Document:

EXHIBIT 10.2

                          SECURITIES PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 23, 2000

                                 BY AND BETWEEN

                      PHAGE THERAPEUTICS INTERNATIONAL INC.
                                 AS THE ISSUER,

                                       AND

                                 THE PURCHASERS
                                  (as defined)

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                                TABLE OF CONTENTS
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ARTICLE I: DEFINITIONS............................................................................................... 1
         1.1 Definitions............................................................................................. 1
         1.2 Accounting Terms and Determinations..................................................................... 4

ARTICLE II. PURCHASE AND SALE OF SECURITIES.......................................................................... 4
         2.1 Purchase and Sale of Units.............................................................................. 4
         2.2 Closing and Mechanics of Payment........................................................................ 4

ARTICLE III. REPRESENTATIONS AND WARRANTIES.......................................................................... 4
         3.1 Organization and Qualification.......................................................................... 4
         3.2 Authorization and Execution............................................................................. 4
         3.3 Capitalization.......................................................................................... 5
         3.4 Governmental Authorization.............................................................................. 5
         3.5 Issuance of Shares...................................................................................... 5
         3.6 No Conflicts............................................................................................ 5
         3.7 Financial Information................................................................................... 6
         3.8 Litigation.............................................................................................. 6
         3.9 Employees............................................................................................... 6
         3.10 Environmental Matters.................................................................................. 6
         3.11 Taxes.................................................................................................. 6
         3.12 Not an Investment Company.............................................................................. 6
         3.13 Full Disclosure........................................................................................ 6
         3.14 No Solicitation; No Integration with Other Offerings................................................... 7
         3.15 Permits................................................................................................ 7
         3.16 Title.................................................................................................. 7
         3.17 Intellectual Property Rights........................................................................... 7
         3.18 Internal Accounting Controls........................................................................... 7

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................................................... 7
         4.1 Investment Purpose...................................................................................... 7
         4.2 Accredited Purchaser Status............................................................................. 8
         4.3 Reliance on Exemptions.................................................................................. 8
         4.4 Information............................................................................................. 8
         4.5 No Governmental Review.................................................................................. 8
         4.6 Transfer or Resale...................................................................................... 8
         4.7 Legends................................................................................................. 9
         4.8 Authorization, Enforcement.............................................................................. 9
         4.9 Receipt of Documents.................................................................................... 9
         4.10 Due Formation of Corporate and Other Purchasers........................................................ 9
         4.11 Due Authorization of Fiduciary Purchasers.............................................................. 9
         4.12 Further Representations by Foreign Purchasers......................................................... 10
         4.13 No Legal Advice From Phage............................................................................ 10

ARTICLE V. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES........................................................... 10
         5.1 Conditions Precedent to Purchaser's Obligations to Purchase............................................ 10
         5.2 Conditions to Phage's Obligations...................................................................... 11

ARTICLE VI AFFIRMATIVE COVENANTS.................................................................................... 11
         6.1 Information............................................................................................ 11
         6.2 Payment of Obligations................................................................................. 11
         6.3 Maintenance of Existence............................................................................... 12
         6.4 Compliance with Laws................................................................................... 12
         6.5 Inspection of Property, Books and Records.............................................................. 12
         6.6 Investment Company Act................................................................................. 12
         6.7 Use of Proceeds........................................................................................ 12
         6.8 Compliance with Terms and Conditions of Material Contracts............................................. 12
         6.9 Reserved Shares and Listings........................................................................... 12
         6.10 Transfer Agent Instructions........................................................................... 13
         6.11 Maintenance of Reporting Status; Supplemental Information............................................. 13
         6.12 Form D; Blue Sky Laws................................................................................. 13
         6.13 Election of Directors................................................................................. 13
         6.14 Sales by the Purchasers............................................................................... 13
         6.15 Unit Offering......................................................................................... 13
         6.16 Form 10SB-12g......................................................................................... 13

ARTICLE VII. RESTRICTIVE LEGENDS.................................................................................... 13
         7.1 Restrictions on Transfer............................................................................... 13
         7.2 Notice of Proposed Transfers........................................................................... 14

ARTICLE VIII. ADDITIONAL AGREEMENTS AMONG THE PARTIES............................................................... 14
         8.1 Registration Rights.................................................................................... 14
         8.2 Due Diligence Expenses................................................................................. 14

ARTICLE IX. PURCHASERS' RIGHT OF FIRST REFUSAL...................................................................... 14
         9.1  Right of First Refusal................................................................................ 14

ARTICLE X. MISCELLANEOUS............................................................................................ 15
         10.1 Notices............................................................................................... 15
         10.2 No Waivers; Amendments................................................................................ 15
         10.3 Indemnification....................................................................................... 16
         10.4 Expenses.............................................................................................. 17
         10.5 Payment............................................................................................... 17
         10.6 Successors and Assigns................................................................................ 17
         10.7 Florida Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent................... 17
         10.8 Entire Agreement...................................................................................... 18
         10.9 Survival; Severability................................................................................ 18
         10.10 Title and Subtitles.................................................................................. 18
         10.11 Publicity............................................................................................ 18

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                                LIST OF SCHEDULES

Schedule I        List of Purchasers
Schedule 3.3      List of Outstanding Stock Options and Warrants

                                LIST OF EXHIBITS

Exhibit A         Form of Registration Rights Agreement
Exhibit B         Form of Common Stock Purchase Warrant

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                          SECURITIES PURCHASE AGREEMENT

         AGREEMENT,  dated as of October 23, 2000,  between  Phage  Therapeutics
International Inc. ("Phage") a Florida  Corporation and the persons and entities
listed on  Schedule  I  "Schedule  of  Purchasers"  attached  to this  Agreement
(individually the "Purchaser" collectively the "Purchasers").

                                                    R E C I T A L S:

         WHEREAS:

     A. Phage desires to sell and issue to the  Purchasers,  and the  Purchasers
desire to purchase from Phage,  2,142,857 units for an aggregate  purchase price
of $1,500,000;

         B. Each "Unit" will consist of one share of Phage's common stock with a
par value of $0.001 per share (the "Common Stock") and one Common Stock purchase
warrant  (the  "Warrant").  For every one and a half  Warrants  the holder  will
entitle the holder to acquire one additional  share of Commons Stock of Phage at
an exercise price of $0.70 per share;

         C. The Purchasers  have agreed to invest an additional One Million Five
Hundred Thousand Dollars ($1,500,000) in equity into Phage within seven (7) days
from the date Phage  files a Form  10SB-12g  with the  Securities  and  Exchange
Commission. In consideration of this investment Phage has agreed to issue to the
Purchasers an additional 2,142,857 Units ("Second Investment");

     D. Phage will deliver the Form  10SB-12g to Mr.  Robert Miller at least two
(2) business  days prior to filing the Form  10SB-12g  with the  Securities  and
Exchange Commission; and

         E.  Purchasers  will have certain  registration  rights with respect to
such shares of Common  Stock  issuable  as  interest  under the Units (the "Unit
Shares")  and on exercise of the  Warrants  (the  "Warrant  Shares,")(  the Unit
Shares and the  Warrant  Shares  being  collectively  referred  to herein as the
"Shares") as set forth in the Registration Rights Agreement in the form attached
hereto as Exhibit A;

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  premises  and  the
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

                             ARTICLE I: DEFINITIONS

     1.1 Definitions.  The following  terms, as used herein,  have the following
     meanings:  "Affiliate"  means,  with  respect to any Person  (the  "Subject
     Person"),  (i) any other Person (a "Controlling  Person") that directly, or
     indirectly through one or more intermediaries,  Controls the Subject Person
     or (ii) any other Person (other than the Subject  Person or a  Consolidated
     Subsidiary of the Subject Person) which is Controlled by or is under common
     Control with a Controlling Person.

         "Agreement"  means this  Securities  Purchase  Agreement,  as  amended,
         supplemented or otherwise modified from time to time in accordance with
         its terms.

         "Business Day" means any day except a Saturday,  Sunday or other day on
         which  commercial  banks  in the  City of  Seattle  are  authorized  or
         required by law to close.

          "Closing  Bid Price" will mean for any  security  as of any date,  the
         lowest closing bid price as reported by Bloomberg,  L.P.  ("Bloomberg")
         on the  principal  securities  exchange  or trading  market  where such
         security is listed or traded or, if the foregoing  does not apply,  the
         lowest  closing  bid  price of such  security  in the  over-the-counter
         market on the  electronic  bulletin board for such security as reported
         by  Bloomberg,  or, if no lowest  trading  price is  reported  for such
         security by Bloomberg, then the average of the bid prices of any market
         makers for such  securities  as  reported  in the "Pink  Sheets" by the
         National Quotation Bureau,  Inc. If the lowest closing bid price cannot
         be  calculated  for such  security on such date on any of the foregoing
         bases,  the lowest closing bid price of such security on such date will
         be the fair market value as mutually  determined by The  Purchasers and
         Phage for which the calculation of the closing bid price requires,  and
         in the absence of such mutual determination, as determined by the Board
         of Directors of Phage in good faith.

         "Commission" means the Securities and Exchange Commission or any entity
         succeeding to all of its material functions.

         "Common Stock" means the common stock,  $0.001 par value per share,  of
Phage.

         "Company  Corporate  Documents"  means the articles of organization and
bylaws of Phage.

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         "Consolidated  Subsidiary" means at any date with respect to any Person
         or Subsidiary,  any Person the accounts of which would be  consolidated
         with those of such Person or Subsidiary in its  consolidated  financial
         statements if such statements were prepared as of such date.

         "Control"   (including,    with   correlative   meanings,   the   terms
         "Controlling,"  "Controlled by" and under "common  Control  with"),  as
         used with  respect to any  Person,  means the  possession,  directly or
         indirectly,  of the  power to  direct  or cause  the  direction  of the
         management and policies of that Person,  whether  through the ownership
         of voting securities, by contract or otherwise.

         "Debt" of any Person means at any date,  without  duplication,  (i) all
         obligations of such Person for borrowed money,  (ii) all obligations of
         such Person  evidenced by bonds,  debentures,  notes,  or other similar
         instruments issued by such Person, (iii) all obligations of such Person
         as lessee  which (y) are  capitalized  in  accordance  with GAAP or (z)
         arise pursuant to sale-leaseback  transactions,  (iv) all reimbursement
         obligations  of such  Person in  respect  of letters of credit or other
         similar  instruments,  (v) all Debt of others  secured by a Lien on any
         asset  of  such  Person,  whether  or not  such  Debt is  otherwise  an
         obligation  of such  Person and (vi) all Debt of others  Guaranteed  by
         such Person.

         "Default"  means any event or condition  which  constitutes an Event of
         Default  or which  with the  giving  of notice or lapse of time or both
         would, unless cured or waived, become an Event of Default.

         "Directors"  means  the  individuals  then  serving  on  the  Board  of
         Directors or similar such management council of Phage.

         "Environmental  Laws"  means  any and all  federal,  state,  local  and
         foreign statutes,  laws,  regulations,  ordinances,  rules,  judgments,
         orders, decrees, permits,  concessions,  grants, franchises,  licenses,
         agreements  or  other   governmental   restrictions   relating  to  the
         environment  or to  emissions,  discharges  or releases of  pollutants,
         contaminants, petroleum or petroleum products, chemicals or industrial,
         toxic  or  hazardous   substances  or  wastes  into  the   environment,
         including,  without  limitation,  ambient air,  surface  water,  ground
         water, or land, or otherwise  relating to the manufacture,  processing,
         distribution,  use, treatment, storage, disposal, transport or handling
         of pollutants, contaminants, petroleum or petroleum products, chemicals
         or industrial,  toxic or hazardous  substances or wastes or the cleanup
         or other remediation.

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

         "GAAP" has the meaning set forth in Section 1.2.

         "Initial Closing Date" means the date of this Agreement or as otherwise
agreed to by the parties.

         "Intellectual Property" has the meaning set forth in Section 3.17.

         "Lien" means any lien,  mechanic's  lien,  materialmen's  lien,  lease,
         easement, charge,  encumbrance,  mortgage,  conditional sale agreement,
         title retention agreement,  agreement to sell or convey, option, claim,
         title  imperfection,  encroachment  or  other  survey  defect,  pledge,
         restriction,  security interest or other adverse claim, whether arising
         by contract or under law or otherwise  (including,  without limitation,
         any financing  lease having  substantially  the same economic effect as
         any of the foregoing,  and the filing of any financing  statement under
         the Uniform  Commercial  Code or comparable law of any  jurisdiction in
         respect of any of the foregoing).

         "Listing Applications" has the meaning set forth in Section 3.4.

         "Nasdaq Market" means the Nasdaq Stock Market's National Market System.

     "National Market" means the Nasdaq Market, the Nasdaq Small Cap Market, the
     New York Stock Exchange, Inc. or the American Stock Exchange, Inc.

         "Notice of  Exercise"  means the form to be  delivered by a holder of a
         Warrant on exercise of all or a portion to Phage  substantially  in the
         form of Exhibit A to the Warrant.

         "OTC Bulletin Board" means the over-the-counter bulletin board operated
by the NASD.

         "Permits" means all domestic and foreign licenses,  franchises, grants,
         authorizations,  permits, easements, variances,  exemptions,  consents,
         certificates,  orders and approvals necessary to own, lease and operate
         the  properties  of,  and to carry  on the  business  of Phage  and its
         Subsidiary.

         "Person"  means  an  individual,   corporation,   partnership,   trust,
         incorporated or unincorporated association,  joint venture, joint stock
         company,  government (or any agency or political  subdivision) or other
         entity of any kind.

<PAGE>

     "Phage" means Phage Therapeutics International Inc., a Florida corporation,
     and its successors.

         "Purchase  Price" means the purchase price for the Securities set forth
in Section 2.2 of this Agreement.

         "Purchasers"  means the  persons  and  entities  listed on  Schedule  I
         "Schedule of Purchasers" attached to this Agreement.

         "Registrable Securities" has the meaning set forth in Section 8.1.

         "Registration  Rights  Agreement" means the agreement between Phage and
         The Purchasers  dated the date of this Agreement  substantially  in the
         form set forth in Exhibit A attached hereto.

         "Reserved Amount" has the meaning set forth in Section 6.9(a).

         "Second  Closing  Date" means the seventh  (7th)  Business Day from the
         date Phage files a Form 10SB-12g with the Commission.

         "Securities" means the Units, the Warrants and, the Shares.

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

         "Shares" has the meaning set forth in the Recitals.

     "Subsidiary" means, Phage Therapeutics, Inc., a Washington corporation, and
     its successors.

         "Subsidiary    Corporate   Documents"   means   the   certificates   of
incorporation and bylaws of Phage's Subsidiary.

         "Transaction Agreements" means this Agreement, the Warrants and Warrant
         Agreement, and the Registration Rights Agreement.

         "Transfer"  means any  disposition  of  Securities  whether or not such
         disposition would constitute a sale under the Securities Act.

         "Warrant" means the Common Stock Purchase Warrant  substantially in the
form set forth in Exhibit B hereto.

         1.2 Accounting Terms and  Determinations.  Unless  otherwise  specified
herein,  all accounting  terms used herein will be  interpreted,  all accounting
determinations  hereunder will be made, and all financial statements required to
be delivered  hereunder will be prepared,  in accordance with generally accepted
accounting  principles  as in effect from time to time,  applied on a consistent
basis with Phage's prior practice (except for interim  financial  statements and
for changes concurred in by Phage's  independent public  accountants)  ("GAAP").
All  references  to  "dollars,"  "Dollars" or "$" are to United  States  dollars
unless otherwise indicated.

                   ARTICLE II. PURCHASE AND SALE OF SECURITIES

         2.1 Purchase and Sale of Units. Subject to the satisfaction (or waiver)
of the terms and conditions of this Agreement,  each Purchaser agrees, severally
and not  jointly,  to  purchase  and  Phage  agrees  to sell  and  issue to each
Purchaser, severally and not jointly:

(3)               at the Initial Closing,  Units in amounts  corresponding  with
                  the subscription amount set out opposite each Purchaser's name
                  on  Schedule  I  attached  to this  Agreement.  The  aggregate
                  principal  amount of all  Units  being  issued at the  Initial
                  Closing pursuant to this Agreement is One Million Five Hundred
                  Thousand Dollars ($1,500,000); and

(4)               at the Second Closing,  Units in the amount corresponding with
                  the subscription amount set out opposite each Purchaser's name
                  on  Schedule  I  attached  to this  Agreement.  The  aggregate
                  principal  amount of all  Units  being  issued  at the  Second
                  Closing pursuant to this Agreement is One Million Five Hundred
                  Thousand Dollars ($1,500,000).

         2.2 Closing and Mechanics of Payment.
             --------------------------------

         (a)      The  Purchase  Price will be paid on each  respective  Closing
                  date by wire transfer of immediately  available  funds.  Phage
                  acknowledges  having received the funds due in connection with
                  the Initial Closing under this Agreement.

2)                Phage will issue the  underlying  Shares and Warrants  forming
                  the Units  within  five  business  days of the  receipt of the
                  requisite funds on each respective Closing date.
1)

<PAGE>

                   ARTICLE III. REPRESENTATIONS AND WARRANTIES

         Phage  represents  and  warrants to the  Purchasers,  as of October 23,
2000, the following:

         3.1  Organization  and  Qualification.  Phage and each  Subsidiary is a
corporation (or other legal entity) duly organized, validly existing and in good
standing under the laws of its  jurisdiction of  incorporation,  with full power
and authority to own, lease,  use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted.  Phage is
qualified to conduct  business as a foreign  corporation and is in good standing
in every  jurisdiction in which the nature of the business conducted by it makes
such  qualification  necessary,  except  where  such  failure  would  not have a
Material Adverse Effect. A "Material  Adverse Effect" means any material adverse
effect on the operations, results of operations, properties, assets or condition
(financial or otherwise) of Phage and its  Subsidiary,  taken as a whole,  or on
the  transactions  contemplated  under this  Agreement or by the  agreements  or
instruments to be entered into in connection with this Agreement.

         3.2 Authorization and Execution.
             ---------------------------

         (a)      Phage has all requisite corporate power and authority to enter
                  into and perform each Transaction  Agreement and to consummate
                  the  transactions  contemplated  under this  Agreement  and to
                  issue  the  Securities  in  accordance  with the terms of this
                  Agreement.

         (b)      The  execution,  delivery  and  performance  by  Phage of each
                  Transaction  Agreement  and  the  issuance  by  Phage  of  the
                  Securities have been duly and validly  authorized by the Board
                  of Directors of Phage and no further consent or  authorization
                  of  Phage,  its  Board of  Directors  or its  shareholders  is
                  required.

         (c)      This Agreement has been duly executed and delivered by Phage.

         (d)      This Agreement  constitutes,  and on execution and delivery by
                  Phage, each of the Transaction  Agreements will constitute,  a
                  valid and binding agreement of Phage, in each case enforceable
                  against Phage in accordance with its respective  terms subject
                  to:

          (i)  applicable  bankruptcy,  insolvency or similar laws affecting the
               enforceability of creditors rights generally; and

               (ii)     equitable principals of general applicability.

         3.3  Capitalization.  The authorized capital stock of Phage consists of
50,000,000  shares of common  stock with a par value of $0.001 per share.  As of
October  23,  2000,  Phage  had  8,566,873  shares of common  stock  issued  and
outstanding. All of such outstanding shares of capital stock are validly issued,
fully paid and nonassessable. No shares of capital stock of Phage are subject to
preemptive rights or similar rights of the shareholders of Phage or any liens or
encumbrances  imposed through the actions or failure to act of Phage. Other than
as set forth on Schedule 3.3 hereto, as of the date of this Agreement, (i) there
are no  outstanding  options,  warrants,  scrip,  rights to subscribe for, puts,
calls,  rights of first  refusal,  agreements,  understandings,  claims or other
commitments or rights of any character  whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital stock of Phage
or its  Subsidiary,  or  arrangements by which Phage or its Subsidiary is or may
become  bound  to  issue  additional  shares  of  capital  stock of Phage or its
Subsidiary,  and (ii) there are no agreements or arrangements  under which Phage
or its  Subsidiary  are  obligated  to register  the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration  Rights
Agreement) and (iii) there are no anti-dilution  or price adjustment  provisions
contained in any security issued by Phage (or in any agreement  providing rights
to security  holders)  that will be  triggered  by the  issuance of the Units or
Shares. Phage has furnished to the Purchasers true and correct copies of Phage's
Corporate  Documents,  and  the  terms  of all  securities  convertible  into or
exercisable for Common Stock.

         3.4 Governmental Authorization.  The execution and delivery by Phage of
the Transaction Agreements does not and will not, the issuance and sale by Phage
of  the  Securities  does  not  and  will  not,  and  the  consummation  of  the
transactions  contemplated  under this  Agreement  and by the other  Transaction
Agreements will not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except:

         (a)      such  actions or  filings  that have been  undertaken  or made
                  prior to the date of this  Agreement  and that will be in full
                  force  and  effect  (or as to  which  all  applicable  waiting
                  periods have expired) on and as of the date of this  Agreement
                  or  which  are not  required  to be  filed  on or prior to the
                  Initial Closing Date;

          (b)  such actions or filings that,  if not obtained,  would not result
               in a Material Adverse Effect;

          (c)  listing  applications  ("Listing  Applications") to be filed with
               the Pink Sheets or the OTC Bulletin Board or the National  Market
               relating to the Shares, if applicable; and

         (d)      the filing of a "Form D" as  described  in Section  6.12 below
                  and  the  filing  of  any  requisite   documents  under  state
                  securities ("Blue Sky") laws.

<PAGE>

         3.5 Issuance of Shares.  On issuance of the Unit Shares and exercise of
the Warrants, the Shares will be duly and validly issued and outstanding,  fully
paid and nonassessable,  free and clear of any Liens and charges and will not be
subject to  preemptive  rights or similar  rights of any other  shareholders  of
Phage.  Assuming the representations and warranties of the Purchasers herein are
true and correct in all material respects, each of the Securities will have been
issued  in  material  compliance  with all  applicable  U.S.  federal  and state
securities laws. Phage  understands and acknowledges that the issuance of Shares
will  dilute the  ownership  interests  of other  shareholders  of Phage.  Phage
further  acknowledges  that its  obligation to issue Shares as part of the Units
and  exercise of the Warrants is absolute and  unconditional  regardless  of the
dilutive effect that such issuance may have on the ownership  interests of other
shareholders of Phage.

         3.6  No  Conflicts.   The  execution  and  delivery  by  Phage  of  the
Transaction Agreements to which it is a party did not and will not, the issuance
and sale by Phage of the Securities did not and will not and the consummation of
the transactions  contemplated under this Agreement and by the other Transaction
Agreements will not, contravene or constitute a default under or violation of:

          (a)  any provision of applicable  law or regulation  known by Phage to
               be applicable to it;

         (b)      Phage Corporate Documents;

         (c)      any material agreement, judgment, injunction, order, decree or
                  other instrument  binding on Phage or any Subsidiary or any of
                  their  respective   assets,  or  result  in  the  creation  or
                  imposition  of any material  Lien on any asset of Phage or any
                  Subsidiary.

To its knowledge,  Phage and each  Subsidiary is in compliance with and conforms
to all statutes, laws, ordinances, rules, regulations,  orders, restrictions and
all other  legal  requirements  of any  domestic  or foreign  government  or any
instrumentality  having  jurisdiction  over the conduct of its businesses or the
ownership of its properties, except where such failure would not have a Material
Adverse Effect.

         3.7  Financial  Information.  Since June 30, 2000 (the  "Balance  Sheet
Date")  there  has  been  (x)  no  material  adverse  change  in the  assets  or
liabilities, or in the business or condition,  financial or otherwise, or in the
results of  operations  or  prospects,  of Phage and its  Subsidiary  taken as a
whole,  whether as a result of any legislative or regulatory change,  revocation
of any license or rights to do business,  fire, explosion,  accident,  casualty,
labor trouble,  flood, drought,  riot, storm,  condemnation,  act of God, public
force  or  otherwise  and (y) no  material,  adverse  change  in the  assets  or
liabilities, or in the business or condition,  financial or otherwise, or in the
results of operations or prospects,  of Phage and its  Subsidiary  except in the
ordinary course of business;  and to the knowledge of Phage no fact or condition
exists which might cause such a change in the future. The unaudited consolidated
balance sheets of Phage and its  Subsidiary for the periods ending  December 31,
1999, and June 30, 2000,  respectively,  and the related unaudited  consolidated
statements of income,  changes in shareholders' equity and changes in cash flows
for the periods then ended, including the footnotes thereto, except as indicated
therein,  (i)  complied in all  material  respects  with  applicable  accounting
requirements  and (ii) have been prepared in accordance  with GAAP  consistently
applied  throughout the periods indicated,  except that the unaudited  financial
statements do not contain  notes and may be subject to normal audit  adjustments
and normal annual  adjustments.  Such  financial  statements  fairly present the
financial  condition of Phage and its Subsidiary at the dates  indicated and the
consolidated  results of their  operations  and cash flows for the periods  then
ended and, except as indicated therein, reflect all claims against and all Debts
and liabilities of Phage and its Subsidiary, fixed or contingency required to be
reflected therein in accordance with GAAP.

         3.8 Litigation.  There is no action,  suit or proceeding pending or, to
the knowledge of Phage,  threatened against Phage or any Subsidiary,  before any
court or arbitrator or any governmental  body, agency or official in which there
is a reasonable  possibility  of an adverse  decision  which could be reasonably
expected to have a Material  Adverse Effect or which  challenges the validity of
any Transaction Agreements.

         3.9  Employees.  Neither  Phage nor its  Subsidiary  is involved in any
labor  dispute  nor, to the  knowledge of Phage or its  Subsidiary,  is any such
dispute threatened.  None of Phage's or its Subsidiary' employees is a member of
a union and Phage and its  Subsidiary  believe that their  relations  with their
employees are good.  Phage does not have any employee benefit plan as defined by
the Employee Retirement Income Security Act of 1974, as amended.

     3.10  Environmental   Matters.   Phage  and  its  Subsidiary  conducts  its
businesses  in  compliance  in  all  material   respects  with  all   applicable
Environmental Laws.

         3.11 Taxes.  All United States federal,  state,  county,  municipality,
local  or  foreign  income  tax  returns  and all  other  material  tax  returns
(including  foreign tax returns)  which are required to be filed by or on behalf
of Phage and each  Subsidiary  have been or will be filed and all material taxes
due and payable pursuant to such returns or pursuant to any assessment  received
by Phage  and each  Subsidiary  have  been or will be paid  except  those  being
disputed in good faith and for which  adequate  reserves have been  established.
The charges,  accruals and reserves on the books of Phage and each Subsidiary in
respect  of taxes and  other  governmental  charges  have  been  established  in
accordance with GAAP.

<PAGE>

     3.12 Not an  Investment  Company.  Neither  Phage nor any  Subsidiary is an
"Investment  Company"  within the meaning of Investment  Company Act of 1940, as
amended.

         3.13 Full Disclosure.  The information heretofore furnished by Phage to
the  Purchasers  for  purposes of or in  connection  with this  Agreement or any
transaction contemplated by this Agreement does not contain any untrue statement
of a material fact.

         3.14 No Solicitation;  No Integration with Other Offerings.  No form of
general  solicitation  or  general  advertising  was  used by Phage  or,  to its
knowledge,  any other Person acting on behalf of Phage,  in connection  with the
offer and sale of the  Securities.  Neither Phage,  nor, to its  knowledge,  any
Person acting on behalf of Phage,  has, either  directly or indirectly,  sold or
offered for sale to any Person (other than the Purchasers) any of the Securities
or, within the six months prior to the date of this Agreement, any other similar
security of Phage except as contemplated by this Agreement, and Phage represents
that neither itself nor any Person  authorized to act on its behalf (except that
Phage makes no  representation  as to the Purchasers and their  Affiliates) will
sell or offer for sale any such  security  to, or solicit  any offers to buy any
such  security  from, or otherwise  approach or negotiate in respect  with,  any
Person or  Persons so as  thereby  to cause the  issuance  or sale of any of the
Securities  to be in  violation  of any of the  provisions  of  section 5 of the
Securities  Act. The issuance of the  Securities to the  Purchasers  will not be
integrated  with any other  issuance  of Phage's  securities  (past,  current or
future).

         3.15 Permits.  To the best of Phage's knowledge,  Phage and each of its
Subsidiary  has, or is in the process of  obtaining,  all  franchises,  permits,
licenses and any similar authority  necessary for the conduct of its business as
now being  conducted  by it, the lack of which could  materially  and  adversely
affect its  business,  properties  or  financial  condition  and believes it can
obtain,  without undue burden or expense,  any similar authority for the conduct
of its business as planned to be conducted.  Neither Phage nor any Subsidiary is
in  default  in any  material  respect  under any of such  franchises,  permits,
licenses or other similar authority.

         3.16 Title. Phage does not own any real property. Any real property and
facilities  held under lease by Phage and its  Subsidiary are held by them under
valid,  subsisting  and  enforceable  leases  with  such  exceptions  as are not
material and do not interfere  with the use made and proposed to be made of such
property and buildings by Phage and its Subsidiary.

         3.17  Intellectual  Property  Rights.  Each of Phage and its Subsidiary
owns,  or is  licensed  under,  and has the rights to use,  all  material to the
knowledge of Phage, patents,  trademarks,  trade names, copyrights,  technology,
know-how  and  processes  (collectively,  "Intellectual  Property")  used in, or
necessary for the conduct of its  business;  no claims have been asserted by any
Person  to  the  use  of  any  such  Intellectual  Property  or  challenging  or
questioning the validity or  effectiveness  of any license or agreement  related
thereto. To Phage's and its Subsidiary'  knowledge,  there is no valid basis for
any such  claim  and the use of such  Intellectual  Property  by  Phage  and its
Subsidiary will not infringe on the rights of any Person.

     3.18  Internal  Accounting  Controls.  Phage  and  each  of its  Subsidiary
maintain a system of internal accounting controls sufficient, in the judgment of
Phage's Board of Directors, to provide reasonable assurance that:

(3)  transactions  are  executed  in  accordance  with  managements'  general or
     specific authorizations;

(4)  transactions  are recorded as necessary to permit  preparation of financial
     statements in conformity with GAAP and to maintain asset accountability;

(5)  access to assets is permitted only in accordance with management's  general
     or specific authorization; and

(6)  the recorded accountability for assets is compared with the existing assets
     at reasonable intervals and appropriate action is taken with respect to any
     differences.

          ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

         Each  Purchaser  represents  and  warrants,  severally and not jointly,
that:

         4.1 Investment  Purpose.  Each Purchaser is acquiring the Units and the
underlying  Warrants and Shares, for its own account for investment only and not
with a view  towards,  or for resale in  connection  with,  the  public  sale or
distribution thereof,  except pursuant to sales registered or exempted under the
1933 Act; provided,  however,  that by making the  representations  herein, such
Purchaser reserves the right to dispose of Shares at any time in accordance with
or pursuant to an effective  registration  statement  covering such Shares or an
available exemption under the 1933 Act.

     4.2  Accredited   Purchaser  Status.   Each  Purchaser  is  an  "accredited
Purchaser" as that term is defined in Rule 501(a)(3) of Regulation D.

<PAGE>

         4.3 Reliance on Exemptions.  Each Purchaser  understands that the Units
and the  underlying  Warrants  and  Shares are being  offered  and sold to it in
reliance on specific  exemptions  from the  registration  requirements of United
States Federal and state  securities laws and that Phage is relying in part upon
the  truth  and  accuracy  of,  and  such   Purchaser's   compliance  with,  the
representations,  warranties, agreements,  acknowledgments and understandings of
such Purchaser set forth herein in order to determine the  availability  of such
exemptions and the eligibility of such Purchaser to acquire such securities.

         4.4  Information.  Such  Purchaser  and its  advisors  (and his or, its
counsel),  if any,  have  been  furnished  with all  materials  relating  to the
business, finances and operations of Phage and information he deemed material to
making an informed  investment  decision regarding his purchase of the Units and
the underlying Warrants and Shares, which have been requested by such Purchaser.
Such Purchaser and its advisors,  if any, have been afforded the  opportunity to
ask questions of Phage and its management.  Neither such inquiries nor any other
due diligence  investigations  conducted by such  Purchaser or its advisors,  if
any, or its representatives shall modify, amend or affect such Purchaser's right
to rely on Phage's  representations and warranties  contained in this Agreement.
Such Purchaser  understands  that its investment in the Units and the underlying
Warrants and Shares  involves a high degree of risk.  Purchaser is in a position
regarding Phage,  which, based upon employment,  family relationship or economic
bargaining power, enabled and enables Purchaser to obtain information from Phage
in order to evaluate the merits and risks of this investment. Such Purchaser has
sought such accounting,  legal and tax advice, as it has considered necessary to
make an informed  investment  decision  with respect to its  acquisition  of the
Units and the underlying Warrants and Shares.

         4.5 No Governmental  Review. Such Purchaser  understands that no United
States Federal or state agency or any other  government or  governmental  agency
has  passed on or made any  recommendation  or  endorsement  of the Units or the
underlying Warrants and Shares, or the fairness or suitability of the investment
in the Units or the underlying  Warrants and Shares,  nor have such  authorities
passed  upon  or  endorsed  the  merits  of the  offering  of the  Units  or the
underlying Warrants and Shares.

     4.6 Transfer or Resale. Such Purchaser  understands that except as provided
in the Registration Rights Agreement:

         (a)      the Units and the underlying Warrants and Shares have not been
                  and are not being  registered  under the 1933 Act or any state
                  securities  laws,  and  may not be  offered  for  sale,  sold,
                  assigned or transferred unless:
                  (i)      subsequently registered there under; or
                  (ii)     such  Purchaser  shall  have  delivered  to  Phage an
                           opinion of counsel,  in a generally  acceptable form,
                           to  the  effect  that  such  securities  to be  sold,
                           assigned  or  transferred  may be sold,  assigned  or
                           transferred   pursuant  to  an  exemption  from  such
                           registration requirements;

         (b)      any sale of such securities made in reliance on Rule 144 under
                  the 1933 Act (or a successor rule thereto) ("Rule 144") may be
                  made  only in  accordance  with  the  terms  of  Rule  144 and
                  further,  if Rule 144 is not  applicable,  any  resale of such
                  securities  under  circumstances  in which the  seller (or the
                  person  through  whom the sale is made) may be deemed to be an
                  underwriter  (as that  term is  defined  in the 1933  Act) may
                  require  compliance  with some other  exemption under the 1933
                  Act or the rules and regulations of the SEC there under; and

         (c)      neither Phage nor any other person is under any  obligation to
                  register  such  securities  under  the 1933  Act or any  state
                  securities  laws or to comply with the terms and conditions of
                  any exemption  there under.  Phage reserves the right to place
                  stop transfer instructions against the shares and certificates
                  for the Warrants and Shares.

         4.7 Legends.  Such Purchaser understands that the certificates or other
instruments  representing the stock  certificates  representing the Warrants and
Shares shall bear a restrictive  legend in substantially the following form (and
a  stop  transfer   order  may  be  placed   against   transfer  of  such  stock
certificates):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  APPLICABLE  STATE  SECURITIES  LAWS. THE SECURITIES  HAVE BEEN
                  ACQUIRED  SOLELY FOR  INVESTMENT  PURPOSES AND NOT WITH A VIEW
                  TOWARD  RESALE  AND  MAY  NOT  BE  OFFERED  FOR  SALE,   SOLD,
                  TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE
                  REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES LAWS,
                  OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
                  REGISTRATION  IS NOT  REQUIRED  UNDER  SAID ACT OR  APPLICABLE
                  STATE SECURITIES LAWS.

         The legend set forth  above  shall be removed  and Phage  shall issue a
         certificate  without such legend to the holder of the Shares upon which
         it is stamped, if, unless otherwise required by state securities laws:

     (a)  in  connection  with a  sale  transaction,  provided  the  Shares  are
          registered under the 1933 Act; or

         (b)      in connection  with a sale  transaction,  such holder provides
                  Phage with an opinion of counsel,  in form acceptable to Phage
                  and its counsel, to the effect that a public sale,  assignment
                  or  transfer  of the Shares may be made  without  registration
                  under the 1933 Act.

<PAGE>

         4.8  Authorization,  Enforcement.  This  Agreement  has  been  duly and
validly authorized,  executed and delivered on behalf of such Purchaser and is a
valid and binding agreement of such Purchaser enforceable in accordance with its
terms,  except as such  enforceability  may be limited by general  principles of
equity and to applicable  bankruptcy,  insolvency,  reorganization,  moratorium,
liquidation  and other  similar laws  relating to, or affecting  generally,  the
enforcement of applicable creditors' rights and remedies.

     4.9  Receipt  of  Documents.  Such  Purchaser  and his or its  counsel  has
          received and read in their entirety:

     (a)  this  Agreement  and each  representation,  warranty  and covenant set
          forth in this Agreement and the Registration Rights Agreement;

     (b)  all due  diligence  and other  information  necessary  to  verify  the
          accuracy and  completeness  of such  representations,  warranties  and
          covenants;

     (c)  Phage's unaudited financial statements for the periods ending December
          31, 1999 and June 30, 2000; and

     (d)  answers to all questions the Purchaser submitted to Phage regarding an
          investment in Phage;  and the Purchaser has relied on the  information
          contained  therein  and has not been  furnished  any other  documents,
          literature, memorandum or prospectus.

         4.10  Due  Formation  of  Corporate  and  Other   Purchasers.   If  the
Purchaser(s) is a corporation, trust, partnership or other entity that is not an
individual  person,  it has been  formed  and  validly  exists  and has not been
organized for the specific purpose of purchasing the Units and is not prohibited
from doing so.

         4.11 Due Authorization of Fiduciary Purchasers.  If the Purchaser(s) is
purchasing the in a fiduciary  capacity for another person or entity,  including
without  limitation a corporation,  partnership,  trust or any other entity, the
Purchaser(s)  has been duly  authorized  and empowered to execute this Agreement
and such other person  fulfills all the  requirements  for purchase of the Units
and  agrees to be bound by the  obligations,  representations,  warranties,  and
covenants contained herein. Upon request of Phage, the Purchaser(s) will provide
true,  complete  and  current  copies of all  relevant  documents  creating  the
Purchasers,   authorizing   its  investment  in  Phage  and/or   evidencing  the
satisfaction of the foregoing.

         4.12 Further Representations by Foreign Purchasers.  If Purchaser(s) is
not a U.S. Person (as defined), such Purchaser represents that such Purchaser(s)
is satisfied as to full observance of the laws of such Purchaser's  jurisdiction
in connection  with any invitation to subscribe for the securities or any use of
this Agreement, including:

     (a)  the  legal  requirements  of  such  Purchaser's  jurisdiction  for the
          purchase of the securities;

     (b)  any foreign exchange restrictions applicable to such purchase;

     (c)  any governmental or other consents that may need to be obtained; and

     (d)  the  income  tax and  other  tax  consequences,  if any,  which may be
          relevant to the purchase,  holding,  redemption,  sale, or transfer of
          the securities.

Such Purchaser's  subscription  and payment for, and such Purchaser's  continued
beneficial  ownership  of,  the  securities  will  not  violate  any  applicable
securities  or other  laws of such  Purchaser's  jurisdiction.  The  term  "U.S.
Person" as used herein shall mean any person who is a citizen or resident of the
United  States  or  Canada,  or any  state,  territory  or  possession  thereof,
including but not limited to any estate of any such person,  or any corporation,
partnership,  trust or other entity  created or existing under the laws thereof,
or any entity controlled or owned by any of the foregoing.

         4.13 No Legal Advice From Phage. The  Purchaser(s)  acknowledge that it
had the opportunity to review this Agreement and the  transactions  contemplated
by this  Agreement  with his or its own legal  counsel  and  investment  and tax
advisors.  The Purchaser is relying  solely on such counsel and advisors and not
on any statements or representations  of Phage or any of its  representatives or
agents for legal, tax or investment advice with respect to this investment,  the
transactions  contemplated  by  this  Agreement  or the  securities  laws of any
jurisdiction.

            ARTICLE V. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

         5.1 Conditions  Precedent to Purchaser's  Obligations to Purchase.  The
obligation of the  Purchaser(s)  hereunder to purchase the Initial Units and the
Second Units is subject to the  satisfaction,  on or before the Initial  Closing
Date, of each of the following  conditions,  provided that these  conditions are
for  Purchaser's  sole benefit and may be waived by  Purchaser(s) at any time in
its sole discretion:

     (a)  Phage will have duly  executed  this  Agreement  and the  Registration
          Rights Agreement, and delivered the same to the Purchaser(s);

<PAGE>

         (b)      Phage will having agreed to deliver to the  Purchaser(s)  duly
                  executed  certificates  representing  the Shares and  Warrants
                  underlying the Units in accordance with section 2.2(b) of this
                  Agreement;

         (c)      The  representations and warranties of Phage contained in each
                  Transaction Agreement will be true and correct in all material
                  respects  as of the  date  when  made  and  as of the  Initial
                  Closing   Date  as  though  made  at  such  time  (except  for
                  representations  and  warranties  that speak as of a specified
                  date) and Phage will have  performed,  satisfied  and complied
                  with all covenants, agreements and conditions required by such
                  Transaction Agreements to be performed,  satisfied or complied
                  with by it at or prior to the Initial Closing Date;

         (d)      Phage will have received all governmental, Board of Directors,
                  shareholders and third party consents and approvals  necessary
                  or desirable in  connection  with the issuance and sale of the
                  Securities   and   the   consummation   of  the   transactions
                  contemplated by the Transaction Agreements;

         (e)      Phage will have  authorized  and  reserved  for  issuance  the
                  Common  Shares  issuable as part of the Units and the exercise
                  of all Warrants pursuant to this Agreement.

         (f)      Phage  Corporate   Documents  and  the  Subsidiary   Corporate
                  Documents,  if any,  will be in full  force and  effect and no
                  term or condition will have been amended,  waived or otherwise
                  modified without the prior written consent of the Purchasers;

         (g)      There will have  occurred  no material  adverse  change in the
                  business,  condition  (financial  or  otherwise),  operations,
                  performance,   properties   or   prospects  of  Phage  or  any
                  Subsidiary since June 30, 2000;

         (h)      There will exist no action, suit, investigation, litigation or
                  proceeding  pending or  threatened  in any court or before any
                  arbitrator or governmental instrumentality that challenges the
                  validity of or purports to affect this  Agreement or any other
                  Transaction Agreement, or other transaction contemplated under
                  this Agreement or that could  reasonably be expected to have a
                  Material Adverse Effect, or any material adverse effect on the
                  enforceability of the Transaction Agreements or the Securities
                  or  the  rights  of  the  holders  of  the  Securities  or the
                  Purchasers hereunder; and

         (i)      with regard to the Second  Closing Date only,  Phage will have
                  provided the  Purchaser(s)  evidence  that it has filed a Form
                  10SB-12g  with the  Commission  seven  (7)  days  prior to the
                  Second Investment.

Subsection  5.1(i) is an  obligation  and  condition  to be met on or before the
Second Closing Date only and is not a condition of the Initial Closing Date.

         5.2  Conditions to Phage's  Obligations.  The  obligations  of Phage to
issue and sell the Securities to the  Purchasers  pursuant to this Agreement are
subject to the  satisfaction,  at or prior to the Initial  Closing  Date, of the
following conditions:

         (a)      The representations and warranties of the Purchasers contained
                  herein  will be true and correct in all  material  respects on
                  the  Initial   Closing  Date  and  the  Purchasers  will  have
                  performed - and  complied in all  material  respects  with all
                  agreements  required  by this  Agreement  to be  performed  or
                  complied  with by the  Purchasers  at or prior to the  Initial
                  Closing Date;

     (b)  The issue and sale of the  Securities  by Phage will not be prohibited
          by any applicable law, court order or governmental regulation;

     (c)  Receipt by Phage of duly executed  counterparts  of this Agreement and
          the Registration Rights Agreement signed by the Purchasers;

         (d)      Phage will have received payment of the Purchase Price; and

         (e)      There will exist no action, suit, investigation, litigation or
                  proceeding  pending  or  threatened  m any court or before any
                  arbitrator or governmental instrumentality that challenges the
                  validity of or purports to effect this  Agreement or any other
                  Transaction Agreement, or other transaction contemplated under
                  this Agreement or that could  reasonably be expected to have a
                  Material Adverse Effect, or any material adverse effect on the
                  enforceability   of  the   Transaction   Agreements,   or  the
                  Securities,  or the rights of the holders of the Securities or
                  the Purchasers hereunder.

                        ARTICLE VI AFFIRMATIVE COVENANTS

         Phage and the Purchasers  hereby agree that, from and after the date of
this  Agreement for so long as any  Securities  remain  outstanding  and for the
benefit of each other:

<PAGE>

         6.1  Information.  Phage will deliver to each holder of the  Securities
promptly on the mailing to the  shareholders of Phage  generally,  copies of all
financial  statements,  reports  and proxy  statements  so mailed  and any other
document generally distributed to shareholders.

         6.2 Payment of Obligations.  Phage will, and will cause each Subsidiary
to, pay and discharge,  at or before  maturity,  all their  respective  material
obligations,  including,  without limitation, tax liabilities,  except where the
same  may be  contested  in good  faith  by  appropriate  proceedings  and  will
maintain,  in accordance with GAAP,  appropriate reserves for the accrual of any
of the same.

         6.3  Maintenance  of  Existence.   Phage  will,  and  will  cause  each
Subsidiary  to,  continue to engage in business of the same  general type as now
conducted by Phage and such  Subsidiary,  and will  preserve,  renew and keep in
full force and effect its respective  corporate  existence and their  respective
material rights,  privileges and franchises necessary or desirable in the normal
conduct of business.

         6.4 Compliance  with Laws.  Phage will, and will cause each  Subsidiary
to, comply, in all material respects, with all federal, state, municipal,  local
or foreign applicable laws, ordinances,  rules, regulations,  municipal by-laws,
codes and  requirements  of  governmental  authorities  except where  compliance
therewith  is  contested  in good  faith  by  appropriate  proceedings  or where
non-compliance  therewith could not reasonably be expected, in the aggregate, to
have  a  Material  Adverse  Effect  on the  business,  condition  (financial  or
otherwise),  operations,  performance,  properties or prospects of Phage or such
Subsidiary.

         6.5  Inspection of Property,  Books and Records.  Phage will,  and will
cause each Subsidiary to, keep proper books of record and account in which full,
true and  correct  entries  will be made of all  dealings  and  transactions  in
relation to their respective businesses and activities;  and will permit, during
normal business hours,  Purchasers'  representative(s)  or an  affiliate(s),  as
representatives of the Purchasers,  to visit and inspect any of their respective
properties,  on reasonable prior notice,  to examine and make abstracts from any
of their respective  books and records and to discuss their respective  affairs,
finances and accounts with their respective  executive  officers and independent
public  accountants  (and by this provision  Phage  authorizes  its  independent
public  accountants  to disclose  and discuss with the  Purchasers  the affairs,
finances  and  accounts  of  Phage  and  its  Subsidiary  in the  presence  of a
representative  of Phage;  provided,  however,  that such  discussions  will not
result in any unreasonable  expense to Phage,  without Company consent),  all at
such reasonable times.

         6.6  Investment  Company  Act.  Phage will not be or become an open-end
investment trust, unit investment trust or face-amount  certificate company that
is or is required to be registered under section 8 of the Investment Company Act
of 1940, as amended.

         6.7 Use of  Proceeds.  The  proceeds  from the issuance and sale of the
Units by Phage will be used for general corporate purposes. None of the proceeds
from the issuance and sale of the Units by Phage pursuant to this Agreement will
be used directly or indirectly for the purpose, whether immediate, incidental or
ultimate,  of  purchasing  or carrying any "margin  stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.

         6.8 Compliance with Terms and Conditions of Material  Contracts.  Phage
will, and will cause each Subsidiary to, comply, in all material respects,  with
all terms and conditions of all material contracts to which it is subject except
in  particular  circumstances  in which Phage  determines  it to 'be in the best
interests of Phage not to comply.

         6.9 Reserved Shares and Listings.
             ----------------------------

     (a)  Phage will at all times have authorized,  and reserved for the purpose
          of issuance,  a sufficient number of shares of Common Stock to provide
          for the full  exercise of the  Warrants  and issuance of the Shares as
          part of the Units in the Second  Investment  (the "Reserved  Amount").
          Phage will not reduce the Reserved  Amount  without the prior  written
          consent  of the  Purchasers.  If at any time the  number  of shares of
          Common Stock  authorized and reserved for issuance is below the number
          of Shares  issued or issuable on  purchaser of the Units in the Second
          Investment and exercise of all Warrants,  Phage will promptly take all
          corporate  action  necessary  to  authorize  and reserve a  sufficient
          number of shares,  including,  without  limitation,  calling a special
          meeting of shareholders to authorize additional shares, in the case of
          an insufficient number of authorized shares.

         (b)      If required, Phage will promptly file the Listing Applications
                  and  secure  the  listing  of  the  Shares  on  each  national
                  securities  exchange or automated quotation system, if any, on
                  which  shares of  Common  Stock are then  listed  (subject  to
                  official notice of issuance) and will maintain, so long as any
                  other shares of Common  Stock will be so listed,  such listing
                  of all Shares  from time to time  issuable  on purchase of the
                  Units in the Second  Investment  and  Warrants,  respectively.
                  Phage will  comply in all  respects  with  Phage's  reporting,
                  filing and other  obligations under the bylaws or rules of the
                  National Association of Securities Dealers,  Inc. (the "NASD")
                  and such exchanges, as applicable.

<PAGE>

         6.10 Transfer Agent  Instructions.  On receipt of a Notice of Exercise,
Phage will  immediately  direct Phage's  transfer  agent to issue  certificates,
registered in the name of  Purchaser(s) or their  nominees,  for the Shares,  in
such amounts as specified from time to time by the Purchasers to Phage on proper
exercise of the Warrants.  On exercise of any Warrants in accordance  with their
terms,  Phage will,  and will use its best lawful  efforts to cause its transfer
agent to, issue one or more certificates  representing shares of Common Stock in
such name or names  and in such  denominations  specified  by a  Purchaser  in a
Notice of  Exercise.  Nothing  in this  Section  6.10  will  affect in any way a
Purchaser's  obligation  to comply  with all  securities  laws  applicable  to a
Purchaser on resale of such shares of Common  Stock,  including  any  prospectus
delivery requirements.

         6.11 Maintenance of Reporting Status;  Supplemental Information.  Phage
agrees to file a Form 10SB-12g with the Commission within sixty (60) days of the
date of this Agreement in order to become a "Reporting Issuer" as defined in the
Exchange  Act. So long as any of the  Securities  are  outstanding  and Phage is
deemed a Reporting  Issuer,  Phage will  timely file all reports  required to be
filed with the  Commission  pursuant to the Exchange Act. If at anytime Phage is
not  subject to the  requirements  of section 13 or 15(d) of the  Exchange  Act,
Phage will promptly furnish at its expense,  on request,  for the benefit of the
holders  from  time  to  time  of  Securities,  and  prospective  purchasers  of
Securities,  information  satisfying the  information  requirements  of Rule 144
under the Securities Act.

         6.12  Form D;  Blue  Sky  Laws.  Phage  agrees  to file a "Form D" with
respect to the Securities as required  under  Regulation D of the Securities Act
and to provide a copy to the the Purchasers  promptly  after such filing.  Phage
will,  on or before the  Initial  Closing  Date,  take such action as Phage will
reasonably  determine  is necessary  to qualify the  Securities  for sale to the
Purchasers at the Initial Closing  pursuant to this Agreement  under  applicable
securities  or "blue sky" laws of the states of the United  States (or to obtain
an exemption  from such  qualification),  and will provide  evidence of any such
action so taken to the Purchasers on or prior to the Initial Closing Date.

         6.13 Election of Directors.  The Board of Directors of Phage  currently
consist of Messrs. Darren Pylot, Gaetano Morello, and Richard Honour. On Initial
Closing,  the Board of Directors  will appoint a non-Canadian  resident  nominee
selected by the Purchasers to the Board of Directors of Phage.

         6.14 Sales by the  Purchasers.  Each Purchaser  agrees that it will not
effect or cause any of its affiliates to effect a short sale of Common Stock for
so long as any of the Warrants  remain  outstanding  or the  Purchasers or their
affiliates hold any Securities.

         6.15  Unit  Offering.  Subject  to the  satisfaction  of the  terms and
conditions of this  Agreement,  the  Purchasers  irrevocably  agree to invest an
additional One Million Five Hundred Thousand Dollars ($1,500,000) in equity into
Phage within seven (7) days from the date Phage files a Form  10SB-12g  with the
Commission. Phage in consideration of this investment has agreed to issue to the
Purchasers  2,142,857 units on receipt of these funds.  Each "Initial Unit" will
consist of one share of Phage Common Stock and one common stock purchase warrant
(the "Series One Warrant"). For every one and a half Warrants the holder will be
entitled to acquire one additional share of common stock of Phage at an exercise
price of $0.70 per share.  These  Warrants will be exercisable at any time on or
before  September  15, 2001 and their  right of exercise  will be subject to the
Purchasers having fully exercised the Warrants received at the Initial Closing.

         6.16 Form 10SB-12g.  Phage will deliver the Form 10SB-12g to Mr. Robert
Miller at least two (2) business days prior to filing the Form 10SB-12g with the
Securities and Exchange Commission.

                        ARTICLE VII. RESTRICTIVE LEGENDS

         7.1 Restrictions on Transfer.  From and after their respective dates of
issuance,  none of the Securities will be transferable  except on the conditions
specified in this Article VII and in Subsection 4(1)g concerning Legends,  which
conditions  are  intended  to  ensure  compliance  with  the  provisions  of the
Securities  Act in  respect of the  Transfer  of any of such  Securities  or any
interest  therein.  The  Purchasers  will cause any proposed  transferee  of any
Securities held by it to agree to take and hold such  Securities  subject to the
provisions and on the conditions specified in this Article VII.

         7.2 Notice of Proposed Transfers. Prior to any proposed Transfer of the
Securities  the  holder  will  give  written  notice  to Phage of such  holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, which will be accompanied by:

     (a)  an opinion of counsel reasonably acceptable to Phage,  confirming that
          such transfer does not give rise to a violation of the Securities Act;

     (b)  representation  letters in form and substance reasonably  satisfactory
          to Phage to ensure  compliance  with the  provisions of the Securities
          Act; and

     (c)  letters in form and substance  reasonably  satisfactory  to Phage from
          each such transferee  stating such transferee's  agreement to be bound
          by the terms of this Agreement and the Registration Rights Agreement.

<PAGE>

Such  proposed  Transfer may be effected  only if Phage will have  received such
notice of transfer, opinion of counsel, representation letters and other letters
referred to in the immediately  preceding  sentence,  whereon the holder of such
Securities  will be entitled to Transfer such  Securities in accordance with the
terms of the notice delivered by the holder to Phage.

              ARTICLE VIII. ADDITIONAL AGREEMENTS AMONG THE PARTIES

     8.1  Registration  Rights.  Phage  will grant the  Purchasers  registration
rights  covering the Shares  (the:  "Registrable  Securities")  on the terms set
forth in the Registration Rights Agreement and this Agreement.

         8.2 Due  Diligence  Expenses.  Phage  agrees  to  offset  the  expenses
incurred by the  Purchasers in  conducting  their due diligence of Phage and its
subsidiary  by payment of the sum of twenty five thousand  dollars  ($25,000) as
directed by Mr. Robert Miller as agent for the Purchasers.

                 ARTICLE IX. PURCHASERS' RIGHT OF FIRST REFUSAL

         9.1 Right of First  Refusal.  Phage hereby grants to each Purchaser the
right of first  refusal to purchase its pro rata share of all or any part of any
New  Securities  (as defined in this Section 9.1) which Phage may,  from time to
time,  propose to sell and issue. A Purchaser's pro rata share,  for purposes of
this right of first refusal, is the ratio that the sum of the Units held by such
Purchaser  to the sum of the total  number of Units as set out  opposite of each
Purchaser's name on Schedule I attached to this Agreement.

     (a)  Except as set out  below,  "New  Securities"  will mean any  shares of
          capital stock of Phage including  Common Stock and Preferred,  whether
          now  authorized  or not,  and rights,  options or warrants to purchase
          said shares of Common Stock or Preferred,  and  securities of any type
          whatsoever  that are, or may become,  convertible  into said shares of
          Common  Stock  or  Preferred.   Notwithstanding  the  foregoing,  "New
          Securities" does not include (i) the Shares and the Conversion  Stock,
          (ii)  securities  offered  to  the  public  generally  pursuant  to  a
          registration   statement  or  pursuant  to   Regulation  A  under  the
          Securities Act, (iii) securities  issued in the acquisition of another
          corporation by Phage by merger,  purchase of substantially  all of the
          assets or other  reorganization  whereby Phage or its shareholders own
          not less  than  fifty-one  percent  (51%) of the  voting  power of the
          surviving  or  successor  corporation,  (iv) shares of Phage's  Common
          Stock or related  options  exercisable for such Common Stock issued to
          employees, officers and directors of, and consultants,  customers, and
          vendors to, Phage,  pursuant to any arrangement  approved by the Board
          of  Directors  of Phage,  (v) stock  issued  pursuant to any rights or
          agreements,   including  without  limitation  convertible  securities,
          options  and  warrants,  provided  that the  rights  of first  refusal
          established by this Section 9.1 apply with respect to the initial sale
          or grant by Phage of such rights or  agreements,  (vi) stock issued in
          connection with any stock split, stock dividend or recapitalization by
          Phage.

         (b)      In the event Phage  proposes to  undertake  an issuance of New
                  Securities,  it will give each Purchaser written notice of its
                  intention,  describing  the  type of New  Securities,  and the
                  price and terms upon which  Phage  proposes to issue the same.
                  Each  Purchaser  will  have  ten  (10)  days  from the date of
                  receipt  of any such  notice  to agree to  purchase  up to the
                  Purchaser's  respective  pro rata share of such New Securities
                  for the price and upon the terms  specified  in the  notice by
                  giving  written  notice  to  Phage  and  stating  therein  the
                  quantity of New Securities to be purchased.

     (c)  In the event a Purchaser fails to exercise such right of first refusal
          within  said ten (10) day  period,  Phage will have  ninety  (90) days
          thereafter  to sell or enter into an agreement  (pursuant to which the
          sale of New  Securities  covered  thereby  will be closed,  if at all,
          within  sixty (60) days from the date of said  agreement)  to sell the
          New  Securities not elected to be purchased by Purchasers at the price
          and  upon  the  terms  no more  favorable  to the  purchasers  of such
          securities  than specified in Phage's  notice.  In the event Phage has
          not sold the New  Securities  or entered into an agreement to sell the
          New Securities  within said ninety (90) day period (or sold and issued
          New Securities in accordance with the foregoing within sixty (60) days
          from the date of said  agreement),  Phage will not thereafter issue or
          sell  any  of  such  New  Securities,   without  first  offering  such
          securities in the manner provided above.

         (d)      The right of first refusal  granted under this  Agreement will
                  expire  upon the  first to  occur  of the  following:  (i) the
                  closing of the first  public  offering of the Common  Stock of
                  Phage to the general  public  which is effected  pursuant to a
                  registration  statement filed with, and declared effective by,
                  the  Commission  under the  Securities  Act, and such right of
                  first  refusal and  related  right of notice will not apply to
                  the offer or sale of shares pursuant to such public  offering;
                  (ii)  September  30, 2001,  or (iii) as to a Purchaser if such
                  Purchaser no longer holds at least 2,000,000  shares of Common
                  Stock   and/or    Warrants    (appropriately    adjusted   for
                  Recapitalizations).

         (e)      The right of first refusal  hereunder is not assignable except
                  by each of such Purchasers to any  wholly-owned  subsidiary or
                  constituent  partner  who  acquires  at least  500,000  shares
                  (appropriately adjusted for Recapitalizations).

<PAGE>

                            ARTICLE X. MISCELLANEOUS

         10.1  Notices.  All notices,  demands and other  communications  to any
party hereunder will be in writing (including telecopier or similar writing) and
will be given to such party at its address set forth on the  signature  pages of
this  Agreement,  or such other address as such party may hereafter  specify for
the  purpose  to  the  other  parties.   Each  such  notice,   demand  or  other
communication will be effective:

         (a)      if given by telecopy, when such telecopy is transmitted to the
                  telecopy  number  specified  on the  signature  page  of  this
                  Agreement,  the sender has received electronic confirmation of
                  the transmission  and the sender has provided  contemporaneous
                  telephonic notice to the recipient of such transmission;

         (b)      if  given by mail,  four  days  after  such  communication  is
                  deposited in the United  States mail with first class  postage
                  prepaid, addressed as aforesaid; or

     (c)  if given by any other means,  when delivered at the address  specified
          in or pursuant to this Section.

For purposes of telephonic  notice to Phage in clause (a) above, such telephonic
notice will be to Darren  Pylot unless Phage  notifies the  Purchasers  of other
individuals to whom telephone notice may be directed.

         10.2 No Waivers; Amendments.
              ----------------------

2)                No failure or delay on the part of any party in exercising any
                  right, power or remedy hereunder will operate as a waiver, nor
                  will any single or partial  exercise of any such right,  power
                  or  remedy  preclude  any  other or  further  exercise  or the
                  exercise of any other right, power or remedy.

2)                Any provision of this  Agreement may be amended,  supplemented
                  or waived  if,  but only if,  such  amendment,  supplement  or
                  waiver  is  in  writing   and  is  signed  by  Phage  and  the
                  Purchasers;  provided, that without the consent of each holder
                  of any Unit affected thereby, an amendment or waiver may not:

               (i)  reduce the aggregate principal amount of Units whose holders
                    must consent to an amendment or waiver;

                           (ii)  reduce the rate or extend the time for  payment
                           of interest on any Unit;  (iii) reduce the  principal
                           amount of or extend the stated  maturity of any Unit;
                           or (iv) make any Unit  payable  in money or  property
                           other than as stated in such Unit.
                  In determining  whether the holders of the requisite principal
                  amount of Units have concurred in any direction,  consent,  or
                  waiver as provided in any Transaction  Agreement,  Units which
                  are owned by Phage or any other obligor on or guarantor of the
                  Units, or by any Person  Controlling,  Controlled by, or under
                  common Control with any of the foregoing,  will be disregarded
                  and deemed not to be  outstanding  for the purpose of any such
                  determination;  and PROVIDED  FURTHER that no such  amendment,
                  supplement   or  waiver  which   affects  the  rights  of  the
                  Purchasers and their affiliates otherwise than solely in their
                  capacities as holders of Units will be effective  with respect
                  to them without their prior written consent.

         10.3 Indemnification.
              ---------------

               3)   Phage   agrees   to   indemnify   and  hold   harmless   the
                    Purchaser(s),  its Affiliates,  and each Person, if any, who
                    controls Purchaser(s),  or any of its Affiliates, within the
                    meaning of the  Securities  Act or the Exchange Act (each, a
                    "Controlling Person"), and the respective partners,  agents,
                    employees,  officers and Directors of the Purchasers,  their
                    Affiliates   and  any  such   Controlling   Person  (each  a
                    "Purchaser   Indemnified   Party")  and  collectively,   the
                    "Purchaser Indemnified  Parties"),  from and against any and
                    all  losses,  claims,  damages,   liabilities  and  expenses
                    (including,  without limitation and as incurred,  reasonable
                    costs of  investigating,  preparing  or  defending  any such
                    claim  or  action,   whether  or  not  such  the  Purchasers
                    Indemnified  Party is a party  thereto,  provided that Phage
                    will  not be  obligated  to  advance  such  costs to any the
                    Purchasers  Indemnified  Party  other  than  the  Purchasers
                    unless it has received from such the Purchasers  Indemnified
                    Party an undertaking to repay to Phage the costs so advanced
                    if it should be determined  by final  judgment of a court of
                    competent  jurisdiction that such the Purchasers Indemnified
                    Party was not  entitled to  indemnification  hereunder  with
                    respect to such  costs)  which may be  incurred  by such the
                    Purchasers   Indemnified   Party  in  connection   with  any
                    investigative, administrative or judicial proceeding brought
                    or  threatened  that  relates  to or arises out of, or is in
                    connection   with  any   activities   contemplated   by  any
                    Transaction  Agreement  or any other  services  rendered  in
                    connection  herewith;   provided  that  Phage  will  not  be
                    responsible for any claims, liabilities,  losses, damages or
                    expenses that are determined by final judgment of a court of
                    competent  jurisdiction  to result from such the  Purchasers
                    Indemnified Party's gross negligence,  willful misconduct or
                    bad faith.

<PAGE>

               14)  The Purchasers  agrees to indemnify and hold harmless Phage,
                    its Affiliates, and each Person, if any, who controls Phage,
                    or  any  of  its  Affiliates,  within  the  meaning  of  the
                    Securities  Act or the  Exchange Act (each,  a  "Controlling
                    Person"),   and  the  respective  employees,   officers  and
                    Directors of Phage (each a "Company  Indemnified Party") and
                    collectively,  the "Company Indemnified Parties"),  from and
                    against any and all losses, claims, damages, liabilities and
                    expenses  (including,  without  limitation  and as incurred,
                    reasonable  costs of  investigating,  preparing or defending
                    any  such  claim or  action,  whether  or not  such  Company
                    Indemnified  Party  is a party  thereto,  provided  that the
                    Purchasers  will not be  obligated  to advance such costs to
                    any Company Indemnified Party other than Phage unless it has
                    received from such Company  Indemnified Party an undertaking
                    to repay to the Purchaser the costs so advanced if it should
                    be  determined  by final  judgment  of a court of  competent
                    jurisdiction  that such  Company  Indemnified  Party was not
                    entitled to  indemnification  hereunder with respect to such
                    costs)  which may be  incurred by such  Company  Indemnified
                    Party in connection with any  investigative,  administrative
                    or judicial proceeding brought or threatened that relates to
                    or arises out of, or is in  connection  with any  activities
                    contemplated  by any  Transaction  Agreement  or  any  other
                    services rendered in connection herewith;  provided that the
                    Purchasers   will  not  be   responsible   for  any  claims,
                    liabilities, losses, damages or expenses that are determined
                    by final  judgment of a court of competent  jurisdiction  to
                    result  from  such   Company   Indemnified   Party's   gross
                    negligence, willful misconduct or bad faith.

     12) If any action will be brought against a Purchasers Indemnified Party or
     a Company  Indemnified Party (each an "Indemnified  Party") with respect to
     which  indemnity may be sought against a party under this  Agreement,  such
     Indemnified  Party will  promptly  notify  the party or  parties  from whom
     indemnification is being claimed (the "Indemnifying  Party") in writing and
     the Indemnifying Party, at its option,  may, assume the defense,  including
     the employment of counsel reasonably satisfactory to such Indemnified Party
     and payment of all reasonable  fees and expenses.  The failure to so notify
     the  Indemnifying  Party will not affect any obligations  the  Indemnifying
     Party may have to such Indemnified  Party under this Agreement or otherwise
     unless the  Indemnifying  Party is  materially  adversely  affected by such
     failure..  Such  Indemnified  Party will have 'the right to employ separate
     counsel in such action and  participate  in the  defense,  but the fees and
     expenses of such counsel will be at the expense of such Indemnified  Party,
     unless

     (i) the  Indemnifying  Party has  failed to assume the  defense  and employ
     counsel; or

     (ii) the named parties to any such action (including any impleaded parties)
     include  such  Indemnified  Party  and the  Indemnifying  Party,  and  such
     Indemnified  Party will have been  advised by counsel that there may be one
     or more legal defenses  available to it which conflict with those available
     to the  Indemnifying  Party;  in  which  case,  if such  Indemnified  Party
     notifies  the  Indemnifying  Party in  writing  that it  elects  to  employ
     separate counsel at the expense of the Indemnifying Party, the Indemnifying
     Party  will not have the  right to assume  the  defense  of such  action or
     proceeding on behalf of such Indemnified Party, PROVIDED, HOWEVER, that the
     Indemnifying  Party will not,  in  connection  with any one such  action or
     proceeding  or separate  but  substantially  similar or related  actions or
     proceedings  in the  same  jurisdiction  arising  out of the  same  general
     allegations or circumstances,  be responsible  hereunder for the reasonable
     fees and  expenses  of more  than one such  firm of  separate  counsel,  in
     addition to any local  counsel,  which  counsel will be  designated  by the
     Indemnified  Party.  The  Indemnifying  Party  will not be  liable  for any
     settlement of any such action  effected  without the written consent of the
     Indemnifying  Party  (which  will  not be  unreasonably  withheld)  and the
     Indemnifying  Party agrees to indemnify and hold harmless each  Indemnified
     Party from and against any loss or liability by reason of settlement of any
     action  effected with the consent of the  Indemnifying  Party. In addition,
     the  Indemnifying  Party will not, without the prior written consent of the
     Indemnified  Party,  settle or  compromise  or  consent to the entry of any
     judgment  in or  otherwise  seek to  terminate  any  pending or  threatened
     action,  claim, suit or proceeding in respect to which  indemnification may
     be  sought  hereunder  (whether  or not any  Indemnified  Party  is a party
     thereto)  unless  such  settlement,   compromise,  consent  or  termination
     includes an express  unconditional release of the Indemnified Party and the
     other  Indemnified  Parties,  satisfactory  in form  and  substance  to the
     Indemnified  Party, from all liability  arising out of such action,  claim,
     suit or proceeding.

(8)               The indemnification and expense reimbursement  obligations set
                  forth  in  this  Section  10.3  will  be in  addition  to  any
                  liability any  Indemnifying  Party may have to any Indemnified
                  Party at common law or otherwise; will survive the termination
                  of this Agreement and the other Transaction Agreements and the
                  payment in full of the Units; and will remain operative and in
                  full force and effect regardless of any investigation  made by
                  or  on  behalf  of  the  Purchasers  or  Phage  or  any  other
                  Indemnified Party.

         10.4  Expenses.  Phage and each  Purchaser  will bear its own  expenses
incurred  on its behalf  with  respect to this  Agreement  and the  transactions
contemplated under this Agreement.

     10.5  Payment.  Phage agrees that, so long as the  Purchasers  will own any
Units  purchased  by it from Phage  hereunder,  Phage will make  payments to the
Purchasers of all amounts due thereon by wire transfer by 5:00 P.M. (P.S.T.).

         10.6  Successors  and Assigns.  This Agreement will be binding on Phage
and on the Purchasers and its respective  successors and assigns. So long as the
Units remain outstanding, Phage will not assign or otherwise transfer its rights
or  obligations  under this  Agreement  to any other  Person  without  the prior
written consent of the Purchasers.  All provisions  hereunder purporting to give
rights to the  Purchasers and its affiliates or to holders of Securities are for
the express benefit of such Persons and their successors and assigns.

<PAGE>

         10.7 Florida Law;  Submission  to  Jurisdiction;  Waiver of Jury Trial;
Appointment of Agent.  THIS  AGREEMENT Will BE CONSTRUED IN ACCORDANCE  WITH AND
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA.  EACH PARTY HERETO HEREBY  SUBMITS
TO THE EXCLUSIVE  JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE STATE
OF FLORIDA  AND OF ANY  FEDERAL  DISTRICT  COURT  SITTING IN MIAMI,  FLORIDA FOR
PURPOSES OF ALL LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS  CONTEMPLATED  HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES,
TO THE  FULLEST  EXTENT  PERMITTED  BY LAW,  ANY  OBJECTION  WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING  BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT  IN AN  INCONVENIENT  FORUM.  EACH PARTY TO THIS  AGREEMENT  IRREVOCABLY
CONSENTS  TO THE  SERVICE OF PROCESS IN ANY SUCH  PROCEEDING  BY THE  MAILING OF
COPIES BY REGISTERED OR CERTIFIED MAIL,  POSTAGE  PREPAID,  TO SUCH PARTY AT ITS
ADDRESS SET FORTH HEREIN.  NOTHING  HEREIN Will AFFECT THE RIGHT OF ANY PARTY TO
SERVE PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW, EACH PARTY WAIVES ITS RIGHT
TO A TRIAL BY JURY.

         10.8 Entire  Agreement.  This  Agreement,  the  Exhibits  or  Schedules
attached, which include, but are not limited to the Warrant and the Registration
Rights  Agreement,  set forth the  entire  agreement  and  understanding  of the
parties  relating to the subject  matter of this  Agreement and  supercedes  all
prior and contemporaneous  agreements,  negotiations and understandings  between
the  parties,  both oral and  written  relating  to the  subject  matter of this
Agreement.  The terms and  conditions  of all  Exhibits  and  Schedules  to this
Agreement are incorporated  herein by this reference and will constitute part of
this Agreement as is fully set forth herein.

         10.9 Survival; Severability. The representations, warranties, covenants
and agreements of the parties hereto will survive the Initial Closing hereunder.
In the event that any  provision of this  Agreement  becomes or is declared by a
court of  competent  jurisdiction  to be illegal,  unenforceable  or void,  this
Agreement  will  continue  in full  force and  effect  without  said  provision;
provided that such severability will be ineffective if it materially changes the
economic benefit of this Agreement to any party.

         10.10  Title and  Subtitles.  The  titles  and  subtitles  used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

         10.11 Publicity.  Phage and the Purchasers will consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions  contemplated  hereby and no party will issue any such press
release or otherwise  make any such public  statement  without the prior written
consent of the other parties, which consent will not be unreasonably withheld or
delayed,  except that no prior  consent will be required if such  disclosure  is
required by law, in which such case the disclosing  party will provide the other
parties  with  prior  notice  of  such  public  statement.  Notwithstanding  the
foregoing, Phage will not publicly disclose the name of Purchaser(s) without the
prior  written  consent of Purchaser,  except to the extent  required by law, in
which case Phage will provide Purchaser with prior written notice of such public
disclosure.

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

                  PHAGE THERAPEUTICS INTERNATIONAL INC.

                            /s/ Darren Pylot /s/
                           By: Darren Pylot
                           Title:   President

                           Address:     Phage Therapeutics International Inc.
                           22116 23rd Drive SE
                           Bothell, Washington 98201
                           Tel: (425) 482-9511
                           Fax.: (425) 482-0834

/s/ Robert Miller/s/                     /s/ Bolivar Longines SA /s/
--------------------                      --------------------------
Name:    Robert Miller                   Name:    Bolivar Longines SA

Address: 1645 South Miami Avenue         Address: Centro Comercial Naraya
          Miami, Florida 33129                     Piso 4 Oficina L-10
                                                  Alta Vista, Puerto Ordaz
                                                  Venezula

/s/ Ricardo Requena /s/                  /s/ Cadaques S.A. /s/
-----------------------                  ---------------------
Name:    Ricardo Requena                 Name:    Cadaques S.A.

Address: 25 de Mayo 444 Piso 2           Address: Benito Blanco 675, Apt. 401
          11000 Montevideo                         11300 Montevideo
          Urguay                                   Urguay

/s/ Blanca de Longo /s/
Name:    Blanca de Longo                 /s/ Stratton S.A. /s/
                                         ---------------------
                                         Name:    Stratton S.A.
Address: Carace 524, Apt. 701
          Montevideo                     Address: 25 de Mayo 444 Piso 2
          Urguay                                   11000 Montevideo
                                                   Urguay

/s/ GIG Limited /s/
Name:    GIG Limited

Address: 105 Marbel Drive
          Grand Cayman BWI

<PAGE>
<TABLE>
<CAPTION>

                                   SCHEDULE I

                             SCHEDULE OF PURCHASERS

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

            Name                             Address/Facsimile Number                 $ Amount of Subscription
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------
<S>                            <C>                                                       <C>

Robert Miller                 1645 South Miami Avenue                                 $  130,000
                               Miami, Florida 33129                                   $  220,000
                                                                                      ----------
                                                                                      $  350,000 = Total
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------

Bolivar Longines SA           Centro Comercial Naraya                                 $    70,000
                               Piso 4 Oficina L-10
                              Alta Vista, Puerto Ordaz
                              Venezula
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------

Ricardo Requena               25 de Mayo 444 Piso 2                                   $  140,000
                              11000 Montevideo
                              Urguay
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------

Cadaques S.A.                 Benito Blanco 675, Apt. 401                             $  350,000
                              11300 Montevideo
                              Urguay
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------

Blanca de Longo               Carace 524, Apt. 701                                    $   70,000
                              Montevideo
                               Urguay

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

Stratton S.A.                 25 de Mayo 444 Piso 2                                   $  180,000
                              11000 Montevideo
                              Urguay
----------------------------- ------------------------------------------------------- ------------------------------
----------------------------- ------------------------------------------------------- ------------------------------

GIG Limited                   105 Marbel Drive                                        $  350,000
                              Grand Cayman BWI

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

                                                                              TOTAL:  $ 1,510,000

</TABLE>EMPLOYMENT AGREEMENT
                    Chief Executive Officer

     Agreement made, effective as of October 31, 1999 by and between
STRATEGIC PARTNERS, INC., a corporation duly organized and existing under
the laws of the State of Wyoming; hereinafter referred to as employer, and
FRANK J. WEINSTOCK, hereinafter referred to as employee.

     In consideration of the mutual covenants and promises of the
parties to this agreement, and in consideration of the services rendered by
employee prior to the effective date of this agreement, employer and
employee agree as follows:

SECTION ONE

EMPLOYMENT

     Employer employs employee as chief executive officer and
employee accepts such employment with employer, subject to the terms and
conditions of this agreement.

SECTION TWO

TERM OF EMPLOYMENT

     This agreement and the employment under this agreement shall
commence on the effective date stated above, and continue until the end of
the fifth fiscal period of employer ending after the effective date of this
agreement.

SECTION THREE

DUTIES OF EMPLOYEE

     Employer hereby employs employee as its Chief Executive Officer;
employee hereby accepts such employment. Employee shall perform the duties
of Chief Executive Officer subject to the general supervision and pursuant
to the orders, advice, and direction of the board of directors of
employer. Employee will at all times faithfully, industriously, and to best
of his ability, experience, and talents, perform all of the duties that
may be required of and from employee pursuant to the express and
implicit terms of this Agreement, to the reasonable satisfaction of employer.
Employee shall perform such other duties as are customarily performed by one
holding such position in other, same, or similar businesses or enterprises
as that engaged in by corporation, and shall also render such other and
unrelated services and duties as may be assigned to him from time to time
by employer. Employee will devote a sufficient amount of his time, energy, and
skill during regular and, if necessary, outside of, regular business
hours to such employment. Employee shall perform such services and act in
such executive capacity as the board of directors of employer shall
direct. This Agreement shall not act to bar employee from continuing any
other business activities or professions in which employee is engaged
on the effective date of this agreement nor from undertaking any new
business activities or professions as long as they do not conflict with
the employer's business.  During the term of this Agreement, as set
forth more specifically below, employee will not engage in or provide
services to businesses that compete with that of employer nor take
advantage of any business opportunity that rightfully belongs to employer.

CONTRACT LABOR OPTION

     To the extent permitted federal and state tax and employment
laws, employee shall have the right to direct employer to pay any or
all of the compensation due employee under this agreement to a viable
business entity owned and operated by employee. In this event such entity
shall be deemed employee's "employer" solely for purposes of computing,
withholding, and paying employee's federal and state taxes and related federal
and state employment charges for income paid by employer to employee under
this Agreement. Both the entity and the employee personally, shall
guarantee employee's performance under this Agreement in writing. None of
employee's  other personal responsibilities or rights under this
Agreement shall terminate or be modified by virtue of such designation.
Employee and employer will cooperate with each other and promptly execute on
demand, any additional documents necessary to carry out the intent of
this provision. This provision is subject to the explicit condition that
either it does not result in additional expense to employer, or, if it does,
employer's board of directors approves such additional expense on such terms
and conditions as are reasonable.

SECTION FOUR

COMPENSATION

     A. Employee's salary shall be at the rate of One Hundred
Fifty Thousand Dollars ($150,000.00) per year from the effective date of this
agreement, unless increased with the approval of employer's Board of
Directors until the end of the fifth fiscal period of employer ending after
the effective date of this agreement.

EMPLOYEE BENEFIT PLAN

     Employee shall be entitled to participate in any qualified
Profit-Sharing Plan, Employee Stock Plan, Stock Bonus Plan and Pension Plan
adopted or implemented by employer. The administration, contributions,
restrictions and degree of employee participation shall be at the discretion
of employer with approval of employer's Board of Directors.

HEALTH CARE INSURANCE BENEFITS

     Employer shall provide employee with Health Insurance
Benefits for employee and employee's partner. The administration,
restrictions, contributions, insurance carrier, extent of coverage, including,
but not limited to major medical, catastrophic medical, dental,
ophthalmology, and optometry, shall be at the discretion of employer with
approval of employer's Board of Directors. Health insurance benefits shall
terminate sixty days after the termination of this agreement.

SECTION FIVE

FAILURE TO PAY EMPLOYEE

     The failure of employer to pay employee his or her salary as
provided in Section Four may, in employee's sole discretion be deemed a
breach of this agreement, and unless such breach is cured within thirty days
after written notice to employer, this employment agreement shall
terminate, including the non-competition provisions of Sections Eight and
Nine.

SECTION SIX

REIMBURSEMENT FOR EXPENSES

     Employer shall reimburse employee for reasonable out-of-pocket
expenses that employee shall incur in connection with his services for
employer contemplated by this agreement, on presentation by employee of
appropriate vouchers and receipts for such expenses to employer.

SECTION SEVEN

TERMINATION

     A.  In the event Employee should die during the term of this
Agreement employer will pay all sums due and payable to employee under this
Agreement, including without limitation all of the compensation payable to
employee under this Agreement as if employee had not died or been
terminated, to employee's legal representative and thereafter to employee's
heirs, through a period ending Sixty days after employee's date of death. Said
sums shall be paid monthly.  Employee shall be deemed not to be or to
have been in breach of this Agreement, and no payment shall be suspended,
withheld or interrupted for any reason.

     B.  Except as otherwise provided in this agreement, if
employee fails to perform or to comply with any material term or condition of
this agreement and does not undertake reasonable steps to cure such
failure to perform or comply, within Thirty days of receipt of written
notice of such failure to conform or comply, then this agreement may  be
terminated on Sixty days' written notice to employee by employer.  Such notice
shall specify the precise nature of the failure to perform or to
comply, shall contain reasonable suggestions for curing same and specifically
warn employee of the consequences of failure to cure within the thirty
day period.  In the event of merger, acquisition or takeover of
employer, employer guarantees employee a position with the surviving,
acquiring, or ongoing entity that is similar or better in position, at the
same or better compensation, and under the same terms and conditions as
are otherwise set forth in this Agreement.  If the holders of either
the common or the preferred stock of employer acquire and
exercise the right to choose a majority of the board of directors of employer
and a majority of the newly elected board of directors vote to
terminate such employment, it may be terminated upon Ninety days written
notice to employee, but only subject to the following terms and conditions:
all sums due and payable to employee under this Agreement, including
without limitation all of the compensation payable to employee under this
Agreement as if employee had not been terminated for employer's first
through fifth fiscal periods, commencing on the effective date of this
Agreement, shall be paid monthly to employee or such entity as employee
designates; employee shall be deemed not to be or to have been in breach of
this Agreement, no payment shall be suspended, withheld or interrupted for any
reason. Additionally, if employee has performed or complied with all the
material terms and conditions of this agreement, the non-competition
provisions of Sections Eight and Nine shall not apply.

     C. If employee shall fail or be unable to perform the
services required under this agreement, because of any physical or mental
infirmity, other than death and such failure or inability shall continue for
three consecutive months, or for six months during any consecutive
twelve-month period, employer shall have the right to terminate this
agreement ninety days after delivering written notice of such termination
to employee; provided, however, that employee shall continue to receive his
full compensation under this agreement to the date of termination, in spite
of any such infirmity. The non-competition provisions of Sections Eight and
Nine shall continue in effect in spite of such termination of this
agreement, but if, after recovery from such infirmity as evidenced by a
medical certificate of a physician of employer, employer does not choose to
hire employee in some executive capacity, the non competition provisions of
Sections Eight and Nine, if still in effect, shall cease to be operative.

SECTION EIGHT

NON-COMPETITION AFTER TERMINATION

     Employee agrees that, in addition to any other limitation,
for a period of three years after the termination of his employment under this
agreement, except a termination caused by employer in violation of the terms
of this agreement, and unless otherwise specified in this agreement,
employee will not directly or indirectly engage in, or in any manner be
connected with or employed by any person, firm, corporation, or other entity
in
competition with employer or engaged in manufacturing, advertising,
designing, promoting, selling, or providing fiscal, or other
promotional or consulting services to any person or entity engaged in a
similar business within the territories of the United States of America. This
provision may be modified in whole or in part, or waived, but only in writing,
by employer with approval of employer's Board of Directors.

SECTION NINE

 SOLICITATION AFTER TERMINATION

     Employee agrees that, in addition to any other limitation,
for a period of three years after the termination of his employment under this
agreement, except a termination caused by employer in violation of the terms
of this agreement, and unless otherwise specified in this agreement,
employee will not, on behalf of himself or on behalf of any other person,
firm, corporation, or other entity, call on any of the customers of
employer, or any of its affiliates or subsidiaries for the purpose of
soliciting  and/or providing to any of such customers any manufacturing,
advertising, designing, promoting, selling, fiscal, or other promotional or
consulting services, nor will he, in any way, directly or indirectly, for
himself, or on behalf of any other person, firm, corporation, or other
entity solicit, divert, or take away any customer of employer, its affiliates
or its subsidiaries. This provision may be modified in whole or in part,
or waived, but only in writing, by employer with approval of employer's
Board of Directors.

SECTION TEN

USE OF CONFIDENTIAL INFORMATION

     Employee agrees that, in addition to any other limitation
contained in this agreement, regardless of the circumstances of the
termination of employment, he will not communicate to any person, firm,
corporation, or other entity any information relating to customer lists,
prices, design or details relating to finished products of whatever nature and
description as it relates to the employers business; to include, drawings,
specifications and processes, nor employer's proprietary and
trade secrets, advertising, nor any confidential knowledge or secrets that
employee might from time to time acquire with respect to the business of the
employer, or any of its affiliates or subsidiaries.

SECTION ELEVEN

 INJUNCTIVE RELIEF

     Employee hereby acknowledges that the services to be
rendered under this agreement are of a unique, special, and extraordinary
character that would be difficult or impossible for employer to replace, and
by reason of such difficulty, employee hereby agrees that for violation of any
of the provisions of this agreement, employer shall, in addition to any
other rights and remedies available under this agreement, at law or
otherwise, be entitled to an injunction to be issued by any court of
competent jurisdiction enjoining and restraining employee from committing
any violation of this agreement, and employee hereby consents to
the issuance of such injunction.

SECTION TWELVE

 COMMUNICATIONS TO EMPLOYER

     A. From the time this agreement commences until the termination of
this agreement, employee shall communicate and channel to employer all
knowledge, business, and customer contacts and any other matters of
information that could concern or be in any way beneficial to the business of
employer, whether acquired by employee before or during the term of this
agreement; provided, however, that nothing under this agreement shall be
construed as requiring such communications where the information is lawfully
protected from disclosure as a trade secret of a third party.

     B. Any such information communicated to employer as stated
above shall be and remain the property of employer, in spite of the
subsequent termination of this agreement.

SECTION THIRTEEN

TERMINATION BY EMPLOYEE

     If employer shall cease conducting its business, take any
action looking toward its dissolution or liquidation, make an assignment for
the benefit of its creditors, admit in writing its inability to pay its debts
as
they become due, file a voluntary or be the subject of an involuntary
petition in bankruptcy, or be the subject of any state or federal
insolvency proceeding of any kind, then the employee may, in his sole
discretion, by written notice to employer, terminate his or her employment and
employer hereby consents to the release of employee under such
circumstances and agrees that if employer ceases to operate or to exist as
a result of such event, the non-competition and other provisions of Sections
Nine through Eleven of this agreement shall terminate.

SECTION FOURTEEN

 BINDING EFFECT

     This agreement shall be binding on and shall inure to the
benefit of any successor or successors of employer and the personal
representatives of employee.

SECTION FIFTEEN

LAW TO GOVERN CONTRACT

     It is agreed that this agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of California.

SECTION SIXTEEN

ENTIRE AGREEMENT

     This agreement shall constitute the entire agreement between
the parties and any prior understanding or representation of any kind
preceding the date of this agreement shall not be binding upon either party
except to the extent incorporated in this agreement.

SECTION SEVENTEEN

MODIFICATION OF AGREEMENT

     Any modification of this agreement or additional obligation
assumed by either party in connection with this agreement shall be binding
only if evidenced in writing signed by each party or an authorized
representative of each party.

SECTION EIGHTEEN

NO WAIVER

     The failure of either party to this agreement to insist upon
the performance of any of the terms and conditions of this agreement,
or the waiver of any breach of any of the terms and conditions of this
agreement, shall not be construed as thereafter waiving any such terms and
conditions, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred.

SECTION NINETEEN

 ATTORNEY FEES

     In the event that any action is filed in relation to this
agreement, or any dispute between employer or its assigns and successors in
interest, and employee and his heirs assigns and successors in interest,
arises out of the subject matter of this agreement, the parties hereby waive
any provision of applicable law entitling any party to any attorney's
fees and costs and hereby specifically agree that each party shall
bear their own attorney's fees and costs.

SECTION TWENTY
NOTICES

     Except as otherwise provided herein, any notice provided for
or concerning this agreement shall be in writing and shall be deemed
sufficiently given when sent by certified or registered mail if sent to the
respective address of each party as set forth in the official records of the
corporation.

     In witness whereof, each party to this agreement has caused
it to be executed at Ventura County, California on the date indicated
below.

DATED: October 31, 1999

Employer

STRATEGIC PARTNERS, INC.

By:____/s/ Gerald Bench_________________________
     Gerald Bench, Chief Financial Officer

Attest:___/s/ Trish R. Francis___________________________
     Trish R. Francis, Secy.
                                             [Seal]

Employee

By        /s/ Frank J. Weinstock

     Frank J. Weinstock

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