange for each $6.75 in Face Amount of Rights acquired pursuant
to the Purchaser's Offer, (i) one Share of the Company's Common Stock and (ii)
a Warrant (as defined in Section 2 below) to purchase 0.1222 shares of the
Company's Common Stock, exercisable for a period of seven (7) years. Such
Shares and Warrants shall be issued by the Company solely in exchange for and
through the cancellation of the Rights that the Purchaser acquires pursuant to
the Purchaser's Offer and shall represent payment in full by the Company of the
Merger Consideration represented by such Rights under the Merger Agreement as if
the Company had paid that portion of the Merger Consideration directly to the
Holders of such Rights.

AGREEMENT

In consideration of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchaser hereby agree as follows:

SECTION 1. THE PURCHASER'S OFFER

1.1 MAKING THE OFFER. (a) The Company and the Purchaser agree that, on
the Effective Date or within five (5) business days thereafter, the Purchaser
will make an offer to the Holders of Rights to acquire from such Holders any or
all of the Rights (subject to a $22,206,250 minimum) for cash. The Purchaser's
Offer shall be on substantially the terms and conditions set forth in the Offer
to Purchase attached hereto as EXHIBIT A (the "Offer to Purchase").

(b) The Purchaser expressly reserves the right to waive any condition to
the Purchaser's Offer, to increase the price offered for such Rights (the "Offer
Price"), to extend the duration of the Purchaser's Offer, or to make any other
changes in the terms and conditions of the Purchaser's Offer; PROVIDED, HOWEVER,
that, without the prior written consent of the Company, no such change may be
made which (i) reduces the Offer Price, (ii) changes the form of consideration
payable in the Purchaser's Offer, (iii) except as provided in the next sentence,
extends the Purchaser's Offer, (iv) amends or imposes conditions to the
Purchaser's Offer in addition to those set forth in the Offer to Purchase

2
<PAGE>

or (v) amends any other term of the Purchaser's Offer in a manner adverse to the
Holders. Notwithstanding the foregoing, the Purchaser may, without the consent
of the Company, (A) extend the Purchaser's Offer, if at the scheduled or
extended expiration date of the Purchaser's Offer any of the conditions of the
Purchaser's Offer set forth in the Offer to Purchase shall not be satisfied or
waived, until such time as such conditions are satisfied or waived (provided,
however, that without the prior written consent of the Company, which consent
shall not be unreasonably withheld, no such extension shall exceed thirty (30)
days), (B) extend the Purchaser's Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or other securities authority, or the staff thereof, applicable to
the Purchaser's Offer, and (C) extend the Purchaser's Offer on one or more
occasions, if on such expiration date there shall not have been irrevocably
assigned at least 50% of the aggregate Face Value of the Rights. The Purchaser
agrees that if all of the conditions to the Purchaser's Offer set forth in the
Offer to Purchase are not satisfied on any scheduled expiration date of the
Purchaser's Offer then, provided that all such conditions are reasonably capable
of being satisfied, the Purchaser shall extend the Purchaser's Offer from time
to time until such conditions are satisfied or waived, provided that the
Purchaser shall not be required to extend the Purchaser's Offer beyond the
Termination Date (as defined in Section 4.1 below). Subject to the terms and
conditions of the Purchaser's Offer and this Agreement, the Purchaser shall
accept for payment, and pay for, any and all Rights validly assigned and not
revoked pursuant to the Purchaser's Offer that the Purchaser becomes obligated
to accept for payment, and pay for, pursuant to the Purchaser's Offer as
promptly as practicable after the expiration of the Purchaser's Offer.

1.2 COMPANY ACTIONS. (a) The Company hereby consents to the transfer of
the Rights by the Holders thereof to the Purchaser pursuant to the Purchaser's
Offer and represents and warrants that (i) the Company's board of directors has
adopted resolutions (A) approving and adopting this Agreement and the
transactions contemplated hereby, (B) authorizing the granting by the Company of
a waiver of the transfer restrictions contained in Section 1.2(c) of the Merger
Agreement with respect to the transfer of the Rights by the Holders to the
Purchaser, (C) approving the exchange of the Shares for the Rights on the terms
and subject to the conditions set forth in this Agreement, and (D) approving the
issuance of a Warrant or Warrants to purchase shares of Common Stock to the
Purchaser. The Company hereby consents to the inclusion in the Purchaser's
Offer documents of the information supplied by the Company for use in the Offer
to Purchase.

(b) The Company further represents that it received a verbal assurance
from the SEC in response to a letter of inquiry from the Company dated April 29,
1998, (the "SEC Letter") confirming that the transactions contemplated by the
SEC Letter and this Agreement are not subject to the provisions of Rules 13-e
and 14-d under the Exchange Act (as defined in Section 5.4 below).

3
<PAGE>

(c) The Company shall deliver to the Holders a letter in substantially
the form attached hereto as EXHIBIT B discharging the obligation of the Company
(if any) pursuant to Rule 14e-2 under the Exchange Act to make a disclosure
statement to the Holders with respect to the Purchaser's Offer.

(d) In connection with the Purchaser's Offer, the Company will promptly
furnish the Purchaser with mailing labels, security position listings and any
available listing or computer file containing the names and addresses of the
Holders as of a recent date (to be set forth on SCHEDULE 2) and shall furnish
the Purchaser with such information and assistance as the Purchaser or its
agents or representatives may reasonably request in communicating the
Purchaser's Offer to the Holders. The Purchaser shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Purchaser's Offer and the Rights
Exchange (as defined below in Section 3.1), and, if this Agreement is terminated
in accordance with Section 14, will deliver to the Company all copies of such
information in the possession of the Purchaser.

1.3 ACCURACY OF INFORMATION. Each of the Company and the Purchaser
represents and warrants to the other that the information supplied by such party
for use in the Offer to Purchase (including, without limitation, in the case of
the Company, the information appearing in Sections 6, 7 and 8 of the Offer to
Purchase) does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made in such
Offer to Purchase, in the light of the circumstances under which they were made,
not misleading. The Company further agrees that the information contained in
the Offer to Purchase and derived from public filings of the Company including,
without limitation, the SEC Documents (as defined in Section 5.4 below), is
deemed to have been "supplied" by the Company for purposes of the preceding
sentence. Each of the Company and the Purchaser shall promptly notify the other
party of any changes in the information supplied by the notifying party and
shall provide the other party with copies of any information necessary to make
the statements made in the Offer to Purchase not untrue or misleading in
accordance with the terms of this Section 1.3.

SECTION 2. AUTHORIZATION AND ISSUANCE OF THE SECURITIES.

Subject to the terms and conditions of this Agreement, the Company has
authorized the issuance and delivery of up to 6,579,629 shares of its Common
Stock and a warrant or warrants to purchase up to 804,000 shares of its Common
Stock for a period of seven years and at an exercise price of $10.00 per share
pursuant to a Warrant agreement in substantially the form attached hereto as
EXHIBIT C (the "Warrant Agreement"). The shares of Common Stock and the warrant
or warrants to purchase Common Stock issued to the Purchaser pursuant to this
Agreement shall be referred to herein as the "Shares" and the "Warrants",
respectively.

4
<PAGE>

SECTION 3. AGREEMENT TO EXCHANGE THE SECURITIES.

3.1 ISSUANCE OF SHARES AND WARRANTS. At the Closing (as defined in
Section 4.1 below), the Purchaser agrees to exchange the Rights at the aggregate
Face Value of such Rights acquired by the Purchaser pursuant to the Purchaser's
Offer (the "Aggregate Exchange Price") and the Company agrees to issue in
exchange for each $6.75 in Face Value of Rights acquired by the Purchaser in the
Offer (i) one Share of the Company's Common Stock and (ii) a Warrant or Warrants
to purchase 0.1222 shares of Common Stock at an exercise price of $10.00 per
share exercisable for a period of seven (7) years pursuant to the Warrant
Agreement. The Aggregate Exchange Price shall be paid solely in the form of the
complete cancellation of the Rights acquired by the Purchaser in connection with
the Purchaser's Offer. The delivery of the Rights in exchange for the issuance
of the Shares and the Warrants to Purchaser pursuant to this Agreement shall be
referred to herein as the "Rights Exchange". In the event that it is determined
that the Rights were not validly assigned to the Purchaser, but the Holder
thereof executed a Letter of Assignment releasing the Company from any further
obligation to pay to the Holder the Merger Consideration in such circumstances
upon receipt of payment from the Purchaser pursuant to the Offer, and the
Purchaser made such payment, all such payments shall, in the aggregate,
constitute payment of the Aggregate Exchange Price.

3.2 FRACTIONAL SHARES. No fractional shares shall be issued by the
Company in connection with this transaction. If the Purchaser would otherwise
be entitled to a fractional interest in a Share, the Purchaser shall receive an
amount of cash (without interest) determined by multiplying (i) the Price Per
Share by (ii) the fractional share interest to which the Purchaser would
otherwise be entitled (the "Fractional Share Payment"). The payment of cash in
lieu of fractional shares is made solely for the purpose of avoiding the expense
and inconvenience of issuing and transferring fractional shares and does not
represent separately bargained-for consideration.

SECTION 4. CLOSING AND DELIVERY.

4.1 CLOSING. The Closing of the issuance of the Shares and the Warrants
in exchange for the Rights (the "Closing") shall be held as soon as practicable
after the satisfaction or waiver of all other conditions to Closing set forth in
Sections 10 and 11 hereof, at the offices of Heller Ehrman White & McAuliffe,
333 Bush Street, San Francisco, California 94104, or on such other date and
place as may be agreed to by the Company and the Purchaser, PROVIDED, HOWEVER,
that in no event shall the Closing take place after August 14, 1998 (the
"Termination Date"). The date on which the Closing occurs is herein referred to
as the "Closing Date".

5
<PAGE>

4.2 DELIVERY OF THE WARRANT AGREEMENT AND THE SHARES. At the Closing,
the Company shall deliver to the Purchaser (i) an executed Warrant Agreement in
substantially the form of EXHIBIT C and (ii) stock certificates registered in
the name of the Purchaser, or in such nominee name(s) as designated by the
Purchaser, representing the number of Shares to be issued by the Company to the
Purchaser at the Closing determined in accordance with Section 3.1 against
cancellation of the Rights acquired by the Purchaser pursuant to the Purchaser's
Offer. The parties hereto acknowledge that the issuance of the Shares and the
Warrants in exchange for the Rights represents the payment in full of that
portion of the Merger Consideration represented by such Rights under the terms
of the Merger Agreement.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth on the Schedule of Exceptions attached hereto as
SCHEDULE 3, the Company hereby represents and warrants as of the date hereof to
the Purchaser as follows:

5.1 ORGANIZATION AND STANDING. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of New Jersey, has full corporate power and authority to own or lease its
properties and conduct its business as presently conducted, and is duly
qualified as a foreign corporation and is in good standing in all jurisdictions
in which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, financial condition or results or operations of the
Company). Other than as disclosed in the SEC Documents and a Stock Purchase
Agreement dated as of May 4, 1998, between the Company and ErythroMed, Inc. (the
"ErythroMed Agreement"), the Company has no Subsidiaries or equity interest in
any other entity. For purposes of this Agreement, "Subsidiary" shall mean an
entity controlled by the Company (including, without limitation, any entity 50%
or more of the voting securities of which are held by the Company).

5.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite
corporate power, and has taken all requisite corporate action, to execute and
deliver this Agreement, to sell and issue the Shares and to enter into the
Warrant Agreement and to carry out and perform all of its obligations under this
Agreement and the Warrant Agreement. This Agreement and the Warrant Agreement
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) as rights to indemnity or contributions hereunder
may be limited by federal or state securities laws or principles of public
policy.

6
<PAGE>

The execution and delivery of this Agreement and the Warrant Agreement do not,
and the performance of this Agreement and the Warrant Agreement and the
compliance with the provisions hereof and thereof and the issuance, sale and
delivery of the Shares by the Company will not conflict with, or result in a
breach or violation of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any lien pursuant to
the terms of, the Articles of Incorporation or Bylaws of the Company or any
statute, law, rule or regulation applicable to the Company or any Subsidiary, or
any state or federal order, judgment or decree applicable to the Company or any
Subsidiary, or any indenture, mortgage, lease or other agreement or instrument
to which the Company or any Subsidiary or any of the properties of such person
is subject (including, without limitation, the Merger Agreement), except such as
would not have a material adverse effect on the Company or such Subsidiary.

5.3 ISSUANCE AND DELIVERY OF THE SHARES; GRANT OF THE WARRANTS. The
Shares, when issued and exchanged for the Rights in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable. Further, the Shares, when issued and exchanged for the Rights in
compliance with the provisions of this Agreement, will not be subject to
preemptive, co-sale, right of first refusal or any other similar rights of the
shareholders of the Company or any liens or encumbrances. In addition, the
shares issuable upon exercise by the Purchaser of the Warrants (the "Warrant
Shares"), when issued, paid for and delivered in accordance with the terms of
the Warrant Agreement, will be validly issued, fully paid and nonassessable, and
will not be subject to preemptive, co-sale, right of first refusal or any other
similar rights of the shareholders of the Company or any liens or encumbrances.
Other than a Registration Rights Agreement between the Company and Novartis
Pharma AG, the Company has not granted any registration rights which are still
in effect with respect to its securities other than the registration rights set
forth herein.

5.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company and each
Subsidiary has filed in a timely manner all documents that such person was
required to file with the SEC under Sections 13, 14(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") during the 36
months preceding the date of this Agreement. As of their respective filing
dates (or, if amended, when amended), all documents filed by the Company or any
of its Subsidiaries with the SEC, whether under the Exchange Act or under the
Securities Act of 1933, as amended (the "Securities Act"), during such 36-month
period (the "SEC Documents") complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be. The
Company satisfies the requirements for the use of Form S-3 under the Securities
Act, to register the offers and sales of the Shares and the Warrant Shares
contemplated by the Shelf Registration Statement (as defined in Section 12).
None of the SEC Documents as of their respective dates contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made

7
<PAGE>

therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and its
Subsidiaries included in the SEC Documents (the "Financial Statements") comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of the Company and its Subsidiaries at the dates thereof and
the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring adjustments
and the absence of footnotes). There is no material liability or commitment of
the Company or any of its Subsidiaries which is not reflected in the most recent
Financial Statements except commitments made since the date of such Financial
Statements in the ordinary course of business. There have not been any changes
in the assets, liabilities, financial condition or operations of the Company or
any of its Subsidiaries from that reflected in the most recent Financial
Statements, except changes in the ordinary course of business that have not had
a material adverse effect on the business, properties, financial condition or
results of operations of the Company or any of its Subsidiaries.

5.5 CONSUMMATION OF MERGER; ISSUANCE OF RIGHTS. The Merger Agreement
was properly adopted, and was properly executed and delivered, and, together
with the Rights created therein, is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or limiting creditors' rights or by equitable principles
generally. The Merger has been duly consummated in accordance with the terms of
the Merger Agreement and the Company has the power to allow the transfer of the
Rights to the Purchaser and has taken (or shall have taken prior to the Closing)
all steps necessary to be taken by the Company to permit the Holders to sell and
the Purchaser to acquire the Rights.

5.6 INTELLECTUAL PROPERTY. (a) The Company and each Subsidiary has
sufficient title and ownership of all material patents, patent rights,
inventions, trademarks, service marks, copyrights, trade secrets, proprietary
rights, processes and know-how (collectively, "Intellectual Property") owned or
used by it or that are necessary for the conduct of its business as presently
conducted and believes that it can obtain, on commercially reasonable terms, any
additional rights necessary for its business as proposed to be conducted, and
that the Intellectual Property does not, and would not, conflict with or
constitute an infringement of the rights of others.

(b) Other than the strategic partnership agreements described in
paragraph (f) of this Section 5.6 and as set forth in the SEC Documents, there
are no outstanding options, licenses (whether to or from the Company) or
agreements of any kind relating to the Intellectual Property described in
paragraph (a) of this Section 5.6 or granting rights

8
<PAGE>

to any other person to manufacture, license, produce, assemble, market or sell
products or services derived or derivable from the Intellectual Property of the
Company or any of its Subsidiaries, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the Intellectual Property of any other person or entity.

(c) Neither the Company nor any of its Subsidiaries has received any
communications alleging that such person or any of its employees of has violated
or infringed or, by conducting its business as proposed, would violate or
infringe, any of the Intellectual Property of any other person or entity.

(d) Neither the Company nor any of its Subsidiaries is aware that any of
its employees is obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or such Subsidiary with respect to the Intellectual Property of the
Company or such Subsidiary or otherwise or that would conflict with the business
of the Company or such Subsidiary as proposed to be conducted.

(e) Neither the execution nor delivery of this Agreement, nor the
carrying on of the business of the Company or any of its Subsidiaries by the
employees of such person, nor the conduct of the business of the Company or any
of its Subsidiaries as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant, or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of the employees of the Company or
any of its Subsidiaries (or people such person currently intends to hire) made
prior to their employment by such person; and

(f) The strategic partnering agreements between the Company and each of
Merck KGaA, Novartis Pharma AG, Centeon L.L.C., Santen Pharmaceutical Co., Ltd.,
Eisai Co., Ltd., Centocor, Inc., LeukoCite, Inc. and Schering, AG (together, the
"Major Strategic Partners"), described under the caption "Corporate
Collaborations" in the Company's Form 10-K for the period ending December 31,
1997, and under the caption "Recent Developments" in the Company's Form 10-Q for
the period ending March 31, 1998, are in full force and effect and constitute
valid and binding obligations of the Company and each Major Strategic Partner
party thereto. Neither the Company nor any Major Strategic Partner is in
default under any of such agreements.

5.7 PROPERTIES. The Company and each Subsidiary has good and valid
title to all of the properties and assets reflected as owned by the Company or
any Subsidiary in

9
<PAGE>

the Financial Statements, free and clear of all material liens, mortgages
(statutory or otherwise), security interests, pledges, claims or encumbrances
except those, if any, disclosed in the Financial Statements. The Company and
each Subsidiary holds its leased properties under valid and binding leases, with
such exceptions as are not materially significant in relation to the business of
the Company or such Subsidiary. The Company and each Subsidiary owns or leases
all of such properties as are necessary to its operations as now conducted.

5.8 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock. Immediately prior to the Closing, 22,200,034 shares of Common Stock will
be outstanding (other than shares issued between the Effective Date and
immediately prior to the Closing as the result of the exercise of employee or
consultant stock options existing on the Effective Date) and no shares of
preferred stock will be outstanding. The certificates evidencing the Shares are
in due and proper legal form and have been duly authorized for issuance by the
Company. All of the issued and outstanding securities of the Company have been
duly authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with federal, state and other applicable laws and were
issued without violation of any preemptive, co-sale or other right. Except as
otherwise disclosed in the SEC Documents and in the Financial Statements, there
is no outstanding option, warrant, agreement or other right calling for the
issuance or redemption of, and there is no commitment, plan or arrangement to
issue or redeem, any securities of the Company. Other than the Merger Agreement
and the ErythroMed Agreement, the Company does not have any binding agreement
with respect to the acquisition or purchase of the securities of or owned by any
person or entity or the acquisition of the business, assets or liabilities of
any person or entity, and the Company does not have any agreement or
understanding with respect to the disposition or sale of its business, assets or
property.

5.9 LITIGATION. There is no pending or, to the Company's knowledge,
threatened, action, suit or other proceeding to which the Company or any of its
Subsidiaries is a party or to which the property or assets of the Company or any
of its Subsidiaries is subject which might result in a material adverse effect
on the business, properties, financial condition or results of operations of the
Company or any of its Subsidiaries.

5.10 NO DEFAULTS. Neither the Company nor any of its Subsidiaries is in
violation or default of any provisions of its certificate of incorporation or
bylaws, or any organizational documents, or in breach with respect to any
provision of any agreement, judgment, decree, order, mortgage, deed of trust,
lease franchise, license, indenture, permit or other instrument to which it is a
party or by which it or any of its properties are bound which violation, default
or breach would have a material adverse effect on the

10
<PAGE>

business, properties, financial condition or results of operations of the
Company or any of its Subsidiaries, and there does not exist any state of facts
which constitutes an event of default on the part of the Company or any of its
Subsidiaries as defined in such documents or which, with notice or lapse of time
or both, would constitute such an event of default.

5.11 MATERIAL AGREEMENTS. The Company and each Subsidiary is a party to
all agreements that are necessary for the conduct of the business of such person
as presently conducted and all such agreements are currently in effect. Neither
the Company nor any of its Subsidiaries is in breach of any provision of any
such agreement where such breach would have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company or such Subsidiary.

5.12 GOVERNMENTAL CONSENTS; COMPLIANCE WITH LAW. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, or local governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement except for (i) the filing of a
Shelf Registration Statement and all amendments thereto with the SEC as
contemplated by Section 12.1 of this Agreement, (ii) any filings required by
state securities laws and (iii) the filing of a notification and report form
under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"). The Company and each Subsidiary is conducting business
in compliance in all material respects with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business, including
but not limited to, all applicable local, state and federal environmental laws
and regulations.

5.13 INSURANCE. The Company and each Subsidiary maintains insurance of
the types and in the amounts generally deemed adequate for its business covering
all risks customarily insured against, all of which insurance is in full force
and effect.

5.14 INVESTMENT COMPANY. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.

5.15 TAXES. The Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon except for such taxes as are being
contested in good faith, and the Company has no knowledge of any tax deficiency
which has been or might be asserted or threatened against the Company or any of
its Subsidiaries which would have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or any
of its Subsidiaries.

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<PAGE>

5.16 LISTING. The Company's Common Stock is traded on The Nasdaq
National Market.

5.17 BROKER'S FEE. The Company represents that there are no brokers or
finders entitled to compensation by the Company in connection with the Rights
Exchange, and shall indemnify the Purchaser for any such fees for which the
Company is responsible.

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

The Purchaser hereby represents and warrants as of the date hereof to the
Company as follows:

6.1 ORGANIZATION AND STANDING. The Purchaser has been duly organized
and is validly existing as a limited liability company in good standing under
the laws of the State of Delaware, has full corporate power and authority to own
or lease its properties and conduct its business as presently conducted, and is
duly qualified as a foreign organization and is in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results or operations of the
Purchaser).

6.2 INVESTMENT PURPOSES. (a) The Purchaser acknowledges that the
Shares and the Warrants are being issued in reliance upon the exception from the
registration requirements of the Securities Act provided by Section 4(2) thereof
and as such the Shares and the Warrants will be "restricted securities" within
the meaning of Rule 144.

(b) The Purchaser is acquiring the Shares and the Warrants pursuant to
this Agreement in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of such
Shares or Warrants or any arrangement or understanding with any other persons
regarding the distribution of such Shares or Warrants except in each case as
conforms with all applicable requirements of the Securities Act, applicable blue
sky laws and all rules and regulations promulgated thereunder.

(c) The Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the securities purchased hereunder
except in compliance with the Securities Act, applicable blue sky laws, and the
rules and regulations promulgated thereunder.

(d) The Purchaser has, in connection with its decision to acquire the
Shares and the Warrants, relied with respect to the Company and its affairs
solely upon the SEC

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<PAGE>

Documents and the other information delivered to the Purchaser by the Company as
described in Sections 5.4 above and the representations and warranties of the
Company contained herein.

(e) The Purchaser is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act.

(f) The Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of this
Agreement by the Purchaser, this Agreement shall constitute a valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) as limited by equitable principles generally, including any
specific performance, and (iii) as to those provisions of Section 12.3 and 13.2
relating to indemnity or contribution.

6.3 NO ADVICE. The Purchaser understands that nothing in this Agreement
or any other materials presented to the Purchaser in connection with the
acquisition of the Shares and the Warrants constitutes legal, tax or investment
advice to the Purchaser. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with the Rights Exchange.

6.4 RESTRICTION ON TRANSFER. The Purchaser understands that: (a) other
than to a person directly or indirectly controlling, controlled by, or in common
control with, the Purchaser (any such person, an "Affiliate"), neither the
Shares nor the Warrants will be transferable in the absence of a registration
under the Securities Act or an exemption therefrom or in the absence of
compliance with any term of this Agreement; (b) the Company may provide stop
transfer instructions to its transfer agent with respect to the Shares and the
Warrants in order to enforce the restrictions contained in this Section 6.4 and
to confirm that the Purchaser has complied with its obligations contained in
Section 12.2 hereof; and (c) each certificate representing Shares shall be in
the name of the Purchaser and shall bear substantially the following legends (in
addition to any legends required under applicable securities laws):

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY ONLY BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE
DISPOSED OF BY THE HOLDER

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<PAGE>

THEREOF IF SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND REGISTERED
OR QUALIFIED UNDER ANY APPLICABLE STATE OR OTHER SECURITIES LAWS, UNLESS
THE COMPANY DETERMINES THAT EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENT
ARE AVAILABLE.

The legend contained in this Section 6.4 may be removed from a stock certificate
immediately upon receipt by the Company's transfer agent of a certificate
substantially in the form of APPENDIX I attached hereto. Notwithstanding the
foregoing, such Shares must be held in certificated form until such Shares have
been sold in accordance with the provisions of APPENDIX I attached hereto.

6.5 BROKER'S FEE. The Purchaser represents that there are no brokers or
finders entitled to compensation by the Purchaser in connection with the Rights
Exchange, and shall indemnify the Company for any such fees for which the
Purchaser is responsible.

SECTION 7. COVENANTS OF THE PARTIES.

7.1 FULL COOPERATION. The Company will use its reasonable best efforts
to cooperate with and assist the Purchaser with respect to the Purchaser's
Offer. Such cooperation and assistance shall include, without limitation, the
provision of any additional disclosure to the Holders that the Parties determine
to be necessary or advisable after the date hereof in connection with the
Purchaser's Offer under applicable federal and state securities laws, rules and
regulations. The Company will not take any position with respect to the
Purchaser's Offer but has waived the transfer restrictions contained in Section
1.2(c) of the Merger Agreement to the extent required to permit the Holders to
transfer the Rights to the Purchaser. The Company will advise the Purchaser of
any need to amend the Offer to Purchase as it relates to information supplied by
the Company for inclusion therein such that the Offer to Purchase does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made in such Offer to Purchase, in the
light of the circumstances under which they were made, not misleading as of any
date during the period in which the Purchaser's Offer is pending in accordance
with the provisions of Section 1.3.

7.2 ACCESS TO INFORMATION. For a period beginning on the Effective Date
and continuing until the earlier of the Closing or the Termination Date, the
Company shall afford to the Purchaser and its agents and representatives full
access, at reasonable times and in a reasonable manner, to all of its premises,
facilities, properties, books and records and shall make its directors,
officers, agents, and (with the prior consent of the Company, which consent
shall not be unreasonably withheld), customers, vendors and creditors reasonably
available to confer with the Purchaser and its agents and representatives. The
Purchaser shall have the right to make copies, extracts and summaries of all
such reports, books, records and information, subject, however, to any
obligations of the Company to

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<PAGE>

any other persons. The Company shall notify the Purchaser of any material
change in the business of the Company or in its operations or properties, or of
any governmental complaints, investigations or hearings (or communications
indicating the same may be contemplated) or of the institution, continuation or
threat of any litigation involving the Company or any affiliate of the Company
or any of its assets, and will keep the Purchaser informed of such events.

7.3 MAINTENANCE OF LISTING. For so long as the Company is obligated to
keep in effect the Shelf Registration Statement provided under Section 12
hereof, the Company will use its reasonable best efforts to maintain its listing
on The Nasdaq National Market or a national securities exchange, as defined in
the Exchange Act.

7.4 PURCHASER REPRESENTATIVE. The Company shall use its reasonable best
efforts to ensure that, as long as the Purchaser (or an Affiliate of the
Purchaser) holds either (i) 5% of the outstanding voting securities of the
Company or (ii) 75% of the Shares, the Purchaser Representative (as defined in
Section 11.2) appointed to serve on the Company's board of directors in
accordance with the provisions of Section 11.2 shall be included in the
Company's proxy statement as a nominee of the board of directors for election to
the board and shall be elected to serve on the Company's board of directors.

7.5 FILINGS. The parties shall consult and fully cooperate with and
provide assistance to each other in preparing and filing as soon as practicable
all consents, approvals and authorizations necessary or advisable to be made or
obtained from any third party or governmental agency in order to consummate the
transactions contemplated hereby, including, without limitation, any required
filing under the HSR Act.

7.6 SHELF REGISTRATION OPINION. Upon the effective date a Shelf
Registration Statement in connection with Section 12, the Company shall provide
the Purchaser with an opinion letter addressed to the Purchaser, dated as of the
effective date of such Shelf Registration Statement, from Satterlee, Stephens,
Burke & Burke LLP, counsel to the Company, stating (i) that the Shelf
Registration Statement covers the Shares and the Warrant Shares (including the
resale thereof), (ii) that such counsel is not aware of any material untruths in
such Shelf Registration Statement and (iii) such other matters as may be
reasonable and customary in connection with such registration.

SECTION 8. NO-SHOP CLAUSE.

8.1 IN GENERAL. For a period beginning on the Effective Date and
continuing until the earlier of the Closing or the Termination Date (the
"No-Shop Period"), the Company shall not, and shall use its best efforts to
cause its respective officers, directors and employees not to, and shall use its
commercially reasonable efforts to cause its investment bankers, attorneys or
other agents retained by or acting on behalf of the

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<PAGE>

Company not to: (i) initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal that constitutes or is reasonably likely
to lead to a Third-Party Offer (as defined below), (ii) engage in negotiations
or discussions (other than to advise as to the existence of the restrictions set
forth in this Section 8.1) with, or furnish any information or data to, any
third party relating to a Third-Party Offer or (iii) enter into any agreement
with respect to any Third-Party Offer or approve any Third-Party Offer.
Notwithstanding anything to the contrary contained in this Section 8.1 or
elsewhere in this Agreement, the Company and its board of directors (or any
committee thereof) (x) may participate in discussions or negotiations with or
furnish information to any third party making an unsolicited Third-Party Offer
(a "Potential Acquiror") or approve an unsolicited Third-Party Offer if the
board is advised by its financial advisor that such Potential Acquiror has the
financial wherewithal to be reasonably capable of consummating such a
Third-Party Offer, and the board determines in good faith (A) after receiving
advice from its financial advisor, that the Third-Party Offer submitted by such
third party to the Company is more favorable to the Company and its stockholders
than the transaction contemplated by this Agreement, and (B) based upon advice
of outside legal counsel, that the failure to participate in such discussions or
negotiations or to furnish such information or approve a Third-Party Offer would
be reasonably likely to violate the board's fiduciary duties under applicable
law, or (y) may take any action necessary to comply with Rule 14e-2 promulgated
under the Exchange Act. The Company agrees that any non-public information
furnished to a Potential Acquiror will be furnished to the Purchaser as well and
shall be furnished pursuant to a confidentiality agreement upon terms reasonably
acceptable to the Purchaser and the Company. In the event that the Company
shall receive a Third-Party Offer or determine to provide any information as
described, it shall promptly, and in any event within 24 hours, notify the
Purchaser in writing as to that fact and shall describe the terms of such
Third-Party Offer.

8.2 THIRD-PARTY OFFER. As used in Section 8.1, the term "Third-Party
Offer" shall mean any bona fide written proposal, made by a third party to
acquire beneficial ownership (as defined under Rule 13d-3 of the Exchange Act)
of all or a material portion of the assets of, or any material equity interest
in, the Company pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer or
exchange offer or similar transaction involving the Company including any single
or multi-step transaction or series of related transactions which is structured
to permit such third party to acquire beneficial ownership of any material
portion of the assets of, or any material portion of the equity interest in, the
Company (other than, but including any transaction similar to, the transactions
contemplated by this Agreement).

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<PAGE>

SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates for the securities delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Purchaser of the certificates representing the Shares and the exchange of
the Rights.

SECTION 10. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING.

The Company's obligation to complete the issuance of the Shares in exchange
for the Rights and deliver Shares to the Purchaser shall be subject to the
following conditions to the extent not waived by the Company:

10.1 CLOSING UNDER THE PURCHASER'S OFFER. The Purchaser shall have
purchased Rights pursuant to the Purchaser's Offer.

10.2 SURRENDER OF THE RIGHTS. The Purchaser shall have surrendered to
the Company against delivery of the Shares and the Warrants the Rights acquired
by the Purchaser pursuant to the Purchaser's Offer.

10.3 CONSENTS AND APPROVALS. Any consents, waivers, clearances,
approvals and authorizations of regulatory or governmental bodies (including,
without limitation, the expiration or termination of the waiting period under
the HSR Act) that are necessary in connection with the consummation of the
transactions contemplated by this Agreement shall have been obtained.

10.4 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchaser in Sections 1 and 6 hereof shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date.

Provided that the Company has delivered the notice referred to in
Section 12(g) of the Offer to Purchase, and notwithstanding anything to the
contrary contained in this Section 10, all the foregoing conditions shall be
deemed to have been satisfied or waived by the Company upon the closing under
the Purchaser's Offer.

SECTION 11. CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT THE CLOSING.

The Purchaser's obligation to deliver the Rights in exchange for the Shares
shall be subject to the following conditions to the extent not waived by the
Purchaser:

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<PAGE>

11.1 CLOSING UNDER PURCHASER'S OFFER. All conditions to closing under
the Purchaser's Offer shall have been satisfied or shall have been waived by the
Purchaser.

11.2 APPOINTMENT OF DIRECTORS. The Company shall have taken all actions
necessary to ensure that a representative of the Purchaser (the "Purchaser
Representative"), to be selected by the Purchaser and reasonably acceptable to
the Company, shall be appointed, effective immediately after the Closing, to
serve on the Company's board of directors as a Class II director.

11.3 NO OTHER ISSUANCE BY THE COMPANY. Other than the Initial Payment
(as defined in the Merger Agreement), the Company shall not have issued any
Common Stock of the Company to any of the Holders who have not accepted the
Purchaser's Offer. Other than the general plan of distribution of the Merger
Consideration as set forth in the Merger Agreement as in effect on the Effective
Date, the Company shall not have any agreement, arrangement or plan to issue any
Common Stock of the Company to any of the Holders who have not accepted the
Purchaser's Offer.

11.4 STATEMENT OF POSITION OF THE COMPANY. The Company shall have
delivered to the Holders the letter contemplated by Section 1.2(c).

11.5 DELIVERY OF SHARES. The Company shall have delivered to the
Purchaser stock certificates representing the Shares in accordance with the
terms of Section 4.2.

11.6 WARRANT AGREEMENT. The Company shall have executed and delivered to
the Purchaser a Warrant Agreement in substantially the form of EXHIBIT C.

11.7 CONSENTS AND APPROVALS. Any consents, waivers, clearances,
approvals and authorizations of regulatory or governmental bodies (including,
without limitation, under the HSR Act) that are necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained.

11.8 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Sections 1 and 5 shall be true and correct in
all material respects when made and as of the Closing Date or any other date, if
a representation or warranty specifically refers to such other date, and the
Purchaser shall have received a certificate signed by the chief executive
officer and chief financial officer of the Company, or such other officers of
the Company as agreed upon by the parties hereto, that each of such
representations and warranties is true and correct in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given on and as of the Closing Date, and that
such party has performed and complied with all of its obligations under this
Agreement which are to be performed or complied with on or prior to the Closing
Date.

18
<PAGE>

11.9 LEGAL OPINION. The Purchaser shall have received from Satterlee,
Stephens, Burke & Burke LLP, counsel to the Company, an opinion letter addressed
to the Purchaser, dated as of the Closing Date, covering the matters set forth
in EXHIBIT D hereto, subject to customary assumptions and qualifications.

SECTION 12. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES
ACT.

12.1 REGISTRATION PROCEDURES AND EXPENSES. (a) As soon as practicable
following the Closing Date and in any event no later than thirty (30) days
following the Closing Date, the Company shall prepare and file with the SEC, and
thereafter shall use its reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Shares and the Common Stock
issuable upon exercise of the Warrants (together, the "Registrable Securities")
by the Company to the Purchaser and by any other holders thereof from time to
time (including, without limitation, the Purchaser), in accordance with the
methods of distribution set forth in such shelf registration statement, through
The Nasdaq National Market or the facilities of any national securities exchange
on which the Company's Common Stock is then traded, or in privately-negotiated
transactions (a "Shelf Registration Statement"). All shares of Common Stock
acquired by the Purchaser pursuant to Section 3.1 or upon the exercise of a
Warrant acquired by the Purchaser pursuant to Section 3.1 shall be included in
such Shelf Registration Statement.

(b) The Company shall use its reasonable best efforts
(including, without limitation, the preparation and filing with the SEC of
amendments and supplements to the Shelf Registration Statement and a prospectus
to be used in connection therewith) to keep the Shelf Registration Statement
continuously effective and not misleading for a period of seven (7) years from
the Closing Date or such shorter period that will terminate when all the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant thereto. The Company shall be deemed not to have used its
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it takes any action that would result in the
holders of the Registrable Securities covered thereby not being able to offer
and sell such Registrable Securities during that period, unless such action is
required by applicable law. Notwithstanding the foregoing, following the
effectiveness of the Shelf Registration Statement, the Company may, at any time,
suspend the effectiveness of the Shelf Registration Statement for up to no
longer than sixty (60) days, as appropriate (a "Suspension Period"), by giving
notice to the Purchaser, if (i) the Company shall have determined that the
Company may be required to disclose any material corporate development or (ii)
the Company shall be involved in an underwritten public offering of its
securities. The Company will use its best efforts to minimize the length of any
Suspension Period. Notwithstanding the foregoing, no more

19
<PAGE>

than two Suspension Periods may occur in any twelve (12) month period. The
Purchaser agrees that, upon receipt of any notice from the Company of a
Suspension Period, the Purchaser will not sell any Registrable Securities
pursuant to the Shelf Registration Statement until (i) the Purchaser is advised
in writing by the Company that the use of the applicable prospectus may be
resumed, (ii) the Purchaser has received copies of any additional or
supplemental or amended prospectus, if applicable, and (iii) the Purchaser has
received copies of any additional or supplemental filings which are incorporated
or deemed to be incorporated by reference in such prospectus.

(c) In order to facilitate the public sale or other disposition
of all or any of the Registrable Securities by the Purchaser, the Company shall
furnish to the Purchaser with respect to the Registrable Securities registered
under the Shelf Registration Statement such number of copies of prospectuses,
prospectus supplements and preliminary prospectuses as the Purchaser reasonably
requests in conformity with the requirements of the Securities Act.

(d) The Company shall file any documents required of the Company
for normal blue sky clearance in states specified in writing by the Purchaser;
PROVIDED, HOWEVER, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.

(e) Other than fees and expenses, if any, of counsel or other
advisers to the Purchaser, which fees and expenses shall be borne by the
Purchaser (except as referred to in Section 16.8 below), the Company shall bear
all expenses (exclusive of any brokerage fees, underwriting discounts and
commissions) in connection with the procedures in paragraphs (a) through (d) of
this Section 12.1.

12.2 TRANSFER OF SECURITIES AFTER SHELF REGISTRATION. The Purchaser
agrees that the Purchaser will not effect any disposition of the Registrable
Securities that would constitute a sale within the meaning of the Securities
Act, except:

(i) pursuant to the Shelf Registration Statement, in which case
the Purchaser shall submit the certificates evidencing the Registrable
Securities to the Company's transfer agent, accompanied by a separate
"Purchaser's Certificate" (A) in the form of APPENDIX I attached hereto, (B)
executed by an officer of, or other authorized person designated by, the
Purchaser, and (C) to the effect that (1) the Registrable Securities have been
sold in accordance with the Shelf Registration Statement and (2) the requirement
of delivering a current prospectus has been satisfied; or

(ii) in a transaction exempt from registration under the
Securities Act.

20
<PAGE>

12.3 INDEMNIFICATION. As used in this Section 12.3 the following terms
shall have the following respective meanings:

(a) "Selling Shareholder" shall mean the Purchaser and any
transferee of the Purchaser who is entitled to resell Registrable Securities
pursuant to the Shelf Registration Statement, including any underwriter involved
in such resale, and each person, if any, who controls such Selling Shareholder
within the meaning of Section 15 of the Securities Act, and each officer and
each director of such Selling Shareholder;

(b) "Shelf Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Shelf Registration Statement referred to in Section 12.1; and

(c) "Untrue Statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Shelf Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

The Company agrees to indemnify and hold harmless each Selling Shareholder
from and against any losses, claims, damages or liabilities to which such
Selling Shareholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any Untrue
Statement on or after the effective date of the Shelf Registration Statement, or
on or after the date of any prospectus or prospectus supplement or the date of
any sale by the Purchaser thereunder, or arise out of any failure by the Company
to fulfill any undertaking included in the Shelf Registration Statement and the
Company will reimburse such Selling Shareholder for any reasonable legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; PROVIDED, HOWEVER, that the Company
shall not be liable to such Selling Shareholder in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in such Shelf Registration Statement in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such Selling Shareholder specifically for use in preparation of the Shelf
Registration Statement, or the failure of such Selling Shareholder to comply
with the covenants and agreements contained in Section 12.1 or 12.2 hereof
respecting sale of the Registrable Securities or any statement or omission in
any prospectus that is corrected in any subsequent prospectus that was delivered
to the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.

The Purchaser agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Shelf Registration
Statement

21
<PAGE>

and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Section 12.1 or 12.2
hereof respecting sale of the Registrable Securities, or any Untrue Statement
contained in the Shelf Registration Statement on or after the effective date
thereof, or in any prospectus supplement as of its issue date or date of any
sale by the Purchaser thereunder, if such Untrue Statement was made in reliance
upon and in conformity with written information furnished by or on behalf of the
Purchaser specifically for use in preparation of the Shelf Registration
Statement, and the Purchaser will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided that in no event shall any
indemnity by the Purchaser under this Section 12.3 exceed the gross proceeds
received by the Purchaser from the sale of Registrable Securities covered by
such Shelf Registration Statement.

Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 12.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified thereof, such indemnifying person
shall be entitled to participate therein, and, to the extent it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; PROVIDED, HOWEVER, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; PROVIDED, HOWEVER, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.

12.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent
imposed by Section 6 or this Section 12 upon the transferability of the
Registrable Securities shall cease and terminate as to any particular number of
the Registrable

22
<PAGE>

Securities when such Registrable Securities shall have been sold or otherwise
disposed of in accordance with the intended method of disposition set forth in
the Shelf Registration Statement covering such Registrable Securities or at such
time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.

12.5 INFORMATION AVAILABLE. So long as the Purchaser continues to own
any of the Registrable Securities and the Shelf Registration Statement is
effective covering the resale of Registrable Securities owned by the Purchaser,
the Company will furnish to the Purchaser:

(a) as soon as practicable after available (but in the case of
the Company's Annual Report to Shareholders, within one hundred twenty (120)
days after the end of each fiscal year of the Company), one copy of (i) its
Annual Report to Shareholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted auditing standards
certified by a national firm of certified public accountants); (ii) its Annual
Report on Form 10-K (excluding exhibits); (iii) its quarterly reports on Form
10-Q (excluding exhibits); (iv) its Proxy Statement; and (v) its current reports
on Form 8-K, if any (excluding exhibits);

(b) upon the request of the Purchaser, all exhibits excluded by
the parentheticals to subparagraphs (a)(ii),(iii) and (v) of this Section 12.5,
in the form generally available to the public; and

(c) upon the reasonable request of the Purchaser, an adequate
number of copies of the prospectuses and supplements to supply to any other
party requiring such prospectuses.

12.6 CHANGES IN PURCHASER INFORMATION. The Purchaser agrees to promptly
notify the Company of any changes in the information set forth in the Shelf
Registration Statement regarding the Purchaser or the Purchaser's plan of
distribution set forth in such Shelf Registration Statement.

SECTION 13. INDEMNIFICATION FOR INCOMPLETE OR INACCURATE INFORMATION.

13.1 BY THE COMPANY. The Company agrees to indemnify and hold harmless
the Purchaser (and each person, if any, who controls the Purchaser within the
meaning of Section 15 of the Securities Act, and each officer, director and
employee of persons who control the Purchaser) from and against any losses,
claims, damages or liabilities to which the Purchaser (or any such officer,
director, employee or controlling person) may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (a)

23
<PAGE>

any untrue statement of a material fact, or omission of a material fact, in any
information provided by the Company for use in the Offer to Purchase, as
contemplated in Section 1 thereof (including, without limitation any such
misstatement or omission in Sections 6, 7 and 8 of the Offer), and (b) the
Merger failing to qualify as a reorganization as defined in Section 368(a) of
the Internal Revenue Code of 1986 as amended, as a result of the transfer
contemplated hereby. Further, the Company will reimburse the Purchaser (or such
officer, director, employee or controlling person) for any reasonable legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim.

13.2 BY THE PURCHASER. The Purchaser, agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act and each officer and director of
the Company) from and against any losses, claims, damages or liabilities to
which the Company (or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement of a material fact, or
omission of a material fact in any information about the identity of the
Purchaser, the source of the Purchasers' funds or the Purchasers' plans and
intentions provided by the Purchaser for use in the Offer to Purchase as
contemplated by Section 1 hereof. Further, the Purchaser will reimburse the
Company (or such officer, director or controlling person) for any reasonable
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim.

13.3 PROCEDURE. The procedure with respect to claims under this Section
13 shall be the same as that provided in Section 12.3.

SECTION 14. TERMINATION.

14.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing: (a) by mutual written consent of the parties hereto; (b) by written
notice by any party if the consummation of the Rights Exchange shall violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction; (c) by written notice by either of the Purchaser
or the Company, respectively, to the other party, upon the failure of any
closing condition applicable to either of the Purchaser or the Company,
respectively, which failure is not capable of being cured by the Termination
Date; (d) by written notice by the Company in accordance with Section 8.1 above
and (e) by written notice by either of the Purchaser or the Company,
respectively, to the other party, if the Closing has not occurred by the
Termination Date set forth in Section 4.1, unless the Closing has not occurred
due to the fault or bad faith of the terminating party. The parties agree that
this Agreement shall be terminated

24
<PAGE>

immediately upon the effectiveness of the written notice or written consent
described above.

14.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 14.1, this Agreement shall forthwith become
void and there shall be no further liability of any party to this Agreement or
their respective officers, directors, employees, agents, representatives, or
shareholders, except as otherwise provided in this Agreement.

14.3 TERMINATION FEE. If this Agreement is terminated by the Company
pursuant to Section 14.1(d) above, which termination is the result of: (a) the
receipt by the Company of a Third-Party Offer during the term of this Agreement
and (b) the commitment by the Company to accept a Third-Party Offer (as such
Third-Party Offer may be amended from time to time) within six (6) months
following the Termination Date, then the Company shall, at the time of the
closing of such Third-Party Offer, pay the Purchaser a termination fee in the
amount of (i) any and all out-of-pocket expenses of the Purchaser (including,
without limitation, reasonable attorneys' fees) incurred in connection with this
Agreement (not to exceed $150,000) PLUS (ii) $750,000. If this Agreement is
terminated by the Company pursuant to Section 14.1(b), (c) or (e) above due to
the Company's inability to meet the conditions set forth herein, the Company
shall pay the expenses of the Purchaser referred to in clause (i) of this
Section 14.3.

SECTION 15. NOTICES.

All notices, requests, consents and other communications hereunder shall be
in writing, shall be sent by confirmed facsimile or mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, and shall be deemed given when so sent in the case of
facsimile transmission, or when so received in the case of mail or courier, and
addressed as follows:

(a) if to the Company, to:

Medarex, Inc.
1545 Route 22 East
Annandale, NJ 08801
Attention: Donald L. Drakeman, President
Phone: (609) 713-6001
Fax: (609) 713-6002

with a copy to:

Satterlee, Stephens, Burke & Burke LLP
230 Park Avenue

25
<PAGE>

New York, NY 10169
Attention: Dwight Kinsey, Esq.
Phone: (212) 818-9200
Fax: (212) 818-9606/9607

(b) if to the Purchaser, to:
Bay City Capital
750 Battery Street, Suite 600
San Francisco, CA 94111
Attention: Sandy Zweifach, Chief Financial Officer
Phone: (415) 676-3830
Fax: (415) 837-0996

with a copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Attention: Timothy G. Hoxie, Esq.
Phone: (415) 772-6000
Fax: (415) 772-6268

Any change of an address set forth in this Section 15 may be
accomplished by means of a notice sent in accordance with the terms of this
Section 15.

SECTION 16. MISCELLANEOUS.

16.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of the Company and the Purchaser.

16.2 SECTIONS; HEADINGS; DOLLAR AMOUNTS. Unless otherwise specified, all
references in this Agreement to "Sections" shall be to Sections of this
Agreement. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement. All currency referred to herein shall be in U.S. dollars.

16.3 SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

26
<PAGE>

16.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California by California residents,
without regard to conflicts of law principles.

16.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties. Delivery of an executed counterpart by
facsimile shall be the same as delivery of an original counterpart.

16.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

16.7 ENTIRE AGREEMENT. This Agreement and other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.

16.8 PAYMENT OF FEES AND EXPENSES. Except as provided in Section 14.3,
each of the Company and the Purchaser shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.

[SIGNATURE PAGE FOLLOWS THIS PAGE]

27
<PAGE>

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

MEDAREX, INC.

By: /s/ Donald L. Drakeman
----------------------------------
Name: Donald L. Drakeman
----------------------------------
Title: President
----------------------------------

BCC ACQUISITION I LLC

By: THE BAY CITY CAPITAL
FUND I, L.P.
Its: Manager

By: Bay City Capital Management LLC
Its: General Partner

By: /s/ Roger H. Salquist
----------------------------------
Name: Roger H. Salquist
----------------------------------
Title: Manager
----------------------------------

S-1
<PAGE>

EXHIBIT A

OFFER TO PURCHASE

<PAGE>

EXHIBIT B

LETTER TO HOLDERS

<PAGE>

EXHIBIT C

FORM OF WARRANT AGREEMENT

<PAGE>

EXHIBIT D

FORM OF LEGAL OPINION

1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New Jersey.
The Company has the requisite corporate power to own or lease its property
and assets and to conduct its business as currently conducted.

2. The Agreement has been duly authorized by all necessary corporate action on
the part of the Company, has been duly executed and delivered on behalf of
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except (a) as
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium and other laws of general applicability relating to or affecting
creditors' rights generally, (b) as limited by public policy or equitable
principles generally or the availability of equitable remedies, whether
such enforceability is considered in a proceeding in equity or at law, and
(c) as rights to indemnity or contribution or pursuant to Section 12.3 and
13.1 of the Agreement may be limited by applicable laws or principles of
public policy.

3. The Company has _________ authorized and, to such counsel's knowledge,
________ outstanding shares of capital stock. The Shares have been duly
authorized and, upon issuance and delivery against the surrender of the
Rights in accordance with the Agreement, will be validly issued, fully paid
and nonassessable. Except as disclosed in the Agreement, to such counsel's
knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase or
receive any of the authorized but unissued capital stock of the Company or
the Shares, other than the shares reserved for issuance under the Merger
Agreement or ________________.

4. The execution and delivery of the Agreement, the execution and delivery of
the Offer to Purchase, the consummation of the Rights Exchange and the
consummation of the Purchaser's Offer do not violate any provisions of the
Company's Articles or Bylaws, and do not conflict with or constitute a
default under the provisions of any agreement (including, without
limitation, the Merger Agreement, agreements involving the Major Strategic
Partners, and any agreement between the Company and The Nasdaq National
Market) to which the Company is a party, and do not violate or contravene
(a) any law applicable to the Company and known to such counsel other than
as may be required by the securities or Blue Sky laws of the various states
as to which such counsel does not express an opinion or (b) any order,
writ, judgment, injunction, decree, determination or award applicable to
the Company and known to such counsel, except for a default, violation or
contravention which would not have a

<PAGE>

material adverse effect on the business, assets, financial condition or
results of operations of the Company.

5. To such counsel's knowledge, no holders of securities of the Company (other
than the Purchaser and as set forth in the Agreement) have rights to the
registration of such securities following the Effective Date that have not
been waived or satisfied.

6. Except as set forth in the Agreement, to such counsel's knowledge, there is
no action, proceeding or investigation pending or threatened against the
Company which could reasonably be anticipated to result, either
individually or in the aggregate, in any material adverse change in the
business, assets, financial condition or results of operations of the
Company.

7. Assuming the accuracy of the Purchaser's representations and warranties and
the fulfillment of the conditions contained in the Agreement, the issuance
of the Shares by the Company to the Purchaser in exchange for the Rights is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act").

8. To such counsel's knowledge, no material governmental consents, approvals,
authorizations, orders, filings, registrations or qualifications are
required for the issuance of the Shares by the Company under the Agreement
other than as may be required by the securities or Blue Sky laws of the
various states or by the bylaws and rules of the National Association of
Securities Dealers.

9. The waiver by the Company of the restrictions on transferability of the
Rights set forth in Section 2.1(e) of the Merger Agreement is valid and
effective. The Merger Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered on behalf of the Company and, together with the Rights created
therein, is, and following the Closing of the transactions contemplated by
the Agreement will remain, a valid and binding obligation of the Company
enforceable in accordance with its terms except (a) as limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium
and other laws of general applicability relating to or affecting creditors'
rights generally, (b) as limited by public policy or equitable principles
generally or the availability of equitable remedies, whether such
enforceability is considered in a proceeding in equity or at law, and (c)
as rights to indemnity or contribution may be limited by applicable laws or
principles of public policy; PROVIDED only that, upon issuance of the
Shares to the Purchaser under the Agreement the Company will have no
further obligation with respect to the Rights assigned to the Purchaser or
with respect to the former Holders thereof. The Rights are not "equity
securities" of the Company within the meaning of the Securities Exchange
Act of 1934 or the Rules of the Securities and Exchange Commission
promulgated thereunder. The Merger has been duly consummated in accordance
with the terms of the Merger Agreement and the Rights have been duly
created pursuant to the Merger Agreement.

<PAGE>

APPENDIX I

MEDAREX, INC.
PURCHASER'S CERTIFICATE OF RESALE OF THE SHARES

(i) The undersigned, an officer of, or other person duly
authorized by
______________________________________________________________________
[fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of the Shares
evidenced by the attached stock certificate(s) and as such, sold such Shares on
__________________
[date]
in accordance with shelf registration statement number ________________________
________________________________________________________________________
[fill in the number of or otherwise identify shelf registration statement]

and the requirement of delivering a current prospectus and current annual,
quarterly and current reports (Forms 10-K, 10-Q and 8-K) by the Company has been
complied with in connection with such sale.
PRINT OR TYPE:

Name of Purchaser:
------------------------------

Name of Individual representing Purchaser:
------------------------------

Title of Individual representing Purchaser:
------------------------------

SIGNATURE BY:

Individual representing Purchaser:
------------------------------

<PAGE>

SCHEDULE 1

(Table of Former GenPharm share values)

<PAGE>

Schedule 2

(List of Holders)

<PAGE>

Schedule 3

(Schedule of Exceptions)

<PAGE>

EXHIBITS, APPENDICES, AND SCHEDULES

EXHIBITS

Exhibit A Offer to Purchase

Exhibit B Letter to Holders

Exhibit C Form of Warrant Agreement

Exhibit D Opinion of Company counsel

APPENDICES

Appendix I Purchaser's Certificate of Resale of Shares

SCHEDULES

Schedule 1 Table of Former GenPharm share values

Schedule 2 List of Holders

Schedule 3 Schedule of Exceptions

<PAGE>

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.

July ___, 1998

WARRANT

To Subscribe for and Purchase Common Stock of
Medarex, Inc.

VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON July ___, 2005,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M,
NEW YORK CITY TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY

NO. [W-1]

THIS CERTIFIES that for valuable consideration, receipt and sufficiency of which
are hereby acknowledged, BCC Acquisition I LLC, a Delaware limited liability
company ("BCC"), or registered assigns, is entitled to subscribe for and
purchase from Medarex, Inc., a New Jersey corporation (hereinafter called the
"Company"), at the price of $10.00 per share (such price, as from time to time
to be adjusted as hereinafter provided), being hereinafter called the "Warrant
Price", at any time and from time to time after the issuance hereof but not
later than the Expiration Date (as defined below), up to [ _________ ] fully
paid, nonassessable shares of Common Stock (as defined below), par value $.01
per share, of the Company, subject, however, to the provisions and upon the
terms and conditions hereinafter set forth, including without limitation the
provisions of Section 2 hereof (the "Warrant"). "Expiration Date" shall mean
5:00 P.M., New York City time, on July ___, 2005, which is seven years from the
date hereof, or if not a Business Day, as defined herein, at 5:00 P.M., New York
City time, on the next Business Day. "Business Day" shall mean a day other than
a Saturday, Sunday or other day on which banks in the State of California or New
York are authorized by law to remain closed.

<PAGE>

SECTION 1. EXERCISE OF WARRANT

(a) CASH EXERCISE

This Warrant may be exercised, at any time and from time to time after
the issuance hereof but not later than the Expiration Date, by the holder hereof
or its permitted assigns (hereinafter referred to as the "Warrantholder"), in
whole or in part (but not as to a fractional share of Common Stock and in no
event for less than 100 shares, unless less than an aggregate of 100 shares are
then purchasable under all outstanding Warrants held by a Warrantholder), by the
completion of the subscription form attached hereto as Exhibit A, and by the
surrender of this Warrant (properly endorsed) at the Company's offices at 1545
Route 22 East, Annandale, New Jersey, 08801 (or at such other location in the
United States as it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the Company), and by
payment to the Company of the Warrant Price, in cash or by certified or official
bank check, for each share being purchased.

(b) NET EXERCISE

Notwithstanding anything to the contrary contained in Subsection 1(a),
the Warrantholder may elect to exercise this Warrant and receive shares on a net
exercise basis in an amount equal to the value of this Warrant by delivery of
the subscription form attached hereto as Exhibit A, and surrender of this
Warrant at the address set forth in Section 1(a), above, in which event the
Company shall issue to Holder a number of shares computed using the following
formula:

X = (P)(Y)(A-B)
-----------
A

Where: X = the number of shares of Common Stock to be issued to
Holder.

P = a fraction, the numerator of which is the number of
shares of Common Stock with respect to which this Warrant
is being exercised and the denominator of which is Y,
expressed as a percentage.

Y = the number of shares of Common Stock issuable upon
exercise of this Warrant.

A = the current Market Price, as defined and determined
pursuant to Subsection 1(d), of one share of Common
Stock.

B = Warrant Price.

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<PAGE>

In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the total number of whole shares of Common
Stock so purchased, registered in the name of the Warrantholder, shall be
delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
remaining number of shares (except a remaining fractional share), if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Warrantholder within such time. With respect to any such
exercise, the Warrantholder shall for all purposes be deemed to have become the
holder of record of the number of shares of Common Stock evidenced by such
certificate or certificates from the date on which this Warrant was surrendered
and if exercise is pursuant to Section 1(a), payment of the Warrant Price was
made, irrespective of the date of delivery of such certificate, except that, if
the date of such surrender and payment is a date on which the stock transfer
books of the Company are closed, such person shall be deemed to have been the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof, shall
pay to the Warrantholder an amount in cash equal to the current Market Price, of
such fractional interest, as determined below.

(d) CURRENT MARKET PRICE

For any computation hereunder, the current Market Price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 30 consecutive Trading Days (as defined below)
commencing 45 Trading Days before the date in question. The daily market price
per share shall be the closing sale price (or, if no closing sale price is
reported, the closing bid price) of the Common Stock on the primary national
securities market or exchange on which the Company's Common Stock trades
(currently the National Association of Securities Dealers Automated Quotation
System ("Nasdaq")). If Market Price cannot be established as described above,
Market Price shall be the fair market value of the Common Stock as determined in
good faith by the Board of Directors. "Trading Day" is defined as a day on
which Nasdaq or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.

-3-

<PAGE>

SECTION 2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES

The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2.

(a) ADJUSTMENTS

(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares;
(C) combine, reclassify or recapitalize its outstanding Common Stock into a
smaller number of shares, or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger), the Warrant Price in effect at the
time of the record date of such dividend, distribution, subdivision,
combination, reclassification or recapitalization shall be adjusted as
appropriate in proportion to such increase or decrease in outstanding shares.
Upon each such adjustment of the Warrant Price, as provided in this Section 2,
the Warrantholder shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares (calculated to the nearest
tenth of a share) obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Warrant Price resulting from such adjustment. Any adjustment
required by this Section 2(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or recapitalization,
to allow the purchase of such aggregate number and kind of shares.

(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as provided
in this Section 2, and the Company shall reserve,

-4-

<PAGE>

for the life of the Warrant, such securities of such subsidiary or other
corporation (together with any dividends or interest paid thereon); provided,
however, that no further adjustment in respect of dividends or interest on such
stock or other securities shall be made during the term of this Warrant or upon
its exercise.

(3) If at any time prior to the exercise of this Warrant in
full, the Company shall issue rights or warrants to all holders of Common Stock
as such entitling them (for a period expiring within ninety days after the
record date of the determination of stockholders entitled to receive the same),
to subscribe for or purchase Common Stock at a price per share less than the
current Market Price per share (as defined below) on such record date, then, in
each such case the number of shares subject to this Warrant thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable upon exercise of
this Warrant by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or warrants,
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants, plus the
number of shares that the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at such current Market Price. In the
event of such adjustment, the Warrant Price shall be proportionately reduced.
For purposes of this Section 2(a)(3), the issuance of rights or warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.

(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or warrants to
subscribe for securities of the Company (excluding those referred to in Sections
2(a)(2) or (3) above), then in each case the Warrant Price shall be adjusted to
a price determined by multiplying the Warrant Price in effect immediately prior
to such distribution by a fraction, the numerator of which shall be the
difference of (i) the then current Market Price per share of Common Stock (as
defined below) on the record date for determination of stockholders entitled to
receive such distribution, LESS (ii) the then fair value (as determined by the
Board of Directors of the Company, whose determination shall be conclusive) of
the portion of the assets or evidence of

-5-

<PAGE>

indebtedness so distributed or of such subscription rights or warrants which are
applicable to one share of Common stock, and the denominator of which shall be
the Market Price per share of Common Stock, provided, however, that if the then
current Market Price per share of Common Stock on the record date for
determination of stockholders entitled to receive such distribution is less than
the then fair value of the portion of the assets or evidence of indebtedness so
distributed or of such subscription rights or warrants which are applicable to
one share of Common Stock, the foregoing adjustment of the Warrant Price shall
not be made and in lieu thereof each Warrantholder, upon the exercise of this
Warrant at any time after such distribution, shall be entitled to receive from
the Company the kind and number of assets, evidence of indebtedness,
subscription rights and warrants (or, in the event of the redemption of such
evidence of indebtedness, subscription rights or warrants, any cash paid in
respect of such redemption) that such Warrantholder would have owned or have
been entitled to receive after the happening in such distribution had such
Warrant been exercised immediately prior to the record date of such
distribution.

(5) For purposes of any computation under this Section 2(a),
the current Market Price per share of Common Stock on any date shall be deemed
calculated as provided in Section 1(d).

(6) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this Section 2(a)(6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2(a) shall be made to the nearest cent or to the nearest one
hundredth of a share, as the ease may be. Notwithstanding anything in this
Section 2(a) to the contrary, (i) except for adjustments pursuant to Section
2(a)(1), the Warrant Price shall not be increased, and (ii) the Warrant Price
shall not be reduced to less than the then existing par value of the Common
Stock as a result of any adjustment made hereunder.

(7) In the event that at any time, as the result of any
adjustment made pursuant to this Section 2(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable, upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 2(a).

-6-

<PAGE>

(b) NO ADJUSTMENT FOR DIVIDENDS

Except as provided in Section 2(a) of this Warrant, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.

Subject to the conditions of Section 2(d), the Company shall not
reorganize, or consolidate with, or merge into a partnership, corporation, or
other entity (other than a reorganization, consolidation, or merger, in which
the Company is the surviving entity) or transfer all or substantially all of its
assets to another entity (any one of which shall constitute a "Reorganization"),
unless the Warrantholder, upon the exercise of the Warrant at any time after the
consummation of such Reorganization, shall be entitled to receive, in the same
manner as specified in this Warrant, the stock or other securities or property
to which the Warrantholder would have been entitled upon such consummation if
the Warrantholder had exercised the Warrant on or before the record date for
such Reorganization. Any new entity formed upon or existing as a surviving
entity after any such Reorganization shall be deemed the "Company" for purposes
of this Warrant. The terms of this Warrant shall survive the consummation of
any such Reorganization, and the Warrant shall thereafter be applicable to the
shares of stock or other securities or property to which the Warrantholder would
have been entitled upon such consummation if the Warrantholder had exercised the
Warrant on or before the record date for such Reorganization. The Company shall
not effect any Reorganization, unless prior to or simultaneously with the
consummation thereof, the successor or surviving entity after such
Reorganization shall assume, by written instrument, (i) the obligation to
deliver to the Warrantholder such shares of stock, or other securities or
property as, in accordance with the foregoing provisions, the Warrantholder may
be entitled to purchase and (ii) the other obligations of the Company under this
Warrant.

(d) NOTICE OF REORGANIZATION

Notice of any contemplated Reorganization, and the proposed terms
thereof, including specifically the manner in which the requirements of Section
3(c) will be met, shall be given to the Warrantholder at least twenty (20) days
before the proposed consummation of such Reorganization.

(e) TREATMENT OF WARRANTHOLDER

Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant

-7-

<PAGE>

(notwithstanding any notation of ownership or other writing hereon) for all
purposes and shall not be affected by any notice to the contrary.

(f) NOTICE OF ADJUSTMENT

Upon any Adjustment of the Warrant Price, then and in each such case the
Company shall give written notice thereof, by first-class mail, postage prepaid,
addressed to each Warrantholder at the address of such Holder as shown on the
books of the Company, which notice shall state the Warrant Price resulting from
such adjustment, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.

(g) STOCK TO BE RESERVED

The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be so issued upon full payment of the
Warrant Price therefor or as otherwise set forth herein, shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be required to ensure that the par value per
share, if any, of the Common Stock is at all times equal to or less than the
effective Warrant Price. The Company will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange or automated quotation system upon which the
Common Stock of the Company may be listed. The Company will not take any action
which results in any adjustment of the Warrant Price if the total number of
shares of Common Stock issued and issuable after such action upon exercise of
this Warrant would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation. The Company has not
granted and will not grant any right of first refusal with respect to shares
issuable upon exercise of this Warrant, and there are no preemptive rights
associated with such shares.

(h) ISSUE TAX

The issuance of certificates for shares of Common Stock upon exercise of
any Warrant shall be made without a charge to the Warrantholder for any issuance
tax in respect thereof, provided that the Company shall not be required to pay
any tax which may be

-8-

<PAGE>

payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Warrantholder.

(i) CLOSING OF BOOKS

The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.

(j) DEFINITION OF COMMON STOCK

Subject to the provisions of this Section 2, the shares purchasable
pursuant to this Warrant shall include only securities designated as Common
Stock of the Company. As used herein, the term "Common Stock" shall mean and
include the Common Stock, par value $.01, of the Company as authorized on the
date hereof, or shares of any class or classes resulting from any
recapitalization or reclassification thereof which are not limited to any fixed
sum or percentage and are not subject to redemption by the Company and in case
at any time there shall be more than one such resulting class, the shares of
each class then so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such reclassification
bears to the total number of shares of all such classes resulting from all such
reclassification.

SECTION 3. Registration Rights

(a) SHELF REGISTRATION STATEMENT

Reference is made to that certain Rights Exchange Agreement by and
between the Company and BCC, dated June ___, 1998 ("Exchange Agreement"), the
provisions of which relating to registration rights for the Common Stock
issuable upon exercise of this Warrant are incorporated herein by this
reference. The Company shall file a shelf registration statement fully in
compliance with Section 12 of the Exchange Agreement.

(b) INDEMNIFICATION

The indemnification provisions set forth in Section 12.3 of the Exchange
Agreement, incorporated herein by this reference, shall govern this Warrant.

SECTION 4. NOTICES OF RECORD DATES

In the event of:

(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are

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<PAGE>

entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or

(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation or
entity; or

(d) any other action which would represent an adjustment in
accordance with Section 2 hereof;

then in each such event the Company will give notice to the
Warrantholder specifying (1) the date on which any such record is to be taken
for the purpose of such dividend, distribution, right or other event and stating
the amount and character of such dividend, distribution, right, or other event
and (2) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock will be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be given at
least 20 days and not more than 90 days prior to the date therein specified, and
such notice shall state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act or to a favorable vote of stockholders, if either is required. Failure to
mail or receive such notice or any defect therein shall not affect the validity
of any action with respect thereto.

SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES

This Warrant shall not entitle the Warrantholder to any voting rights or
other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

-10-

<PAGE>

SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT

In case the certificate or certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall, at the request of the
Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the applicant's
cost. Applicants for such substitute Warrant certificate or certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.

SECTION 7. NOTICES

All notices, requests, consents and other communications hereunder shall
be in writing, shall be sent by confirmed facsimile or mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, and shall be deemed given when so sent in the case of
facsimile transmission, or when so received in the case of mail or courier, and
addressed as follows:

(a) if to the Company, to:

Medarex, Inc.
1545 Route 22 East
Annandale, NJ 08801
Attention: Donald L. Drakeman, President
Phone: (609) 713-6001
Fax: (609) 713-6002

with a copy to:

Satterlee, Stephens, Burke & Burke LLP
230 Park Avenue
New York, NY 10169
Attention: Dwight Kinsey, Esq.
Phone: (212) 818-9200
Fax: (212) 818-9606/9607

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<PAGE>

(b) if to the Purchaser, to:

Bay City Capital
750 Battery Street, Suite 600
San Francisco, CA 94111
Attention: Sandy Zweifach, Chief Financial Officer
Phone: (415) 676-3830
Fax: (415) 837-0996

with a copy to:

Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Attention: Timothy G. Hoxie, Esq.
Phone: (415) 772-6000
Fax: (415) 772-6268

Any change of an address set forth in this Section 7 may be accomplished by
means of a notice sent in accordance with the terms of this Section 7.

SECTION 8. TRANSFER

This Warrant is non-transferable, except with the prior written consent
of the Company, provided, however, that transfers may be made to an affiliate of
the Warrantholder without prior written consent of the Company. Any transfer or
assignment hereunder shall be in the form of Exhibit B attached hereto.

SECTION 9. AMENDMENTS AND WAIVERS

This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.

SECTION 10. SEVERABILITY

If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

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<PAGE>

SECTION 11. GOVERNING LAW

This Warrant shall be governed by and construed under the laws of the
State of New Jersey without regard to conflict of law principles.

SECTION 12. HEADINGS

The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.

SECTION 13. COUNTERPARTS

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

IN WITNESS WHEREOF, the Company and BCC have executed this Warrant on
and as of the day and year first above written.

Medarex, Inc.,
a New Jersey corporation

-----------------------------------
Name

-----------------------------------
Title

BCC Acquisition I LLC,
a Delaware limited liability company

-----------------------------------
Name

-----------------------------------
Title

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<PAGE>

EXHIBIT A

SUBSCRIPTION FORM

(To be executed upon exercise of this Warrant)

The undersigned hereby irrevocably elects to exercise the right of
purchaser represented by the within Warrant for, and to purchase thereunder,
___________ shares of Common Stock, as provided for therein, and either tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $__________ or, if the
undersigned elects pursuant to Section 1(b) of the within Warrant to convert
such Warrant into Common Stock by net exercise, the undersigned exercises the
within Warrant by exchange under the terms of Section 1(b).

Please issue a certificate or certificates for such Common Stock in the
name of and pay any cash for any fractional share to:

Name:
-----------------------------------

Address:

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

Tax I.D. No:
----------------------------

Signature
of Authorized Agent:
--------------------

Print Name:
-----------------------------

Note: The above signature must correspond
exactly with the name on the first
page of this Warrant or with the
name of the assignee appearing in
the assignment form below.

If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.

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<PAGE>

Signature Guaranteed:
----------------------------------

(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)

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<PAGE>

EXHIBIT B

ASSIGNMENT

(To be executed only upon assignment of Warrant)

For value received, ___________________________ hereby sells, assigns,
and transfers unto ______________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute, and appoint attorney, to transfer said Warrant on the books of the
within-named Company with respect to the number of Warrants set forth below,
with full power of substitution in the premises:

Name(s) of
Assignee(s)/Address No. of Warrants
------------------- ---------------

And if said number of Warrants shall not be all the Warrants represented by the
Warrant, a new Warrant is to be issued in the name of said undersigned for the
balance remaining of the Warrants registered by said Warrant.

Dated: Signature:
----------------------------------

Note: The above signature must correspond
exactly with the name on the face of
this Warrant

Signature Guaranteed:
--------------------------------------

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<PAGE>

LLC OPERATING AGREEMENT
FOR
BCC ACQUISITION I LLC

THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made as of June 5,
1998, by and between The Bay City Capital Fund I, L.P. (the "Manager" and a
"Member") and Bay Investment Group, LLC ("BIG", a "Member" and, with the
Manager, the "Members").

RECITALS

A. On June 3, 1998, a Certificate of Formation (the "Certificate") for
BCC ACQUISITION I LLC (the "Company"), a limited liability company formed under
the laws of the State of Delaware, was filed with the Delaware Secretary of
State.

B. The Members desire to adopt and approve an operating agreement for
the Company.

C. The business of the Company shall be managed, pursuant to this
operating agreement, exclusively by the Manager, who shall not be removable.

NOW, THEREFORE, the Members by this Agreement set forth the operating
agreement for the Company under the Delaware Limited Liability Company Act (the
"Act") upon the terms and subject to the conditions of this Agreement:

ARTICLE I
ORGANIZATIONAL MATTERS AND CERTAIN DEFINITIONS

1.1. NAME. The name of the Company shall be "BCC ACQUISITION I LLC".
The Company may conduct business under that name or any other name approved by
the Manager.

1.2. TERM. The term of the Company commenced on the date of the filing
of the Certificate and, unless sooner terminated under Section 9.1, shall
terminate on December 31, 2020.

1.3. OFFICE AND AGENT. The Company shall continuously maintain an office
and registered agent in the State of Delaware as required by the Act. The
principal office of the Company shall be care of Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805 or such location as the Manager may
determine. The registered agent shall be as stated in the Certificate or as
otherwise determined by the Manager.

<PAGE>

1.4. BUSINESS OF THE COMPANY. The Company may engage in any lawful act
or activity for which limited liability companies may be organized under the
Act.

1.5. CERTAIN DEFINITIONS. When used in this Agreement, the following
terms not elsewhere defined shall have the meanings set forth below:

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent applicable,
the Treasury Regulations.

"NET PROFITS" and "NET LOSSES" shall mean the income, gain, loss,
deductions, and credits of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with generally accepted accounting
principles.

"TREASURY REGULATIONS" shall mean the final or temporary regulations
that have been issued by the U.S. Department of Treasury pursuant to its
authority under the Code.

ARTICLE II
CAPITAL COMMITMENT AND CONTRIBUTIONS

2.1. CAPITAL COMMITMENT. The Manager's aggregate capital commitment
hereunder is $15 million. BIG's aggregate capital commitment hereunder is $23
million.

2.2. CAPITAL CONTRIBUTION. Upon the request of the Manager for capital
contributions, each of the Members shall make capital contributions to the
Company up to such Member's aggregate capital commitment, provided that no
Member shall be obligated to make a capital contribution other than related to
the Rights Exchange Agreement dated June __, 1988 between the Company and
Medarex, Inc. and the transactions contemplated thereby or operating expenses of
the Company. All capital contributions shall be made first by the Manager (up
to $15 million in the aggregate) and then by BIG (up to $23 million in the
aggregate).

2.3. CAPITAL ACCOUNTS. The Company shall establish an individual capital
account ("Capital Account") for each Member. Capital Accounts shall be
increased by the amount of each Member's capital contributions and shares of Net
Profits, and decreased by each Member's distribution of shares of Net Losses.

2.4. NO INTEREST. The Company shall not pay any interest on capital
contributions.

2
<PAGE>

ARTICLE III
MEMBERS

3.1. ADMISSION OF ADDITIONAL MEMBERS. The Manager may admit to the
Company additional Members who will participate in the Net Profits, Net Losses
and distributions of the Company on such terms as are determined by the Manager.

3.2. WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign as a
Member without the consent of the Manager.

3.3. PAYMENTS TO MEMBERS. Except as specified in this Agreement or
pursuant to a transaction permitted by Section 4.6, no Member is entitled to
remuneration for services rendered or goods provided to the Company.

ARTICLE IV
MANAGEMENT AND CONTROL OF THE COMPANY

4.1. MANAGEMENT BY MANAGER. The business of the Company shall be
conducted by the Manager, who shall not be removable by the Members. Except as
otherwise required by law or set forth herein, the Manager shall have full and
complete authority, power, and discretion to manage and control the business,
property and affairs of the Company, to make all decisions regarding those
matters, to represent the Company vis-a-vis third parties and to perform any and
all other acts or activities customary or incident to the management of the
Company's business, property and affairs. Without limiting the foregoing, the
Members shall have no rights to vote on any matter except as required by law, it
being the intention of the Members to vest the management of the Company to the
fullest extent possible in the Manager.

4.2. MEMBER APPROVAL. No annual or regular meetings of the Members are
required to be held. In any instance in which the approval of the Members is
required under the Act, such approval may be obtained in any manner permitted by
the Act, including by written consent.

4.3. DEVOTION OF TIME. The Manager shall not be obligated to devote all
or any particular amount of his time or business efforts to the Company.

4.4. COMPETING ACTIVITIES. The Members (including the Manager) may
engage or invest in any activity, including, without limitation, those that
might be in direct or indirect competition with the Company. Neither the
Company nor any Member shall have any right in or to such other activities or to
the income or proceeds derived therefrom. No Member shall be obligated to
present any investment opportunity to the Company, even if the opportunity is of
the character that, if presented to the Company, could be taken by the Company.
Each Member shall have the right to hold any

3
<PAGE>

investment opportunity for his or her own account or to recommend such
opportunity to persons other than the Company. The Members acknowledge that
certain Members may own and/or manage other businesses, including businesses
that may compete with the Company and for the Members' time. Each Member hereby
waives any and all rights and claims which such Member may otherwise have
against the other Members as a result of any of such activities.

4.5. TRANSACTIONS BETWEEN THE COMPANY AND THE MEMBERS. Notwithstanding
that it may constitute a conflict of interest (including the Manager), a Member
and its affiliates may engage in any transaction with the Company so long as
such transaction is approved by the Manager or, if the transaction is between
the Company and the Manager or an affiliate of the Manager, the other Member.

ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS

5.1. ALLOCATIONS OF NET PROFIT AND NET LOSS. Profits and Net Loss shall
be allocated to the Members in proportion to their Capital Accounts.

5.2. DISTRIBUTIONS OF ASSETS BY THE COMPANY. Subject to applicable law,
the Manager may cause the Company from time to time to make distributions to the
Members. Distributions shall be first to the Members in proportion to their
Capital Accounts. In the event any distribution exceeds that which is
permissible under the Act, any Member receiving such distribution shall, at the
request of the Manager, return such excess to the Company.

ARTICLE VI
TRANSFER AND ASSIGNMENT OF INTERESTS

6.1. TRANSFER AND ASSIGNMENT OF INTERESTS. Except as provided in Section
6.3, no Member shall be entitled to transfer, assign, convey, sell, encumber or
in any way alienate all or any part of his interest in the Company
(collectively, "transfer") except with the prior approval of the Manager. The
Manager may not transfer its interest without the consent of each of the other
Members.

6.2. SUBSTITUTION OF MEMBERS. A transferee of a membership interest
shall have the right to become a substitute Member only if (i) consent of the
Manager is given in accordance with Section 6.1, (ii) such person executes an
instrument satisfactory to the Manager accepting and adopting the terms and
provisions of this Agreement, and (iii) such person pays any reasonable expenses
in connection with his admission as a new Member. The admission of a substitute
Member shall not result in the release of the

4
<PAGE>

Member who assigned the membership interest from any liability that such Member
may have to the Company.

6.3. TRANSFERS IN VIOLATION OF THIS AGREEMENT AND TRANSFERS OF PARTIAL
MEMBERSHIP INTERESTS. Upon a transfer in violation of this Article VI, the
transferee shall have no right to vote or participate in the management of the
Company or to exercise any rights of a Member, and such transferee shall not be
considered a Member for any purpose other than receipt of the economic interests
described in the next sentence. Such transferee shall only be entitled to
receive the share of the Company's Net Profits, Net Losses and distributions of
the Company's assets to which the transferor would otherwise be entitled.
Notwithstanding the immediately preceding sentences, if, in the determination of
the Manager, a transfer in violation of this Article VI would cause the
termination of the Company under the Code, the transfer shall be null and void.

ARTICLE VII
CONSEQUENCES OF WITHDRAWAL,
BANKRUPTCY, OR DISSOLUTION OF MANAGER

7.1. DISSOLUTION EVENT. Upon the withdrawal, bankruptcy, or dissolution
of the Manager ("Dissolution Event"), the Company shall dissolve unless the
remaining Members and the transferee of the Manager unanimously elect, within 90
days of such Dissolution Event, to continue the business of the Company.

ARTICLE VIII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS

8.1. BOOKS AND RECORDS. The books and records of the Company shall be
kept in accordance with generally accepted accounting principles, or such other
method as the Manager may determine. Such books and records shall include:

A. A current list of the full name and last known business or
residence address of each Member, together with the capital contributions,
Capital Account and Profits Interest of each Member;

B. A copy of the Certificate and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Certificate or any amendments thereto have been executed;

C. Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;

5
<PAGE>

D. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;

E. Copies of the financial statements of the Company, if any, for
the six (6) most recent fiscal years; and

F. The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four (4) fiscal years.

8.2. REPORTS. The Company shall cause to be prepared at least annually
information necessary for the preparation of the Members' federal and state
income tax returns. The Company shall send or cause to be sent to each Member
within ninety (90) days after the end of each taxable year such information as
is necessary to complete federal and state income tax or information returns.

8.3. BANK ACCOUNTS. The Manager shall maintain the funds of the Company
in one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other person. Only the Manager is authorized to endorse checks, drafts,
and other evidences of indebtedness made payable to the order of the Company for
the purpose of deposit into the Company's accounts, as well as sign checks,
drafts, and other instruments obligating the Company to pay money.

8.4. TAX MATTERS FOR THE COMPANY. Unless the Manager designates another
Member as such, the Manager shall be the "Tax Matters Partner" (as defined in
Code Section 6231), to represent the Company (at the Company's expense) in
connection with all examination of the Company's affairs by tax authorities and
to expend Company funds for professional services and costs associated
therewith.

ARTICLE IX
DISSOLUTION AND WINDING UP

9.1. CONDITIONS OF DISSOLUTION. The Company shall dissolve upon the
occurrence of any of the following events:

A. Upon the entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Act;

B. Upon the election of the Manager; or

C. The occurrence of a Dissolution Event (unless an election to
continue the Company is made pursuant to Section 7.1).

6
<PAGE>

9.2. WINDING UP. Upon the dissolution of the Company, the Company's
assets shall be disposed of and its affairs wound up by the Manager or, if there
be no Manager, the remaining Members.

9.3. ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION. After determining
that all the known debts and liabilities of the Company have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in accordance with their positive Capital Account balances, after taking
into account income and loss allocations for the Company's taxable year during
which liquidation occurs and deemed income or loss attributable to any
unrealized gain or loss on distributed assets computed as if the assets of the
Company were sold at their then fair market value.

9.4. LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Member shall be entitled to look
solely at the assets of the Company for the return of his positive Capital
Account balance and shall have no recourse for his Capital Contribution and/or
share of Net Profits against any other Member.

ARTICLE X
INDEMNIFICATION

10.1. INDEMNIFICATION. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a Member, Manager, or agent of the Company to the same extent provided
for a Member, Manager, or agent in the Limited Liability Company Operating
Agreement of Bay City Capital LLC dated as of June 24, 1997 (as may be amended
from time to time), all as if such Member, Manager, or agent of the Company was
a Member, Manager, or agent of Bay City Capital LLC.

ARTICLE XI
INVESTMENT REPRESENTATIONS

Each Member hereby represents and warrants to, and agrees with, the other
Members, and the Company as follows:

11.1. PREEXISTING RELATIONSHIP OR EXPERIENCE. The Member has a
preexisting personal or business relationship with the Company or its Members,
or by reason of the Member's business or financial experience, or by reason of
the business or financial experience of the Member's financial advisor who is
unaffiliated with and who is not compensated, directly or indirectly, by the
Company or any affiliate or selling agent of the Company, the Member is capable
of evaluating the risks and merits of an investment

7
<PAGE>

in the Company and of protecting the Member's own interests in connection with
this investment.

11.2. NO ADVERTISING. The Member has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting, article or
any other form of advertising or general solicitation with respect to the sale
of the membership interest.

11.3. INVESTMENT INTENT. The Member is acquiring the membership interest
for the Member's own account only and not with a view to or for sale in
connection with any distribution of all or any part of the membership interest.
No other person will have any direct or indirect beneficial interest in or right
to the membership interest.

ARTICLE XII
MISCELLANEOUS

12.1. COMPLETE AGREEMENT. This Agreement and the Certificate constitute
the complete and exclusive statement of agreement among the Members with respect
to the subject matter herein and therein and replace and supersede all prior
written and oral agreements among the Members. To the extent that any provision
of the Certificate conflicts with any provision of this Agreement, the
Certificate shall control.

12.2. BINDING EFFECT. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.

12.3. INTERPRETATION. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
interpretation of any provision of this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated. In the
event any claim is made by any Member relating to any conflict, omission or
ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be implied by virtue of the fact that this Agreement was prepared by or at
the request of a particular Member.

12.4. JURISDICTION. Each Member hereby consents to the jurisdiction of
the state and federal courts sitting in California or Delaware in any action on
a claim arising out of, under or in connection with this Agreement, or the
transactions contemplated by this Agreement. Each Member further agrees that
personal jurisdiction over the Member may be effected by service of process by
registered or certified mail addressed as provided in Section 12.6 of this
Agreement, and that when so made shall be as if served upon the Member
personally within the State of California or the State of Delaware.

8
<PAGE>

12.5. SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.

12.6. NOTICES. Any notice to be given or to be served upon the Company or
any party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member at the address specified in the signature page
hereto. Any party may, at any time by giving five (5) days' prior written
notice to the other Members, designate any other address in substitution of the
foregoing address to which such notice will be given.

12.7. AMENDMENTS. All amendments to this Agreement will be in writing and
signed by all of the Members.

12.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. Delivery of any executed
counterpart to this Agreement by facsimile shall be the same as delivery of an
original counterpart.

12.9. ATTORNEY FEES. In the event that any dispute between the Company
and the Members or among the Members should result in litigation or arbitration,
the prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including, without limitation, reasonable attorneys' fees and
expenses.

<PAGE>

IN WITNESS WHEREOF, each of the Members of BCC ACQUISITION I LLC have
executed this Agreement, effective as of the date written above.

THE BAY CITY CAPITAL FUND I, L.P.

Address: c/o Bay City Capital LLC
750 Battery Street, Suite 600
San Francisco, CA 94111

By: Bay City Capital Management LLC

Its: General Partner

By: /s/ John D. Diekman
----------------------------------------

Name: John D. Diekman
Title: Managing Partner

BAY INVESTMENT GROUP, LLC

Address: 200 West Madison Street
Suite 3800
Chicago, IL 60606

By: /s/ Thomas J. Pritzker
----------------------------------------

Name: Thomas J. Pritzker
Title: Co-Trustee of R.A. Trust No. 25,
a general partner of R.A.
Investment Group, a member
of Bay Investment Group,
L.L.C.

By: /s/ Marshall E. Eisenberg
----------------------------------------

Name: Marshall E. Eisenberg
Title: Co-Trustee of R.A. Trust No. 25,
a general partner of R.A.
Investment Group, a member
of Bay Investment Group,
L.L.C.

10
<PAGE>

<PAGE>

OFFER TO PURCHASE FOR CASH
ANY OR ALL OF THE $44,412,500 AGGREGATE FACE VALUE
(SUBJECT TO A $22,206,250 MINIMUM)
OF CONTINGENT PAYMENT RIGHTS OF
MEDAREX, INC.
BY BCC ACQUISITION I LLC

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
FRIDAY, JULY 17, 1998, UNLESS THE OFFER IS EXTENDED.

BCC Acquisition I LLC, a Delaware limited liability company (the
"Purchaser"), hereby offers to purchase for cash any or all of the $44,412,500
(subject to a $22,206,250 minimum) in aggregate face value of certain contingent
payment rights (the "Rights") of Medarex, Inc. (the "Company"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Assignment enclosed with this Offer to Purchase (which
together constitute the "Offer"). The full, undiscounted value of any of the
Rights is referred to herein as the "Face Value" of such Rights. The Rights are
held by the former holders (the "Holders") of preferred stock ("GenPharm
Preferred Stock") and common stock ("GenPharm Common Stock") of GenPharm
International, Inc. ("GenPharm"). The Rights, as such term is used in this
Offer, represent such Holders' rights to receive the remainder of the merger
consideration (the "Remaining Merger Consideration") payable to such Holders
under the Amended and Restated Agreement and Plan of Reorganization dated as of
May 5, 1997 by and among the Company, Medarex Acquisition Corp., a California
corporation wholly-owned by the Company ("Merger Sub"), and GenPharm (the
"Merger Agreement"), pursuant to which the Company acquired GenPharm (the
"Merger"). While the Remaining Merger Consideration is denominated in dollars,
the Merger Agreement provides that it is payable (in most cases) in shares of
the Company's common stock, par value $.01 per share (the "Common Stock"),
valued at the Fair Market Value thereof at the time of payment (as defined in
the Merger Agreement). At the date hereof, the Remaining Merger Consideration
is $44,412,500. This amount is not required to be paid until December 31, 1998
(and possibly, to some extent, in 1999) and is subject to reduction in certain
circumstances all as more fully described herein.

The Purchaser is offering to acquire any or all of the Rights, subject to
the terms and conditions of the Offer (which includes the condition that at
least 50% ($22,206,250) of the aggregate Face Value of the Rights be assigned),
at a price that represents a 20% discount from the amount of the Remaining
Merger Consideration such Holder would receive if the Remaining Merger
Consideration were not reduced and such Holder actually received such Holder's
maximum entitlement to such Remaining Merger Consideration. Since, pursuant to
the Merger Agreement, the amount of each Holder's

<PAGE>

share of the Remaining Merger Consideration is dependent on whether such Holder
was a holder of GenPharm Preferred Stock and/or GenPharm Common Stock (and, if a
holder of GenPharm Preferred Stock, which series of GenPharm Preferred Stock
such Holder held), the price the Purchaser is offering to pay to each Holder
depends upon which class or series of GenPharm stock the Holder held.

The following table sets forth the cash payment the Purchaser is offering
to make to the Holders to acquire the Rights pursuant to the Offer. The first
line of the table sets forth the price to be paid by the Purchaser for the
Rights relating to each share of GenPharm Preferred Stock and GenPharm Common
Stock (on an as-converted fully diluted basis) formerly held by any such Holder.
This price reflects the 20% discount. The second line of the table sets forth,
on the same per-share basis, the amount of Remaining Merger Consideration that
would be received by such Holders pursuant to the Merger, assuming no further
reduction in the Remaining Merger Consideration.

GenPharm
Series of GenPharm Preferred Stock Common
---------------------------------- Stock
-----

A B C D E F G H I
- - - - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Payment to be $.17 $.17 $.67 $.78 $1.57 $4.02 $4.47 $3.14 $3.13 $1.65
Received Pursuant
to the Offer

Value of Additional $.21 $.21 $.84 $.98 $1.96 $5.03 $5.59 $3.93 $3.91 $2.06
Shares to be
Received Assuming
No Further
Reduction in
Remaining Merger
Consideration (the
Face Value of the
Rights)
</TABLE>

In evaluating the Offer, Holders should note that, under the Merger
Agreement, the aggregate amount of the Remaining Merger Consideration payable to
the Holders is subject to reduction, on a dollar-for-dollar basis, to the extent
GenPharm fails to receive

<PAGE>

certain license fees and promissory note payments from unrelated third parties
(the "Third Party Payments") of approximately $23 million. Although the Company
believes that the Third Party Payments will be received (and the Company has to
date received timely payment of sums due from the parties obligated to make the
Third Party Payments), there is a risk that unforeseen factors will result in
the Company's not receiving some or possibly all of the Third Party Payments. A
significant reduction in the receipt of such Third Party Payments could result
in a significant reduction in the amount of the Remaining Merger Consideration
to be received by the Holders of the Rights. The Company also has some
discretion as to when the Remaining Merger Consideration is paid and is not
required to pay such amount until December 31, 1998 (and possibly, to some
extent, until 1999). Even the form of payment is uncertain. While in most
cases the Company is obligated to pay the Remaining Merger Consideration in
shares of Common Stock, at any time during which the Fair Market Value (as
defined in the Merger Agreement) of the Company's Common Stock is less than
$5.00, it may pay such Remaining Merger Consideration in cash. Finally, if the
Company issues Common Stock to the Holders, depending on the then Fair Market
Value of such stock, a large number of shares may be issued. Any attempt by a
significant number of Holders to sell such a large number of shares of Common
Stock upon receipt could have an adverse effect on the market price of the
Company's Common Stock.

Holders who accept the Offer will receive, at the consummation of the
Offer, in consideration of their assignment of their Rights to Purchase, the
cash purchase price offered by the Purchaser. Holders who do not accept the
Offer will receive payment of the amount of the Remaining Merger Consideration
they are entitled to receive as and when provided under the terms of the Merger
Agreement.

The Purchaser and the Company have entered into a Rights Exchange Agreement
(the "Rights Exchange Agreement"), dated as of June 10, 1998. This Offer is
being made by the Purchaser pursuant to the Rights Exchange Agreement. The
Rights Exchange Agreement provides that, immediately upon the consummation of
the Offer, the Company will issue to the Purchaser in exchange for each $6.75 in
Face Value of the Rights acquired by the Purchaser (i) one share of the
Company's Common Stock (up to a maximum of 6,579,629 shares; such shares being
the "Shares") and (ii) a warrant or warrants (the "Warrants") to purchase 0.1222
shares of the Company's Common Stock at an exercise price of $10.00 per share
exercisable over a period of seven years (up to a maximum of 804,000 shares).
The Warrants will be issued upon the terms and conditions set forth in the
Warrant Agreement (the "Warrant Agreement") between the Company and the
Purchaser in a form attached as an exhibit to the Rights Exchange Agreement.
The Company and the Purchaser have agreed that the aggregate Face Value of the
Rights for purposes of the exchange for Shares shall be $44,412,500 (i.e., their
full, undiscounted value). If all of the Rights are assigned to the Purchaser
and exchanged for Shares under the Rights Exchange Agreement, the Purchaser will

<PAGE>

beneficially own (after taking into account the Warrants) approximately 25% of
the Company's outstanding Common Stock.

The Rights Exchange Agreement also provides, among other things, that the
Company will register the Shares and the shares to be issued to the Purchaser
upon exercise of the Warrants as well as any resale thereof, and will pay to the
Purchaser a fee of $750,000 (plus expenses) under certain circumstances if the
Offer is not consummated and the Company completes a similar transaction with
another party. The Rights Exchange Agreement is more particularly described in
Section 5 of this Offer to Purchase. Under the Rights Exchange Agreement, the
Company will appoint a representative of the Purchaser to the Company's Board of
Directors immediately following the closing of the transactions contemplated by
the Rights Exchange Agreement. While no formal agreement exists, the Company
and the Purchaser have discussed adding another director mutually acceptable to
the Company and the Purchaser.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST $22,206,250
(50%) IN AGGREGATE FACE VALUE OF RIGHTS BEING PROPERLY ASSIGNED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. NEITHER THE COMPANY NOR ITS
BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY HOLDER OF THE RIGHTS AS TO
WHETHER OR NOT TO ASSIGN THE RIGHTS. HOWEVER, IN ORDER TO FACILITATE THE OFFER,
THE COMPANY HAS AGREED TO GRANT ITS CONSENT TO THE TRANSFER OF THE RIGHTS TO THE
PURCHASER. THE RIGHTS MAY NOT BE ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO THE OFFER.

IMPORTANT

THE OFFER IS BEING MADE BY THE PURCHASER PURSUANT TO THE RIGHTS EXCHANGE
AGREEMENT BETWEEN THE PURCHASER AND THE COMPANY. PURSUANT TO THAT AGREEMENT,
THE COMPANY AND THE PURCHASER HAVE PREPARED THIS OFFER TO PURCHASE. ALL
STATEMENTS MADE IN THIS OFFER TO PURCHASE (OTHER THAN THOSE RELATING TO THE
IDENTITY OF THE PURCHASER, THE SOURCE OF THE PURCHASER'S FUNDS, THE PURCHASER'S
PLANS AND INTENTIONS, OR THE TERMS OF THE OFFER) ARE BASED SOLELY ON INFORMATION

<PAGE>

SUPPLIED BY THE COMPANY TO THE PURCHASER OR CONTAINED IN THE COMPANY'S PUBLIC
FILINGS UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND THE
SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"). THE COMPANY HAS REVIEWED
THIS OFFER TO PURCHASE AND BELIEVES THAT ALL INFORMATION (OTHER THAN THAT
PERTAINING TO THE IDENTITY OF THE PURCHASER, THE SOURCE OF THE PURCHASER'S FUNDS
OR THE PURCHASER'S PLANS AND INTENTIONS, AS TO WHICH THE COMPANY CAN EXPRESS NO
VIEW) SET FORTH HEREIN IS ACCURATE AND COMPLETE IN ALL MATERIAL RESPECTS. WHILE
THE PURCHASER BELIEVES ALL INFORMATION SUPPLIED BY THE COMPANY OR OBTAINED FROM
THE COMPANY'S FILINGS UNDER THE SECURITIES ACT AND THE EXCHANGE ACT TO BE
ACCURATE IN ALL MATERIAL RESPECTS, THE PURCHASER DOES NOT AND CANNOT WARRANT THE
ACCURACY OF SUCH INFORMATION.

ANY HOLDER OF RIGHTS DESIRING TO ASSIGN TO THE PURCHASER ALL OR ANY PORTION
OF ITS RIGHTS SHOULD COMPLETE AND SIGN THE LETTER OF ASSIGNMENT OR A FACSIMILE
THEREOF IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF ASSIGNMENT AND MAIL
OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO CONTINENTAL STOCK TRANSFER &
TRUST COMPANY (THE "DEPOSITARY"). THE COMPANY WILL PAY ALL CHARGES AND EXPENSES
OF THE DEPOSITARY IN CONNECTION WITH THE OFFER.

QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE DEPOSITARY OR
SHAREHOLDER COMMUNICATIONS CORPORATION (THE "INFORMATION AGENT") AT THEIR
RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SPECIFIED ON THE BACK COVER OF THIS
OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO PURCHASE AND THE LETTER
OF ASSIGNMENT MAY BE OBTAINED FROM THE DEPOSITARY.

<PAGE>

<TABLE>
<CAPTION>
CONTENTS
<S> <C>
INTRODUCTION 1

SECTION 1 TERMS OF THE OFFER 4

SECTION 2 ACCEPTANCE FOR PAYMENT AND PAYMENT FOR RIGHTS 6

SECTION 3 PROCEDURE FOR ASSIGNING RIGHTS; EFFECTS OF ASSIGNING RIGHTS 7

SECTION 4 WITHDRAWAL RIGHTS 8

SECTION 5 THE RIGHTS EXCHANGE AGREEMENT 8

SECTION 6 CERTAIN FEDERAL INCOME TAX CONSEQUENCES 9

SECTION 7 PRICE RANGE OF THE COMPANY'S COMMON STOCK, DIVIDENDS 12

SECTION 8 CERTAIN INFORMATION CONCERNING THE COMPANY 13

SECTION 9 CERTAIN INFORMATION CONCERNING THE PURCHASER 17

SECTION 10 SOURCE AND AMOUNT OF FUNDS 17

SECTION 11 PURPOSE OF THE OFFER 17

SECTION 12 CERTAIN CONDITIONS OF THE OFFER 19

SECTION 13 CERTAIN LEGAL MATTERS 21

SECTION 14 FEES AND EXPENSES 22

SECTION 15 MISCELLANEOUS 23
</TABLE>

<PAGE>

INTRODUCTION

The Purchaser hereby offers to purchase for cash any or all of the Rights
upon the terms and subject to the conditions set forth in the Offer. The
"Rights" are each Holder's right to receive such Holder's share of the Remaining
Merger Consideration to be paid to the Holders under the Merger Agreement
pursuant to which the Company acquired GenPharm. THE OFFER IS CONDITIONED UPON,
AMONG OTHER THINGS, A MINIMUM OF $22,206,250 (50%) IN AGGREGATE FACE VALUE OF
RIGHTS BEING PROPERLY ASSIGNED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER.

The Purchaser is offering to acquire any or all of the Rights, subject to
the terms and conditions of the Offer, at a price that represents a 20% discount
from the amount of Remaining Merger Consideration such Holder would receive if
the Remaining Merger Consideration were not reduced as described below and such
Holder actually received such Holder's maximum entitlement to such Remaining
Merger Consideration. Since, pursuant to the Merger Agreement, each Holder's
share of the Remaining Merger Consideration is dependent on whether such Holder
was a holder of GenPharm Preferred Stock and/or GenPharm Common Stock (and, if a
holder of GenPharm Preferred Stock, which series of GenPharm Preferred Stock
such Holder held), the price the Purchaser is offering to pay to each Holder
depends upon which class or series of GenPharm stock the Holder held.

<TABLE>
<CAPTION>
GenPharm
Series of GenPharm Preferred Stock Common
---------------------------------- Stock
-----

A B C D E F G H I
- - - - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Payment to be $.17 $.17 $.67 $.78 $1.57 $4.02 $4.47 $3.14 $3.13 $1.65
Received Pursuant
to the Offer

Value of Additional $.21 $.21 $.84 $.98 $1.96 $5.03 $5.59 $3.93 $3.91 $2.06
Shares to be
Received Assuming
No Further
</TABLE>

<PAGE>

Reduction in
Remaining Merger
Consideration (the
Face Value of the
Rights)

The Company, Merger Sub and GenPharm entered into the Merger Agreement on
May 5, 1997. Pursuant to the Merger Agreement, on October 21, 1997 (the "Merger
Date"), Merger Sub merged with and into GenPharm with GenPharm being the
surviving corporation and all of the outstanding shares of GenPharm Common Stock
and GenPharm Preferred Stock were converted into the right to receive
$62,725,000 (the "GenPharm Purchase Price"), subject to adjustment. As a
result, GenPharm became a wholly-owned subsidiary of the Company. On the Merger
Date, the Company issued 3,250,000 shares of Common Stock (the "Initial Shares")
as payment of $17,793,750 of the GenPharm Purchase Price. As of the date
hereof, the GenPharm Purchase Price has been reduced by $518,750 as a result of
certain adjustments provided for in the Merger Agreement. As a result, the
Remaining Merger Consideration payable to the Holders is currently $44,412,500.
However, under the Merger Agreement, the aggregate amount of the Remaining
Merger Consideration payable to the Holders is subject to reduction, on a
dollar-for-dollar basis, to the extent GenPharm fails to receive certain license
fees and promissory note payments from unrelated third parties (the "Third Party
Payments") of approximately $23 million. Although the Company believes that the
Third Party Payments will be received (the $23 million in remaining Third Party
Payments already reflects the timely receipt of approximately $8 million of such
payments) there is a risk that unforeseen factors will result in non-receipt of
some or possibly all of the Third Party Payments. A significant reduction in
the receipt of such Third Party Payments could result in a significant reduction
in the amount of the Remaining Merger Consideration to be received by the
Holders of the Rights. (As noted above, the Remaining Merger Consideration
already reflects a reduction of $518,750).

The Remaining Merger Consideration is payable in additional shares of the
Company's Common Stock (the "Additional Shares") or, under certain
circumstances, cash. The Additional Shares are to be issued first to the
Holders of the Rights relating to GenPharm Preferred Stock to the extent of the
balance of their aggregate preference amount of $40,378,646 (the "Preference
Amount") and then pro rata to the Holders of the Rights relating to GenPharm
Common Stock and GenPharm Preferred Stock (on an as-converted fully diluted
basis).

The Merger Agreement provides that payment of the Remaining Merger
Consideration is to be made on or before December 31, 1998, provided GenPharm
has received the Third Party Payments by that time. In the event any of the
Third Party Payments are received after December 15, 1998, final payment of the
Remaining Merger Consideration will occur not later than the earlier of (i) 30
days following the receipt of the last Third Party Payment, and (ii) December
31, 1999. The Remaining Merger

<PAGE>

Consideration will be paid first to the Holders of the Rights relating to
GenPharm Preferred Stock to the extent of the Preference Amount remaining after
the issuance of the Initial Shares ($22,584,896), and then to Holders of the
Rights relating to GenPharm Common Stock and GenPharm Preferred Stock (on an
as-converted basis). Since the number of Additional Shares to be issued as
payment of the Remaining Merger Consideration will be determined at future dates
based on the then Fair Market Value of the Company's Common Stock and the amount
of the Remaining Merger Consideration as adjusted, the maximum number of
Additional Shares to be issued in connection with the Merger cannot be
determined at this time. A significant decrease in the Fair Market Value of the
Company's Common Stock would result in a significant increase in the number of
Additional Shares issuable in connection with the Merger or, possibly, the
payment of the Remaining Merger Consideration in cash. Similarly, a significant
increase in the Fair Market Value of the Company's Common Stock and/or a
significant reduction in the Remaining Merger Consideration would result in a
significant decrease in the number of Additional Shares issuable in connection
with the Merger. The uncertainties surrounding payment of the Remaining Merger
Consideration are of particular concern to former Holders of GenPharm Common
Stock, since, at least to the extent of the remaining Preference Amount, the
Remaining Merger Consideration is first paid to former Holders of GenPharm
Preferred Stock and, therefore, any significant reduction in the Remaining
Merger Consideration would have a disproportionately greater negative impact on
the value received in the Merger per share of GenPharm Common Stock.

Holders of Rights who accept the Offer and assign their Rights eliminate
the risk associated with a reduction of the Remaining Merger Consideration in
the event all or a portion of the Third Party Payments are not received. In
addition, under the terms of the Merger Agreement, the Company is not required
to issue Additional Shares of its Common Stock in satisfaction of the Rights
until December 31, 1998 (and possibly, to some extent, until December 31, 1999).
Thus, Holders who accept the Offer will, if the Offer is completed, receive cash
payments for their Rights in advance of the time they would receive any
Additional Shares (or cash) from the Company as payment of the Remaining Merger
Consideration. Furthermore, there can be no assurance that Holders who do not
accept the Offer will be able to sell the Additional Shares they receive in
payment of the balance of the Remaining Merger Consideration at one time or over
a relatively short time frame without adversely affecting the market price of
the Company's Common Stock. Finally, if the Company issues Common Stock to the
Holders, depending on the then Fair Market Value of such stock, a large number
of shares may be issued. Any attempt by a significant number of Holders to sell
such a large number of shares of Common Stock upon receipt could have an adverse
effect on the price of the Company's Common Stock.

<PAGE>

While acceptance of the Offer would reduce or eliminate the above described
risks, assuming the Third Party Payments are received and there are no further
reductions in the Remaining Merger Consideration, because of the discount,
Holders of the Rights who accept the Offer will receive less in value than they
would if they did not accept the Offer and continued to hold their Rights until
the Company delivered the Additional Shares as payment of the Remaining Merger
Consideration.

Holders who accept the Offer will receive at the consummation of the Offer,
in consideration of their assignment of their Rights to Purchase, the cash
purchase price offered by Purchaser. Holders who do not accept the Offer will
receive payment of the amount of the Remaining Merger Consideration they are
entitled to receive as and when provided under the terms of the Merger
Agreement.

The Purchaser and the Company have entered into the Rights Exchange
Agreement and this Offer is being made by the Purchaser pursuant thereto. The
Rights Exchange Agreement provides that, immediately upon the consummation of
the Offer, the Company will issue to the Purchaser in exchange for each $6.75 in
Face Value of the Rights acquired by the Purchaser (i) one Share of the
Company's Common Stock (up to a maximum of 6,579,629 Shares), and (ii) a Warrant
or Warrants to purchase .1222 shares of the Company's Common Stock at an
exercise price of $10.00 per share exercisable over a period of seven years (up
to a maximum of 804,000 shares). The Warrants will be issued upon the terms and
conditions set forth in the Warrant Agreement between the Company and the
Purchaser in the form attached to the Rights Exchange Agreement.

In order to facilitate the Offer, pursuant to the Rights Exchange
Agreement, the Company has granted its consent to the transfer of the Rights to
the Purchaser. The Rights may not be assigned or otherwise transferred except
pursuant to the Offer. The Rights Exchange Agreement is more particularly
described in Section 5 of this Offer to Purchase.

The purpose of the Offer is for the Purchaser to purchase for cash any or
all of the $44,412,500 aggregate Face Value of Rights so that the Purchaser
will, upon acquisition of the Shares under the Rights Exchange Agreement, have a
substantial equity interest in the Company, and be entitled to purchase
additional Common Stock of the Company by exercising the Warrants. The
Purchaser will also obtain representation on the Company's board of directors
(see Section 11 below). In connection with the Rights Exchange Agreement, the
Company and Purchaser have agreed that the aggregate value of the Rights for
purposes of the exchange for Shares shall be $44,412,500; in other words, the
Purchaser will receive Shares based on the full, undiscounted value of the
Rights. Holders should note that the Company and the

<PAGE>

Purchaser have no agreement preventing the sale of the Shares by the Purchaser,
and the Company has agreed in the Rights Exchange Agreement to register the
Shares for resale.

According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998 (the "March 10-Q"), as filed with the Securities
and Exchange Commission (the "Commission") on May 14, 1998, there were
22,197,486 shares of Common Stock outstanding (the "Outstanding Shares") as of
May 7, 1998. In the event the minimum amount of Rights are assigned and
accepted for purchase by the Purchaser, the number of shares of Common Stock to
be issued by the Company to the Purchaser under the Rights Exchange Agreement in
exchange for the Rights acquired in the Offer will constitute approximately 14%
(or approximately 25% if all the Rights are assigned and accepted for payment)
of the number of shares of the Company's Common Stock that will be outstanding
following the completion of the Offer, in each case including the shares of the
Company's Common Stock that the Purchaser would receive upon exercise of the
Warrants.

1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer, the Purchaser will accept for payment and will pay for any or all of the
$44,412,500 in Face Value of the Rights which are properly assigned on or prior
to the Expiration Date (as hereinafter defined) and not withdrawn in accordance
with Section 4 of this Offer to Purchase. The Purchaser is offering to acquire
the Rights at a price that represents a 20% discount from the amount of
Remaining Merger Consideration each Holder would receive if the amount of
Remaining Merger Consideration were not reduced below $44,412,500.

As used in the Offer, the term "Expiration Date" means 12:00 Midnight, New
York City time, on Friday, July 17, 1998, provided, however, that if the
Purchaser, in its sole discretion, has extended the period of time for which the
Offer is open, the term "Expiration Date" means the latest time and date to
which the Offer is extended, subject to the terms and conditions of the Rights
Exchange Agreement, including, but not limited to, the provisions contained
therein that the Offer may not be extended beyond August 14, 1998 (the
"Termination Date").

Any Holder of Rights desiring to assign to the Purchaser all or any portion
of its Rights should complete and sign the Letter of Assignment or a facsimile
thereof in accordance with the instructions in the Letter of Assignment and mail
or deliver it and any other required documents to the Depositary. (See Section
3 below).

If Letters of Assignment convey fewer than $22,206,250 (50%) in aggregate
Face Value of the Rights are properly delivered to the Depositary by the
Expiration Date and

<PAGE>

not withdrawn, the Purchaser may (i) terminate the Offer and return all assigned
Rights to assigning Holders, (ii) extend the Offer and retain all such Rights
until the expiration of the Offer as extended, or (iii) waive the condition that
at least $22,206,250 (50%) in aggregate Face Value of the Rights be properly
assigned and purchase all properly assigned Rights.

Due to the difficulty of determining the precise amount of Rights properly
assigned and not withdrawn, the Purchaser does not expect to announce the final
results of the Offer or pay for any Rights until at least seven NASDAQ trading
days after the Expiration Date. Holders of Rights will be notified as promptly
as practicable as to the results of the Offer.

The Purchaser reserves the right, at any time or from time to time, to
extend the period of time during which the Offer is open by announcing such
extension in a press release followed as promptly giving written notice of such
extension to the Holders of the Rights. If the Purchaser decides to increase
the consideration offered in the Offer to Holders of the Rights, make a material
modification to the Offer or waive a material condition to the Offer and, at the
time that notice of such action is first sent or given to Holders of the Rights
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so sent or given, the Offer
will be extended until the expiration of such period of ten business days,
provided that such date is not beyond the Termination Date.

The Purchaser also expressly reserves the right (i) to delay payment for
any Rights regardless of whether such Rights were theretofore accepted for
payment or to terminate the Offer and not accept for payment or pay for any
Rights not theretofore accepted for payment or paid for upon the occurrence of
any of the conditions specified in Section 12 by giving as provided in the next
sentence notice of such delay in payment or termination to the Holders of the
Rights and (ii) at any time or from time to time, subject only to the Rights
Exchange Agreement, to amend the Offer in any respect. Any extension, delay in
payment, termination or amendment will be announced by means of press release
followed as promptly as practicable by delivery of written notice thereof to the
Holders of the Rights.

This Offer to Purchase and the related Letter of Assignment is being mailed
to the record Holders of the Rights and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's list of Rights Holders.

<PAGE>

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR RIGHTS. Upon the terms and subject
to the conditions of the Offer, the Purchaser will purchase, by accepting for
payment, and will pay for, Rights properly assigned and not withdrawn by the
Expiration Date as soon as practical after the latest of (i) the expiration or
termination of the waiting period applicable to the issuance of the Shares by
the Company to the Purchaser in exchange for the Rights acquired by the
Purchaser in the Offer pursuant to the Rights Exchange Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R Act"), and (ii)
Expiration Date. In all cases, payment for Rights purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of a properly
completed and duly executed Letter of Assignment (or facsimile thereof) and any
other documents required by the Letter of Assignment. Since the Rights are not
transferable (except pursuant to the Offer), the Rights may only be assigned as
provided in the Letter of Assignment.

The Company and the Purchaser intend to file a Notification and Report Form
with respect to the issuance of the Shares by the Company to the Purchaser in
exchange for the Rights acquired by the Purchaser pursuant to the Offer under
the H-S-R Act on or before June 17, 1997 and, accordingly, the waiting period
under the H-S-R Act applicable thereto will expire at 11:59 p.m., New York City
time, on the date which is 30 days from the date of such filing. However, prior
to such time, the Federal Trade Commission (the "FTC") or the Antitrust Division
of the Department of Justice (the "Antitrust Division") may extend the waiting
period by requesting additional information or documentary material from the
Purchaser. If such a request is made, the waiting period would expire on the
tenth day after substantial compliance by the Purchaser with such request. For
additional information regarding the H-S-R Act, see Section 12.

For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) assigned Rights as, if and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Rights for payment. Payment for Rights purchased pursuant to
the Offer will be made by deposit of the purchase price with the Depositary,
which will act as agent for Holders choosing to assign their Rights for the
purpose of receiving payment from the Purchaser and transmitting payments to
such Holders. Under no circumstances will interest be paid on the purchase
price by the Purchaser by reason of any delay in making such payment. IF ANY
ASSIGNED RIGHTS ARE NOT PURCHASED FOR ANY REASON, THE ASSIGNMENT OF SUCH RIGHTS
WILL NOT BE EFFECTIVE.

If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Holders of the Rights pursuant to the Offer, such increased
consideration shall be paid to all Holders whose assignments of Rights have
previously been accepted for payment pursuant to the Offer.

<PAGE>

The Purchaser reserves the right to transfer or assign to one or more
direct or indirect affiliates of the Purchaser the right to purchase Rights
assigned pursuant to the Offer, but any such transfer or assignment shall not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of Holders assigning their Rights to receive payment for Rights properly
assigned and accepted for payment.

3. PROCEDURE FOR ASSIGNING RIGHTS; EFFECTS OF ASSIGNING RIGHTS. For Rights to
be properly assigned pursuant to the Offer, a properly completed and duly
executed Letter of Assignment or facsimile thereof with any other documents
required by the Letter of Assignment must be received by the Depositary at one
of its addresses indicated on the back cover of this Offer to Purchase on or
before the Expiration Date.

THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE ELECTION AND RISK OF THE
ASSIGNING HOLDER.

Under the backup withholding rules, unless an exception applies under the
applicable law and regulations, the Depositary will be required to withhold, and
will withhold, 20 percent of the gross proceeds paid to a Holder pursuant to the
Offer unless the Holder provides his tax identification number (employer
identification number or social security number) and certifies that such number
is correct. Therefore, unless such an exception exists and is proved in a
manner satisfactory to the Purchaser and the Depositary, each Holder wishing to
assign Rights should complete and sign the main signature form, and, if
applicable, should complete and sign the Substitute Form W-9 (or a Form W-8 for
foreign Holders) included as part of the Letter of Assignment, so as to provide
the information and certification necessary to avoid backup withholding.

Payment for Rights assigned and purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of a properly completed and
duly executed Letter of Assignment or facsimile thereof and any other documents
required by the Letter of Assignment.

The assignment of Rights pursuant to the procedures described above will
constitute a binding agreement between the Holder and the Purchaser upon the
terms and subject to the conditions of the Offer. In addition, by delivering
the Letter of Assignment a Holder thereof assigns (conditioned upon payment) to
the Purchaser any claim such Holder may have against the Company to receive any
portion of the Remaining Merger Consideration represented by such Rights, as
well as any non-contractual claims against the Company. Further, if for any
reason the assignment is not effective, the Holder agrees to release any claim
that the Holder may have against the Company for payment of the Remaining Merger
Consideration in consideration of the payment by the Purchaser of the purchase
price for the Rights pursuant to the Offer.

<PAGE>

All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any assignment of Rights will be
determined in the sole discretion of the Purchaser, whose determination shall be
final and binding. The Purchaser reserves the absolute right to reject any or
all assignments not in proper form or if the acceptance of or payment for such
Rights may, in the opinion of the Purchaser's counsel, be unlawful. The
Purchaser also reserves the absolute right to waive any of the conditions of the
Offer or any defect or irregularity in any assignment with respect to any
particular Rights of any particular Holder. None of the Purchaser, the
Depositary, or the Company will be under any duty to give notification of any
defects or irregularities in assignment or incur any liability for failure to
give any such notification.

4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section,
assignments of Rights made pursuant to the Offer are irrevocable. Holders
assigning Rights to the Purchaser pursuant to the Offer may withdraw their
Rights (in other words, they may revoke their assignment) at any time prior to
12:00 Midnight on the Expiration Date, and, unless theretofore accepted for
payment as provided in this Offer to Purchase, such assignments may also be
revoked after the date that is 60 days after the commencement of the Offer. For
the purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday, and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time. If the Purchaser extends the Offer,
is delayed in its purchase of or payment for Rights or is unable to purchase or
pay for Rights for any reason, then, without prejudice to the Purchaser's rights
under Sections 1 and 12, assigned Rights may be retained by the Depositary on
behalf of the Purchaser and may not be revoked except to the extent that Holders
are entitled to revoke such assignments as set forth in this Section.

For a revocation to be effective, a written, telegraphic, telex or
facsimile transmission notice of revocation must be timely received by the
Depositary at its address indicated on the back cover of this Offer to Purchase.
Any such notice of revocation must specify the name of the Holder who assigned
the Rights and the aggregate Face Value of Rights to be revoked. Such notice of
revocation must be signed by such revoking Holder prior to becoming effective.
All questions as to the form and validity (including time of receipt) of notices
of revocation will be determined by the Purchaser, in its discretion, whose
determination shall be final and binding.

Any assignments of Rights revoked will be deemed not properly assigned for
purposes of the Offer. However, Rights may be reassigned by following any of
the procedures described in Section 3 at any subsequent time prior to or at the
Expiration Date.

<PAGE>

5. THE RIGHTS EXCHANGE AGREEMENT. The Purchaser and the Company have
entered into the Rights Exchange Agreement. What follows is a summary of the
Rights Exchange Agreement. This summary is qualified in its entirety by the
text of the Rights Exchange Agreement itself, which has been filed by the
Company with the Commission as an exhibit to a Current Report on Form 8-K
(see Section 8 for information or how to obtain documents from the
Commission).

The Rights Exchange Agreement provides that, immediately upon the
consummation of the Offer, each $6.75 in Face Value of the Rights purchased
by the Purchaser in the Offer will be exchanged for (i) one Share of the
Company's Common Stock (up to a maximum of 6,579,629 Shares) plus (ii) a
Warrant or Warrants to purchase 0.1222 shares of the Company's Common Stock
(up to a maximum of 804,000 shares) for $10.00 per share exercisable over a
period of seven years, upon the terms and conditions set forth in the Warrant
Agreement. The Company and the Purchaser have agreed that, for purposes of
the Rights Exchange Agreement, the aggregate Face Value of the Rights shall
be $44,412,500.

The closing conditions to the Rights Exchange Agreement include, among
other things: (i) the consummation of the Offer, (ii) that a director
specified by the Purchaser be appointed to the board of directors of the
Company, (iii) that the Company has not paid any of the Remaining Merger
Consideration to any of the Holders, and (iv) certain other customary closing
conditions.

As soon as practicable (but not later than 30 days) after the
consummation of the Offer, the Company has agreed to prepare and file with
the Securities and Exchange Commission (the "Commission") a shelf
registration statement (and thereafter shall use its reasonable best efforts
to cause such shelf registration statement to be declared effective) for the
Shares and the Common Stock issuable upon the complete exercise of the
Warrants (the "Warrant Shares") as well as any resale thereof. An effective
shelf registration statement would permit the Purchaser to sell or otherwise
transfer the Shares or the Warrant Shares without violating the Securities
Act or relying on a transfer that is exempt from the Securities Act.

If (i) during the term of the Rights Exchange Agreement, the Company
receives an unsolicited third-party offer where the third-party offers to
merge with, acquire assets or stock of, or engage in a similar transaction
with, the Company, and (ii) within six months of the termination of the
Rights Exchange Agreement, the Company commits to accept such third-party
offer, then the Company is obligated to pay the Purchaser $750,000 plus up
to $150,000 in expenses as a break-up fee. The terms of the Rights Exchange
Agreement provide that the Company cannot itself solicit third-party offers
and can only accept such an offer if advised that such offer is more
favorable than

<PAGE>

the Offer, and if advised by outside legal counsel that failure to accept the
third-party offer would be reasonably likely to violate the fiduciary duties
of its board of directors.

6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion
summarizes the material federal income tax consequences of the Offer that are
generally applicable to Holders of Rights. This discussion is based on
currently existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury Regulations thereunder
and current administrative rulings and court decisions, all of which are
subject to change. Any such change, which may or may not be retroactive,
could alter the tax consequences to Holders of Rights.

Holders should be aware that this discussion does not deal with all
federal income tax considerations that may be relevant to particular Holders
in light of their particular circumstances, such as Holders who are dealers
in securities, who are subject to the alternative minimum tax provisions of
the Code, who are foreign persons, or who do not hold their Rights as capital
assets. In addition, the following discussion does not address the tax
consequences of the Offer under foreign, state or local tax laws, the tax
consequences of transactions effectuated prior or subsequent to, or
concurrently with, the Offer (whether or not any such transactions are
undertaken in connection with the Offer).

RIGHTS HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

ASSIGNMENT OF RIGHTS

Assignment of Rights pursuant to the Offer will be taxable transactions
for federal income tax purposes. A Holder who assigns Rights in the Offer
will recognize capital gain or loss (assuming the Rights are held as a
capital asset) and imputed interest income. The amount of capital gain or
loss will be determined by subtracting the adjusted basis of the Rights from
the present value of the cash consideration received (using a discount rate
equal to the appropriate applicable federal rate ("AFR") of interest) as
discounted from the date of assignment to the Merger Date. The remainder of
the cash consideration will be treated as interest for federal income tax
purposes. To the extent that a Holder recognizes capital gain or loss, such
capital gain or loss will be long-term if, as of the date of assignment, the
holding period of the Rights is more than 18 months, mid-term if the holding
period is more than one year but not more than 18 months, or short-term if,
as of such date, the holding period is one year or less.

<PAGE>

RETENTION OF RIGHTS

Holders of Rights who do NOT accept the Offer will continue to be
entitled to payment of the Remaining Merger Consideration in accordance with
the terms of the Merger Agreement. As a general matter, the federal income
tax consequences of a Holder who does not accept the Offer should not be
affected by the Offer or the acceptance of the Offer by other Holders.

The Merger was intended to constitute a tax-free reorganization under
Section 368(a) of the Code (a "Reorganization"). However, the parties to the
Merger did not request a ruling from the Internal Revenue Service ("IRS") in
connection with the Merger. Assuming the Merger qualified as a
Reorganization, subject to the limitations and qualifications referred to
herein, the receipt of the Remaining Merger Consideration pursuant to the
Merger Agreement should result in the following federal income tax
consequences:

(a) No gain or loss will be recognized by holders of GenPharm Common
Stock and GenPharm Preferred Stock solely upon their receipt of the Company's
Common Stock in exchange for GenPharm Common Stock and GenPharm Preferred
Stock in the Merger (except as described below with respect to a portion of
the Additional Shares being characterized as interest under the Code and gain
or loss being recognized on cash received in lieu of a fractional share of
the Company's Common Stock).

(b) The aggregate tax basis of the Company's Common Stock received by
GenPharm shareholders in the Merger (other than Common Stock characterized as
interest under the Code), as reduced by any tax basis attributable to
fractional shares deemed to be disposed of, will be the same

<PAGE>

as the aggregate tax basis of the GenPharm Common Stock and GenPharm
Preferred Stock surrendered in exchange therefor.

(c) The holding period of the Company's Common Stock received by each
GenPharm shareholder in the Merger, other than Common Stock characterized as
interest under the Code, will include the period for which the GenPharm
Common Stock and GenPharm Preferred Stock so surrendered is held as a capital
asset at the time of the Merger.

(d) Cash payments received by holders of GenPharm Common Stock and
GenPharm Preferred Stock in lieu of a fractional share will be treated as if
such fractional share of the Company's Common Stock had been issued in the
Merger and then redeemed by the Company. A GenPharm shareholder receiving
such cash will recognize gain or loss, upon such payment, measured by the
difference (if any) between the amount of cash received and the basis in such
fractional share.

IMPUTED INTEREST

Notwithstanding the intended qualification of the Merger as a
reorganization, a portion of any Additional Shares received by a holder more
than six months after the Merger Date will be characterized as interest for
federal income tax purposes under the imputed interest rules of the Code and
in certain circumstances, the original issue discount rules of the Code.
Generally, under these rules, a portion of the Additional Shares received
more than six months after the Merger Date equal to the present value of the
Additional Shares (using a discount rate equal to the appropriate AFR) as
discounted from the date of payment of the Additional Shares to the Merger
Date will be treated as merger consideration (and therefore subject to the
rules discussed above). The remainder of each such payment of Additional
Shares will be treated as interest for federal income tax purposes. The
interest portion of the payment will be includable in the gross income of the
holder in the year in which the amount of the payment is made. Also, in the
event the right of payment of Additional Shares becomes fixed more than six
months before the payment is due, the holder of the right to Additional
Shares will recognize original issue discount.

The federal income tax discussion set forth is included for general
information only. For a more detailed description of the federal income tax
consequences of the Merger please see the discussion relating thereto
contained the Section entitled "THE MERGER-Certain Federal Income Tax
Considerations" in the Prospectus/Consent Solicitation Statement dated
September 25, 1997 delivered to the Holders in connection with the Merger.
Each Holder is urged to consult his tax advisor with respect to the tax

<PAGE>

consequences to him of the Offer, including the effects of state, local and
other tax consequences.

A Holder who sells Rights in the Offer and who fails to complete and
sign the Substitute Form W-9 that is included in the Offer (or, in the case
of a Foreign Holder, a Form W-8) may be subject to a required United States
backup withholding tax of 31% of the gross proceeds payable to such Holder.
In addition, that portion of the purchase price paid to a Foreign Holder
which is attributable to imputed interest will be subject to a withholding
tax at a 30% rate or at such lesser rate as may be provided by treaty. To
claim a lower treaty withholding tax rate, a Foreign Holder must submit a
properly completed Form 1001 to the Purchaser.

7. PRICE RANGE OF THE COMPANY'S COMMON STOCK, DIVIDENDS. The Rights are
not transferable (other than pursuant to this Offer by virtue of the
Company's waiver of the transfer restrictions under the Merger Agreement).
Accordingly, there is no public or private market for the Rights. However,
Holders not accepting the Offer are likely to be paid their share of the
Remaining Merger Consideration in shares of Common Stock, since that is
required by the Merger Agreement so long as the Fair Market Value (as defined
in the Merger Agreement) of the Company's Common Stock is $5.00 or more.
Further, the Purchaser will receive up to 6,579,629 Shares under the Rights
Exchange Agreement at a valuation equal to $6.75 per Share and Warrants to
acquire up to 804,000 shares of Common Stock for $10.00 per share exercisable
over a period of seven years.

The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "MEDX." The following table sets forth for the periods indicated
the high and low sale prices for the Common Stock as reported by Nasdaq.

High Low
1995 ---- ---
- ----
<S> <C> <C>
First Quarter. . . . . . . . . . . . . . . . . . . . . . $4.13 $2.38

Second Quarter . . . . . . . . . . . . . . . . . . . . . $6.50 $2.75
Third Quarter. . . . . . . . . . . . . . . . . . . . . . $7.63 $5.13
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . $7.50 $5.38
1996
- ----

</TABLE>

<PAGE>

<S> <C> <C>
First Quarter. . . . . . . . . . . . . . . . . . . . . . $8.00 $5.75

Second Quarter . . . . . . . . . . . . . . . . . . . . . $12.25 $6.25
Third Quarter. . . . . . . . . . . . . . . . . . . . . . $9.00 $5.38
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . $9.00 $6.25
1997
- ----

First Quarter. . . . . . . . . . . . . . . . . . . . . . $10.00 $6.50

Second Quarter . . . . . . . . . . . . . . . . . . . . . $8.75 $5.88
Third Quarter. . . . . . . . . . . . . . . . . . . . . . $6.75 $4.13
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . $7.06 $4.75
1998
- ----
First Quarter. . . . . . . . . . . . . . . . . . . . . . $6.25 $4.38
Second Quarter (through June 10) . . . . . . . . . . . . $8.25 $4.75

</TABLE>

The Company has not paid any dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends
to retain any earnings to finance its growth.

On May 5, 1997, the last trading day prior to the announcement by the
Company and GenPharm that they had reached an agreement concerning the
Merger, the closing sale price of the Company's Common Stock as reported on
The Nasdaq National Market was $8.50 per share. On June 10, 1998, the last
trading date prior to the commencement of the Offer, the closing sale price
of a share of the Company's Common Stock as reported on The Nasdaq National
Market was $6.31.

8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is incorporated
under the laws of the State of New Jersey and its principal executive offices
are located at 1545 Route 22 East, Annandale, New Jersey 08801 (telephone
(908) 713-6001).

The following description of the Company is derived from the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and filed
with the Commission on March 31, 1998 (the "1997 10-K").

The Company is engaged in the discovery and development of novel
therapeutics to treat cancer, autoimmune diseases and other life threatening
diseases based on its expertise in monoclonal antibodies and immunology.
Virtually all of the

<PAGE>

Company's products are designed either to enhance and direct a specific
immune response or to block or diminish an undesired immunological activity.
The Company's broad technology platform has led to five products in clinical
trials and eight strategic alliances and includes: (i) bispecific antibodies
that are designed to attach to both disease targets and immune system killer
cells simultaneously; (ii) with the acquisition of Houston Biotechnology,
Incorporated, immunoconjugates, a monoclonal antibody linked to a toxin;
(iii) monoclonal antibodies; and (iv) with the acquisition of GenPharm, the
ability to create fully human monoclonal antibodies for itself and for
potential partners.

The Company files periodic reports, proxy statements and other
information with the Commission under the Exchange Act, relating to its
business, financial statements and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular
dates, concerning its directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities,
and any material interests of such persons in transactions with the Company.
Such reports, proxy statements and other information filed by the Company may
be inspected and copied at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.,
and at the Commission's regional offices located at 7 World Trade Center,
Suite 1300, New York, New York 10048, Citicorp Center, Suite 1400, 500 West
Madison, Chicago, Illinois 60661, and at 5670 Wilshire Boulevard, 11th Floor,
Los Angeles, California 90036-3648. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may
also be obtained from the Commission's web page at: http:\\www.sec.gov.

Set forth below is certain summary consolidated financial information
with respect to the five years ended December 31, 1993, 1994, 1995, 1996 and
1997 of the Company and its consolidated subsidiaries, which is excerpted or
derived from the 1997 10-K, and certain unaudited consolidated summary
financial information with respect to the quarter ended March 31, 1998 which
is excerpted or derived from the March 10-Q. More comprehensive financial
and other information is included in such reports and other documents filed
by the Company with the Commission, and the following summary is qualified in
its entirety by reference to such reports and other documents and all of the
financial information and notes contained therein.

<S><C>
Year Ended December 31,
----------------------------
</TABLE>

<PAGE>

1993 1994 1995 1996 1997
---- ---- ---- ---- ----

(in thousands, except per share data)

<S> <C> <C> <C> <C> <C>
Statement of Operations Data:

Revenues:

Sales $ 406 $ 378 $ 312 $ 255 $ 221

Grants, contract and license revenues -- 200 1,467 1,626 3,011
------- ------- ------- ------- -------

Total revenues 406 578 1,778 1,881 3,232

Costs and expenses:

Cost of sales 82 91 123 132 150

Research and development 3,797 5,905 6,442 7,596 14,100

General and administrative 2,361 2,154 2,275 2,558 3,644

Stock bonus to GenPharm
International, Inc. Employees -- -- -- -- 2,275

Acquisition of in-process technology -- -- -- -- 40,316
------- ------- ------- ------- -------

Total costs and expenses 6,240 8,150 8,840 10,286 60,486

</TABLE>

<PAGE>

<S> <C> <C> <C> <C> <C>
Operating loss (5,834) (7,573) (7,062) (8,405) (57,254)

Interest and dividend income 419 337 553 1,537 1,876
------- ------- ------- ------- --------

Net loss $(5,415) $(7,236) $(6,509) $(6,868) $(55,377)
------- ------- ------- ------- --------
------- ------- ------- ------- --------

Basic and diluted net loss per share(1) $ (0.86) $ (1.00) $ (0.69) $ (0.45) $ (2.93)

Weighted average common shares

outstanding(1) 6,304 7,269 9,457 15,289 18,871

</TABLE>

December 31,
----------------------------------------

1993 1994 1995 1996 1997
---- ---- ---- ---- ----

(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:

Cash, cash equivalents and marketable
securities

</TABLE>

<PAGE>

<S> <C> <C> <C> <C> <C>
$ 9,687 $ 9,434 $ 15,729 $ 31,463 $ 28,444

Working capital 8,330 8,017 14,549 31,259 1,647

Total assets 12,640 13,017 19,240 36,044 48,695

Long-term obligations 78 60 40 110 107

Cash dividends declared per common share -- -- -- -- --

Accumulated deficit (10,877) (18,113) (24,623) (31,491) (86,869)

Total stockholders' equity 10,943 11,097 17,375 34,648 5,681

</TABLE>

- ----------

(1) Computed on the basis described for net loss per share in Note 2 to the
Consolidated Financial Statements.

<PAGE>

<TABLE>
<CAPTION>
Three Months Ended

March 31,
-------------------

(Unaudited)

1998 1997
------ ------
<S> <C> <C>
Statement of Operations Data:

Revenues:

Sales 59,213 50,163

Grants, contract and license revenues 1,254,345 400,177
--------- -------

Total revenues 1,313,558 450,340

Costs and expenses:

Cost of sales 131,351 38,485

Research and development 5,287,577 2,530,380

General and administrative 1,059,254 810,323
</TABLE>

<PAGE>

<S> <C> <C>
Acquisition of in-process technology -- 10,662,952
----------- ----------

Operating loss (5,164,624) (13,591,800)

Interest and dividend income 695,071 390,817

Interest expense 600,218 5,651
-------

Net loss (5,069,771) (13,206,634)
----------- ------------
----------- ------------

Basic and diluted net loss per share(1) $ (0.23) $ (0.74)

Weighted average shares outstanding 22,163,875 17,963,137
</TABLE>

<TABLE>
<CAPTION>
March 31, 1998
-----------------------
<S> <C> <C>

Actual As
-------- Adjusted(2)
--------

Balance Sheet Data:
(Unaudited)

Current assets, principally cash, cash
equivalents, notes receivable and
marketable securities
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
$36,911,455 $44,411,455

Property, plant and equipment, net 3,118,373 3,118,373

Investments in, and advances to affiliate 414,777 414,777

Other assets 1,217,245 1,217,245
----------- -----------

$41,661,850 $49,161,850
----------- -----------
----------- -----------

Current liabilities $39,852,244 $ 5,487,051

Other liabilities 87,018 87,018

Stockholders' equity 1,722,588 43,587,781
----------- -----------

$41,661,850 $49,161,850
----------- -----------
----------- -----------
</TABLE>

(1) Compiled on the basis described for net loss per share in Note 2 to the
Consolidated Financial Statements.

(2) As adjusted to give effect to the issuance of the Shares in exchange for
the Rights pursuant to the Rights Exchange Agreement and the receipt of the
remaining Third Party Payments.

The information concerning the Company contained herein has been taken from
or is based upon documents and records on file with the Commission or otherwise
publicly available. Although the Purchaser has no knowledge that would indicate
that

<PAGE>

any statements contained herein are untrue, the Purchaser cannot take
responsibility for the accuracy of the information or for any failure by the
Company to disclose events unknown to the Purchaser that may have occurred and
may affect the significance or accuracy of any such information.

9. CERTAIN INFORMATION CONCERNING THE PURCHASER.

The Purchaser, BCC Acquisition I LLC, is a manager-managed Delaware limited
liability company which has two members. One member, The Bay City Capital Fund
I, L.P. ("BCC"), is a Delaware limited partnership. BCC has committed to
provide $15,000,000 to the Purchaser. BCC is the manager of the Purchaser and
is an investment fund that solely invests in companies in the life sciences
industry. BCC has made $24,310,054 in investments within the past twelve months
and has undrawn committed funds of $75,689,946. The second member of the
Purchaser is Bay Investment Group, L.L.C., a Delaware limited liability company
("BIG"). BIG has committed to contribute all funds in excess of $15,000,000
needed to consummate the Offer. BIG has assets in excess of $23 million and has
undrawn committed funds of $63.9 million. BIG is ultimately owned by trusts for
the benefit of various members of the Pritzker family.

Other than the Rights Exchange Agreement or as elsewhere disclosed herein,
neither the Purchaser nor, to the best knowledge of the Purchaser, any of its
officers, directors or affiliates has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, but not limited to, the transfer or voting of such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies.

10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase the Rights pursuant to the Offer (not including related
fees and expenses) is estimated to be approximately $35,530,000 (the "Funds"),
assuming all $44,412,500 in aggregate Face Value of the Rights are assigned and
accepted for payment pursuant to the Offer.

The Purchaser has received a binding commitment to contribute $15,000,000
from BCC. BIG has made a binding commitment to contribute the balance of the
funds needed to consummate the Offer. The commitments are unconditional. The
Offer is not conditioned on financing.

11. PURPOSE OF THE OFFER. The primary purpose of the Offer is to acquire for
cash all of the Rights so that, upon exchange of the Rights for shares of
Company Common Stock under the Rights Exchange Agreement, the Purchaser will
have a significant

<PAGE>

equity interest in the Company. Immediately upon the consummation of the Offer,
the Purchaser will exchange each $6.75 in Face Value of the Rights it acquires
in the Offer for (i) one Share of the Company's Common Stock (up to a maximum of
6,579,629 shares) plus a Warrant or Warrants to purchase .1222 shares of Common
Stock of the Company (up to a maximum of 804,000 shares) at an exercise price of
$10.00 per share exercisable over a period of seven years. In the event the
minimum amount of Rights are accepted for purchase by the Purchaser and assigned
to the Purchaser, the number of shares of Common Stock to be issued by the
Company to the Purchaser in exchange for the Rights will constitute
approximately 14% (or approximately 25% if all the Rights are assigned and
accepted for payment) of the number of shares of the Company's Common Stock that
will be outstanding following the completion of the Offer, in each case
including the shares that the Purchaser would hold upon exercise of the
Warrants.

Upon consummation of the Offer, Purchaser shall obtain representation on
the board of directors of the Company. Under the terms of the Rights Exchange
Agreement, the Company and the Purchaser have agreed that the Company will add
to its board of directors, on or before the Closing of the transactions
contemplated by the Rights Exchange Agreement, a person with substantial
experience and reputation in the biotechnology or pharmaceutical industries who
is nominated by the Purchaser and acceptable to the board of directors of the
Company. In addition, so long as the Purchaser owns at least 5% of the
Company's outstanding Common Stock or at least 75% of the number of shares of
Common Stock it received from the Company pursuant to the Rights Exchange
Agreement, the Company will use its reasonable best efforts to ensure that the
Purchaser's representative is included in the Company's proxy materials as a
nominee of the board of directors for election to the board and is elected to
serve on the Company's board of directors.

In addition, while no formal agreement currently exists as to any future
changes in the board of directors of the Company, discussions have taken place
between the Company and the Purchaser to the effect that it may be appropriate
for the addition of another new director who has substantial experience and
reputation in the biotechnology or pharmaceutical industry and who is deemed
mutually acceptable by the board of directors of the Company and the Purchaser.

The Purchaser does not presently have any plans to acquire control of the
Company, nor does it have any current plans relating to or which would result in
(i) an extraordinary corporate transaction relating to Company, (ii) the sale or
transfer of a material amount of the Company's assets, (iii) a change (beyond
that described above) in the Company's board of directors or management, (iv)
beyond that contemplated by the Offer and the Rights Exchange Agreement, any
material change in the Company's capitalization or dividend policy, (v) any
other material change to the Company's corporate structure and business, or (vi)
any distribution of the Company Common

<PAGE>

Stock or termination of the registration of the Company's Common Stock under
Section 12 of the Exchange Act.

While the Purchaser presently intends to hold the shares of Common Stock it
acquires under the Rights Exchange Agreement, it reserves the right to either
acquire more such shares or sell, in any lawful manner, any or all of such
shares at any time. In this regard, the Purchaser notes that, pursuant to the
Rights Exchange Agreement, the Company has agreed within 30 days of the closing
of the Offer, to file a shelf registration statement covering the Shares of
Common Stock and the shares of Common Stock resulting from the complete exercise
of the Warrants to be acquired by the Purchaser as well as any resales thereof.

Upon consummation of the transactions contemplated by this Offer and by the
Rights Exchange Agreement, the Purchaser will be the beneficial owner of more
than 10% of the Company's Common Stock and as such will be an "interested
stockholder" as defined in the New Jersey Shareholders Protection Act ("NJSPA").
The NJSPA may prohibit certain future business combinations between the
Purchaser and the Company including a merger or consolidation, a sale, lease,
exchange, transfer or other disposition of 10% or more of the assets of the
Company.

12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of
the Offer, the Purchaser will not be required to accept for payment or pay for
any Rights assigned, or may terminate or amend the Offer, or may postpone the
acceptance for payment or payment for any Rights assigned, if fewer than
$22,206,250 (50%) in aggregate Face Value of the Rights are properly assigned
and the assignments are not revoked prior to the Expiration Date, or if at any
time before payment for any Rights assigned (whether or not any other Rights
have theretofore been accepted for payment or paid for pursuant to the Offer),
any of the following shall occur:

(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened or shall have
become known to the Purchaser in the business, properties, assets,
liabilities, financial condition, operations, prospects or results of
operations of the Company or any of its subsidiaries or affiliates which
has or may have material adverse significance with respect to the Company
and its subsidiaries and affiliates, taken as a whole, or the value of the
Company's Common Stock.

(b) any (i) general suspension of, or limitation on prices for, trading in
securities on The Nasdaq National Market, (ii) declaration of a banking
moratorium or any suspension of payments in respect of federal or state
banks in the United States of any limitation on, or any other condition,
event or development which may affect, the extension of credit by lending
institutions in

<PAGE>

the United States, or in any other country, (iii) commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) material change in United
States or any other currency exchange rates or a suspension of, or
limitation on the market therefor or (v) in the case of any of the
foregoing existing at the time of commencement of the Offer, a material
acceleration or worsening thereof;

(c) the Company or any subsidiary or affiliate of the Company shall, on or
after June 10, 1998, have (i) issued or sold, or authorized or proposed the
issuance or sale of, any shares of capital stock of any class, or any
securities convertible into any such shares, or any rights, warrants or
options to acquire any such shares or convertible securities, except (a)
the issuance of shares upon the exercise, in accordance with the terms
thereof in effect on June 10, 1998, of employee stock options outstanding
on June 10, 1998, and (b) pursuant to the terms of any agreement with the
Company's strategic corporate partners as disclosed in the 1997 10-K and
the March 10-Q, (ii) issued, sold, authorized or proposed the issuance or
sale of any other securities in respect of, in lieu or in substitution for
shares of its Common Stock outstanding on June 10, 1998, (iii) declared or
paid any dividend or distribution on any shares of its capital stock, or
(iv) authorized, proposed, recommended or entered into or granted any
option or other right with respect to, or announced any intention to
authorize, propose, recommend or enter into or grant any option or right
with respect to any merger, consolidation, business combination,
acquisition of assets or securities, disposition of assets, disposition of
shares of a subsidiary or affiliate, or any material change in its
capitalization, any relinquishment of any material contractual rights, or
any comparable event not in the ordinary course of business or taken any
action to implement any such transaction previously authorized, recommended
or proposed, other than recommendations concerning the Offer;

(d) any action or proceeding shall be taken, instituted, proposed or
threatened, or any statute, rule, regulation or order shall be proposed,
introduced, enacted, promulgated, entered, enforced or deemed applicable to
the Offer by or before any domestic or foreign government, court, agency,
authority or instrumentality or any official or representative of any of
the foregoing (each being referred to herein as a "Governmental Agency") or
by any other person, domestic or foreign, which may (i) challenge the
making or completion of the Offer or closing of the transactions
contemplated by the Rights Exchange Agreement or otherwise directly or
indirectly relate to the making or completion of the Offer, or the
execution, delivery or performance by any party of the Rights Exchange
Agreement (ii) result in a delay in or restrict the ability of the
Purchaser to accept for payment or to pay for some or all of the Rights
pursuant to the Offer, or make the consummation of the Offer unduly
burdensome to the Purchaser, (iii) render the Purchaser unable to accept
for payment or to pay for

<PAGE>

some or all of the Rights pursuant to the Offer, (iv) make the acceptance
for payment or payment for some or all of the Rights illegal or otherwise
restrict or prohibit consummation of the Offer (whether under any federal
or state law or otherwise), (v) seek to prohibit ownership or require the
divestiture by the Purchaser or any of the Purchaser's subsidiaries or
affiliates of any Rights or impose any limitation on the ability of any of
them to acquire or own Rights, (vi) impose any limitation on the ability of
the Purchaser or any of the Purchaser's subsidiaries or affiliates to
exercise effectively all rights of ownership with respect to the Rights or
the Shares, (vii) impose any limitation upon the ability of the Purchaser
or any of the Purchaser's subsidiaries or affiliates effectively to enforce
or enjoy the benefit of Purchaser's rights under the Rights Exchange
Agreement, (viii) prohibit or impose any limitation upon Purchaser's
ownership of the Rights, the Shares, or the Warrants or compel the
Purchaser or the Company to divest or hold separate all or any portion of
the business or assets of the Purchaser or the Company (including the
businesses or assets of any of their respective subsidiaries and
affiliates) or impose any limitation on any of them in the conduct of their
businesses, or (ix) otherwise adversely affect the Purchaser or the Company
or any of their respective subsidiaries or affiliates;

(e) the Company or any of its subsidiaries or affiliates shall have
proposed or adopted any amendment to any of their articles of incorporation
or bylaws or similar organizational documents, or the Purchaser shall have
learned that the Company or any of its subsidiaries or affiliates shall
have adopted any such amendment which shall not have been publicly
disclosed prior to June 10, 1998;

(f) any condition set forth in the Rights Exchange Agreement has not been
satisfied immediately prior to the Expiration Date or any impediment to
closing the transactions contemplated by the Rights Exchange Agreement
exists; or

(g) the failure of the Company to inform the Purchaser in writing
immediately prior to the Expiration Date that all conditions to Company's
obligations under the Rights Exchange Agreement have been satisfied or
waived and that Company will exchange all Rights purchased by Purchaser for
Shares and Warrants under the Rights Exchange Agreement;

which, in the sole judgment of the Purchaser with respect to each and every
matter referred to above and regardless of the circumstances, including any
action or omission by the Purchaser giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment of
or payment for the Rights. Any determination by the Purchaser concerning the
events described in this Section 12 shall be final and binding upon all parties.
The foregoing conditions are for the sole benefit of the Purchaser and may be
waived by the Purchaser in whole or in part at any time and from time to time.

<PAGE>

13. CERTAIN LEGAL MATTERS. GENERAL. Except as otherwise disclosed below,
neither the Company nor the Purchaser is aware of any license or regulatory
permit which appears to be material to the business of the Company and likely to
be adversely affected by the consummation of the transactions contemplated by
the Rights Exchange Agreement. Except as disclosed below, neither the Company
nor the Purchaser is aware of any approval or other action by any state, federal
or foreign governmental or administrative agency that would be required for the
acquisition of Rights by the Purchaser as contemplated herein. Should any such
license, permit, approval or other action be required, it is presently
contemplated that the same would be sought. There can be no assurance that any
license, permit, approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not have to be
disposed of in the event that such license, permit, or approval was not obtained
or any such other action was not taken. The Purchaser's obligation under the
Offer to accept for payment and pay for Rights is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section.

ANTITRUST. The issuance of the Shares by the Company in exchange for the
Rights acquired by the Purchaser pursuant to the Offer (the "Rights Exchange")
is subject to the provisions of the H-S-R Act, which provides that certain
acquisition transactions may not be consummated until certain information has
been furnished to the Antitrust Division and the FTC and certain waiting period
requirements have been satisfied. Pursuant to the H-S-R Act, the Purchaser and
the Company intend to file a Notification and Report Form and certain
supplemental material with respect to the Rights Exchange with the Antitrust
Division and the FTC on or before June 17, 1998. Under the provisions of the
H-S-R Act applicable to the Rights Exchange, the issuance of the Shares by the
Company in exchange for the Rights acquired by the Purchaser pursuant to the
Offer may not be consummated until the expiration of a 30-calendar day waiting
period following the Purchaser's filing. Accordingly, the waiting period under
the H-S-R Act will expire at 11:59 p.m., New York City time, on the date which
is 30 days from the date of such filing, unless the Purchaser or the Company
receives a request for additional information or documentary material prior
thereto. If either the FTC or the Antitrust Division were to request additional
information or documentary material form the Purchaser or the Company, the
waiting period would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by the Purchaser or the
Company with such request. Thereafter, the waiting period could be extended
only by court order. If the Rights Exchange, and therefore, the acquisition of
the Rights pursuant to the Offer, is delayed by a request from the FTC or the
Antitrust Division for additional information or documentary material pursuant
to the H-S-R Act, the Offer may, but need not, be extended and, in any event,
the purchase of and payment for Rights pursuant to the Offer will be deferred
until 10 days after the request is substantially complied with, unless the
10-day extended period expires on or before the date when the initial 30-day
period would otherwise have expired or unless the waiting period is sooner
terminated by the FTC or the Antitrust Division. Any extension of the waiting
period will not give rise to any withdrawal rights not

<PAGE>

otherwise provided for by applicable law (see Section 4). Although the Company
is required to file certain information and documentary material with the
Antitrust Division and the FTC in connection with the Rights Exchange, neither
the Company's failure to make such filings nor a request form the Antitrust
Division or the FTC for additional information or documentary material made to
the Company will extend the waiting period.

At any time before or after the Rights Exchange and the Purchaser's
acquisition of the Rights pursuant to the Offer, either the Antitrust Division
or the FTC, or both, could take such action under the antitrust laws as either
deems necessary or desirable in the public interest, or any other person could
take action under the antitrust laws, including seeking to enjoin the Rights
Exchange or seeking divestiture of the Shares acquired thereunder or the
divestiture of substantial assets of the Company or the Purchaser. Neither the
Purchaser nor the Company believe that the Purchaser's acquisition of the Offer
would violate the antitrust laws. However, there can be no assurance that a
challenge to the Rights Exchange on antitrust grounds will not be made or that,
if such a challenge is made, the Purchaser will prevail.

14. FEES AND EXPENSES. The Purchaser will not pay any fees or commissions to
any broker or dealer or any other person for soliciting assignments of Rights
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Company for customary mailing and handling expenses
incurred by them in forwarding offering materials to their customers.

The Company has retained Continental Stock Transfer & Trust Company as
Depositary in connection with the Offer. The Depositary will receive reasonable
and customary compensation for its services. The Company will also reimburse
the Depositary for out-of-pocket expenses, including reasonable attorneys' fees,
and has agreed to indemnify the Depositary against certain liabilities in
connection with the Offer, including certain liabilities in connection with the
Offer.

The Purchaser has retained Shareholder Communications Corporation as
Information Agent in connection with the Offer. The Information Agent will
receive reasonable and customary compensation for its services. The Purchaser
will also reimburse the Information Agent for out-of-pocket expenses, including
reasonable attorneys' fees, and has agreed to indemnify the Information Agent
against certain liabilities in connection with the Offer, including certain
liabilities in connection with the Offer.

Neither the Depositary nor the Information Agent has been retained to make
solicitations or recommendations with respect to the Offer.

<PAGE>

15. MISCELLANEOUS. The Offer is not being made to, nor will assignments be
accepted front or on behalf of, Holders of Rights in any jurisdiction in which
the making or acceptance thereof would not be in compliance with the laws of
such jurisdiction.

No person has been authorized to give any information or make any
representation on behalf of the Purchaser other than as contained in this Offer
to Purchase or in the related Letter of Assignment and, if given or made, such
information or representation must not be relied upon as having been authorized.

BCC ACQUISITION I LLC

June 11, 1998

<PAGE>

Facsimile copies of the Letter of Assignment will be accepted. The Letter
of Assignment and any other required documents should be sent or delivered to
the Depositary at one of its addresses set forth below:

THE DEPOSITARY:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY
BY MAIL: BY FACSIMILE: BY HAND:
Continental Stock Transfer (212) 509-5250 Continental Stock Transfer
& Trust Company & Trust Company
2 Broadway Confirm by Telephone: 2 Broadway - 19th Floor
New York, New York (212) 509-4000 Ext. 535 New York, New York
10004 10004

Continental Stock Transfer & (212) 509-5250 Continental Stock
Trust Company Transfer & Trust Company
2 Broadway Confirm by Telephone 2 Broadway
New York, New York 10004 (212) 509-4000, Ext. 535 New York, New York

Any questions or requests for assistance or for additional copies of
this Offer to Purchase or the Letter of Assignment may be directed
to the Information Agent at the telephone numbers and
addresses below. To confirm delivery for your Letter of
Assignment you are directed to contact the Depositary.

THE INFORMATION AGENT:

SHAREHOLDER COMMUNICATIONS CORPORATION
BY TELEPHONE:
(212) 509-5250

Confirm by Telephone:
(212) 509-4000 Ext. 535
(800) 733-8481, Ext. 493
(or call direct at)
(212) 805-7000